Managerial economics applies microeconomic principles to analyze business decisions. It has three branches: competitive markets, markets with power, and imperfect markets. A market consists of buyers and sellers who voluntarily exchange. Whether local or global, the same principles apply. Firms with power can influence prices and demand. Imperfect markets occur when external costs/benefits exist or information is asymmetric. Models necessarily simplify reality by focusing on key factors and holding others constant. Marginal concepts measure change while average concepts measure total values. Stocks represent quantities at a point in time while flows represent changes over time.