MBA Managerial Economics

Description
Managerial Economics is concerned with the application of economic principles and methodolo-gies to business decision problems. In this course students will increase their understanding of economics and learn a variety of techniques that will allow them to solve business problems relat-ing to costs, prices, revenues, profits, and competitive strategies.

The over-riding goal of the course is to make students better decision-makers in a business or institutional context but the principles and techniques are also applicable to personal financial and economic decisions. A subsidiary purpose of the course is to sharpen analytical skills so that students will be better able to recognize and solve decision problems in different contexts.

The course, accordingly, is concerned with both theory and practice: the theory serves to sharpen analytical skills, and the practice will give experience in the application of the principles and techniques to real-world business problems.

Prerequisites
Principles of Microeconomics, Principles of Macroeconomics, and MATHS , or equivalent skills and knowledge.

Objectives
After completing this course, you should be able to:

List the different goals and constraints that firms fac Apply the economic way of thinking to individual decisions and business decisions Use calculus (first and second order derivatives) to solve for an optimum solution Understand how prices get determined in markets, how market participants benefit in the form of consumer surplus and producer surplus, and what are the consequences of government intervention

Measure the responsiveness of consumers' demand to changes in the price of a good or service, the price of other goods and services, and income

Understand the different costs of production and how they affect short and long run decisions Derive the equilibrium conditions for cost minimization and profit maximization Understand economies of scale, diseconomies of scale, economies of scope, and cost complementarities, and how each affects the cost of production

Explain the principal-agent problem and why different forms of compensation exist Understand the four basic market models of perfect competition, monopoly, monopolistic competition, and oligopoly, and how price and quantity are determined in each model

Understand how game theory can be used to explain a number of business decisions Explain four different pricing practices such as discrimination, two part pricing, block pricing, commodity bundling, transfer pricing, and peak load pricing

Course Outline
Module 1: The Fundamentals of Managerial Economics

1. 2. 3. 4. 5. 6. 7.

Goals and Constraints The Nature and Importance of Profits Understanding Incentives Understanding Markets Time and Value of Money Marginal Analysis Basic Calculus: The Calculus of Optimization

Module 2: Demand and Supply

1. 2. 3. 4. 5. 6. 7. 8.

Demand Consumer Surplus Supply Producer Supply Market Equilibrium Price Ceilings and Price Floors Comparative Statics: Changes in Demand and Supply Price Elasticity of Demand

9.

Price Elasticity, Total Revenue, and Marginal Revenue

10. Factors Affecting Price Elasticity 11. Cross Price elasticity 12. Income Elasticity of Demand 13. Other Elasticities

Module 3: Costs of Production and the Organization of the Firm

1. 2. 3. 4. 5. 6. 7. 8.

The Production Function Profit-Maximizing Input Usage Isoquants and Isocosts Cost Minimization and Optimal Input Substitution The Cost Function Long-run Costs and Economies of Scale Multiple Cost Functions and Economies of Scope Methods of Procuring Inputs and Optimal Input Procurement

Module 4: Market Structures: Pricing and Output Decisions

1. 2. 3. 4.

The Nature of Industry Perfect Competition Monopoly Monopolistic Competition

Module 5: Pricing Strategies

1. 2. 3. 4.

Basic Pricing Strategies Strategies that Yield Even Greater Profits Pricing Strategies for Special Cost and Demand Structures Pricing Strategies in Markets with Intense Price Competition

Module 6: Capital budgeting decisions

Module 7: Decisions under risk and uncertainty

Required Text and Materials

Students will receive all course materials including the textbook in their course package.

1. Baye, Michael. Managerial Economics and Business Strategy (USED). Sixth Edition. Boston: McGraw-Hill
Irwin, 2009. Type: Textbook. ISBN: 978-0-07-337568-7

2. Baye, Michael. Study guide for use with Managerial Economics and Business Strategy. Sixth Edition.
Boston: McGraw-Hill Irwin, 2008. Type: Study Guide. ISBN: 978-0-07334361-7

NOTE: Students registering for this course will receive a used copy of "Managerial Economics and Business Strategy". The cost of your materials has been adjusted to reflect this fact.

Additional Requirements
Computer with internet is required for Web version of this course.

Assessment
In order to successfully complete this course, you must obtain at least 50 % overall. It is recommended that students complete all assignments in order to achieve the learning outcomes of the course. The total mark will be determined on the following basis: Assignment 1 Assignment 2 CAT Examination Total 10% 10% 20% 60% 100%

Students must pass the final exam to receive a passing grade in the course.