Learning Objectives
5 objectives- Understand fundamental concepts and applications of managerial economics in organizational decision-making.
- Analyze demand, production, cost, and market structures to inform managerial strategies.
- Evaluate pricing strategies, risk management techniques, and capital budgeting methods for optimal business outcomes.
- Apply game theory and understand government regulation impacts on business decisions.
- Explore globalization effects and develop strategies to operate effectively in international markets.
Content Outline
PreviewUnit 954: Managerial Economics
1. Introduction to Managerial Economics
- Definition and scope of managerial economics
- Importance in organizational decision-making
- Application of economic theory and methods to business problems
- Role of managerial economics in strategic planning
2. Demand Analysis
2.1 Principles of Demand
- Concept of demand and demand function
- Law of demand and exceptions
- Factors affecting demand (price, income, preferences, substitutes, complements)
2.2 Consumer Behavior
- Utility theory and consumer choice
- Budget constraints and optimization
2.3 Elasticity of Demand
- Price elasticity, income elasticity, cross elasticity
- Measuring elasticity and interpretation
- Importance of elasticity in managerial decisions
3. Production and Cost Analysis
3.1 Production Theory
- Production functions: short-run and long-run
- Law of variable proportions
- Returns to scale
3.2 Cost Concepts
- Fixed, variable, total, average, and marginal costs
- Explicit and implicit costs
3.3 Cost Functions and Economies of Scale
- Short-run and long-run cost functions
- Economies and diseconomies of scale
3.4 Cost Minimization Strategies
- Isoquants and isocost lines
- Optimal input combinations
3.5 Relationship Between Production and Costs
- How production decisions impact cost structures
4. Market Structures
4.1 Perfect Competition
- Characteristics
- Price-taking behavior
- Short-run and long-run equilibrium
4.2 Monopoly
- Characteristics
- Price setting and output decisions
- Welfare implications
4.3 Oligopoly
- Features and types (collusive and non-collusive)
- Strategic behavior
- Price rigidity and kinked demand
4.4 Monopolistic Competition
- Product differentiation
- Pricing and output decisions
- Long-run equilibrium
4.5 Implications for Managerial Decision-Making
5. Pricing Strategies
- Cost-based pricing
- Value-based pricing
- Price discrimination (first, second, and third degree)
- Price leadership and competitive pricing
- Strategies to maximize profits under different market conditions
6. Risk and Uncertainty
- Definition and types of risk
- Decision-making under uncertainty
- Expected utility theory
- Risk aversion and risk preferences
- Tools and techniques for risk assessment and mitigation
7. Capital Budgeting
- Importance of capital budgeting in managerial economics
- Net Present Value (NPV) method
- Internal Rate of Return (IRR)
- Payback Period
- Profitability Index
- Comparison of methods and decision rules
8. Game Theory
- Introduction to game theory concepts
- Types of games: simultaneous and sequential
- Nash equilibrium
- Applications in competitive strategy and cooperation
- Examples of strategic interactions in business
9. Government Intervention and Regulation
- Role of government in the economy
- Regulatory policies and objectives
- Antitrust laws and competition policy
- Environmental regulations
- Impact on business operations and managerial decision-making
10. Globalization and Managerial Economics
- Challenges and opportunities of globalization
- International trade theories and their implications
- Foreign exchange markets and exchange rate effects
- Multinational corporations and global strategies
- Managing economic risks in global markets
- Navigating global economic dynamics in decision-making
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