Credits: 3, Lecture Hours: 48
Managerial Economics Syllabus | MBS First Semester
Course Objectives
The course aims to develop students’ knowledge and skills in the tools and techniques of economics applicable to managerial decision-making.
Course Description
This course deals with the introduction to managerial economics and theories of firm. demand forecasting, production and cost analysis, pricing theory and practice, risk analysis, and market efficiency and role of government.
Course Details
Unit 1: Introduction to Managerial Economics and Theories of Firm (LH7)
Concept and scope of managerial economics; Managerial economics and business decision-making; Business profit and economic profit; Theories of the firm: Profit maximization, Value maximization, Sales revenue maximization, Williamson’s model of managerial discretion.
Unit 2: Demand Analysis and Forecasting (LH8)
Concept and significance of demand forecasting; Techniques of demand forecasting: Qualitative methods: Survey methods and Market experiment; Quantitative methods: Trend projection method (Time series analysis and Moving average method), Regression analysis and Barometric technique; Use of elasticities of demand in business decision making; Limitations of forecasting.
Unit 3: Production and Cost Analysis (LH 5)
Production function: Short run production function, Long run production function, Cobb- Douglas production function; Optimal use of one variable input and two variable inputs; Learning curve, Empirical estimation of a short-run cost function.
Unit 4: Pricing Theory and Practice (LH 14)
Pricing under oligopoly: Cartel arrangement, Price leadership, and Kinked demand curve model; Strategic behaviour and game theory: Concept, Payoff matrix, Nash equilibrium, Prisoner’s dilemma, Simultaneous move one-shot game, Simultaneous move repeated game and Multistage game; Pricing techniques: Cost-plus pricing, Incremental cost pricing. Predatory pricing, Multiple product pricing (fixed proportion), Transfer pricing, Peak-load pricing, and Two-part tariff; Economics of discriminations: Wage differential, Price
discrimination.
Unit 5: Risk Analysis (LH 4)
Concept of risk and uncertainty; Attitude toward risk and uncertainty: Utility Theory and risk aversion; Information and risk: Asymmetric information, Adverse selection, Signaling, Moral
hazard, Principal -agent problem.
Unit 6: Market Efficiency and Role of Government (LH 10)
Market and efficiency: Effect of government policy (tax and price control policy) in market equilibrium and market efficiency: Market failure: Concept and sources of market failure: Market power and deadweight loss, Incomplete information, Externalities, Public goods; Government response to market failure: Rationale for regulation, Monopoly regulation, Antitrust policy, Patent system, Operating controls, Subsidy policy, Tax policy, Regulation of environmental pollution; Regulation of international competition; Problems effects of regulation on efficiency; Government failure: Theory of public choice.
Note: Numerical illustrations and case analysis will be used wherever applicable.
