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Lecture 1
Introduction to
Manager a Econom cs
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Introduction. The nature of managerial
economic decision making
Managerial economic
as an economics
discipline
The role of managerial
economics in
managerial decision
op on
Economicoptimisation
ma ng
The value of firm
Economic constraints
The basic economic
variables
eman
Supply
Costs
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Revenue
Profit
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Demand analysis and estimation
Market demand
Market supply
Market equilibrium
Price, cross-price, and income
elasticity of demand
Normal versus inferior good
Implication: optimal pricing policy
Implication: optimal level of
advertising
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Production and Costs
Production functions
Factors of production
Total, marginal and averageproduct, revenue and costs
scale
Firm and plant size
Economies and diseconomies of
scale
Optimal level of single input and
inputs
Fixed and variable costs
Explicit and implicit costs
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Short run versus long run in cost
analysis
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Competition, market structures and
business decisions
How does competition affect
business decisions in different
market structures?
Perfect competition; monopoly;
oligopoly; monopolistic
competition, Monopoly/monopsony
confrontation
Competitive strategies.
Measurement of market structures
Market strategies in differentmarket structures.
Non-price competition.
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Multinational companies. Vertical
and horizontal coordination.
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Pricing strategies and practices
What prices should be set?
Mark-u ricin
Competitive strategies.
Price discrimination.
Bundle pricing
Multiple and joint product pricing.
Transfer pricing
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Business and Government
The impact of regulation,
deregulation and taxation policy on
decision making, competitiveness
and efficiency.
Reasons for regulation. Regulatory
response to incentive and
.
Taxes and subsidies
Anti-Trust Policies.
Problems with regulation
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Capital budgeting
Capital budgeting process
Decision rules
Cash flow estimation
Alternative projects
Cost of capital.
Optimal capital budgeting
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Business and current economic
situationResearch topic
What would be the impact of
high/low interest rates on costs or
ca ital bud etin ?
How important, to managerial and
marketing decisions, are changes
in
foreign exchange rates, in interest
rates, in incomes, in the balance of
,
etc
, ,
etc
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Topic 1.Introduction: The nature of
making
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Competition,
market structures and Pricing strategies and
business decisions
Business and Government.
,
technological changes and
industrial innovations
Capital budgeting
Managerial
EconomicsDemand analysis
and estimation
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Business and current
economic situation.
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Introduction. The nature of managerial
economic decision making
Managerial economic
as an economics
discipline
The role of managerialeconomics in
managerial decision
op onEconomicoptimisation
ma ng
The value of firm
Economic constraints
The basic economic
variables
eman
Supply
Costs
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Revenue
Profit
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Introduction. The nature of managerial economic decision making
Learning objectives
This topic is deals with the nature and the scope of
Mana erial Economics as a whole.
The place of Managerial economics in the Economicsdiscipline.
How do managers make their decisions?
The elements of the economic theory of firm that we need
making are:
Economic optimisation;
The value of firm;
Economic constraints;
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The basic economic variables, including demand
supply, costs, revenue and profit.
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Introduction. The nature of managerial economic decision making
Reading
Mansfield, Chapter 1.
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Introduction. The nature of managerial economic decision making
Managerial economic as an economics discipline
Economics
Macroeconomics Microeconomics
Money, finance, banking Sector economics
Labor economics
EC
Managerial economics
International Economics
Re ional Economics
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Economic Development
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Introduction. The nature of managerial economic decision making
The role of managerial economics in managerial decision making
Product price and output
Make or buy
Production technique
n erne s ra egy
Advertising media and intensityInvestment and financing
Economic concepts
Theory of consumer behaviour
Theory of firm
Theory of market structures and
Decision making tools
Numerical analysis
Statistical analysis
Forecasting
pricing Game theory
Optimisation
Managerial Economics
Use of economics concepts and
decision making tools to solve
managerial decision problems
16Optimal solutions
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Introduction. The nature of managerial economic decision making
The role of managerial economics in managerial decision making
The Process of decision-making
Identify objectives
Define the problem
y u
Select the best possible solution
Implement the decision
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Introduction. The nature of managerial economic decision making
Economic
optimisation
Marginal value
The marginal value of a dependent variable
s e s epen en var a e
associated with a 1-unit aparticular independent variable
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Introduction. The nature of managerial economic decision making
Economic
optimisation
Choose alternative
that produces a result the most
with managerial objective
What is the primary
managerial objective?
Profit maximisation?
The value of firm
maximisation?
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Profit per employee
maximisation?
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Introduction. The nature of managerial economic decision making
m e resourses
Labour
Capital
nance
Raw materials
Environment
Limited capacity of market
Demand
20Choice/Opportunity cost