Managerial Economics

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Managerial Economics:

Managerial Economics refers to the application of economic theory and the tools of decision science to examine how an organisation can achieve its aims or objectives most efficiently.This definition can be best summarised in a diagram. Click on the link below to view the diagram: File:Diagram

Management decision problem arise in any organisations when they seek to achieve some objectives subject to some constraints. For e.g. A Telecommunication Company may seek to provide its service to as many customers as possible at the lowest possible cost. A hotel may seek to rent its room to the maximum tourists with limitations on its physical resources and budget. A university may aim to provide education to as many students as possible subject to the physical and financial constraints it faces.

Topics within Managerial Economics

Managerial Economics deals with:

The Theory of the Firm
Theories of Profit
Optimisation Techniques:

  *Substitution Method
  *Lagrangian Multiplier Method
  *Linear Programming

Demand Forecasting:

  *Qualitative forecasts
  *Time Series Analysis
  *Smoothing Techniques
  *Barometric Methods
  *Econometric Methods

Production Theory and Estimation
Cost Theory and Estimation
Market Structure:

  *Perfect Competition
  *Monopoly
  *Monopolistic Competition
  *Oligopoly

Pricing Practices:

  *Pricing of Multiple products
  *Price Discrimination
  *Transfer Pricing
  *Other Pricing Practices

Risk Analysis
Asymmetric information

Prerequisites

The prerequisites for this course include Microeconomic Theory, Macroeconomic Theory, Mathematics for Economics and Principal of Econometrics.

Syllabus

Most students taking Managerial Economics are likely to have some knowledge of some of the topics presented and tools of analysis utilized in Managerial Economics. Thus Managerial Economics concentrate more on its integrating and synthesizing role in analyzing the decision making process.

Click on the link below to view the syllabus for Managerial Economics Course:

File:Syllabus

Assignments

Summary

Managerial economics (also called business economics), is a branch of economics that applies microeconomic analysis to specific business decisions. As such, it bridges economic theory and economics in practice. It draws heavily from quantitative techniques such as regression and correlation, Lagrangian calculus, linear If there is a unifying theme that runs through most of managerial economics it is the attempt to optimize business decisions given the firm's objectives and given constraints imposed by scarcity.

Almost any business decision can be analysed with managerial economics techniques, but it is most commonly applied to:

Risk analysis - various uncertainty models, decision rules, and risk quantification techniques are used to assess the riskiness of a decision.
Production analysis - microeconomic techniques are used to analyse production efficiency, optimum factor allocation, costs, economies of scale and to estimate the firm's cost function.
Pricing analysis - microeconomic techniques are used to analyse various pricing decisions including transfer pricing, joint product pricing, price discrimination, price elasticity estimations, and choosing the optimum pricing method.
Capital budgeting - Investment theory is used to examine a firm's capital purchasing decisions.

References

Ivan Png (2002) Managerial Economics, Malden, MA: Blackwell.
Edward Lazear (2008). "Personnel economics," The New Palgrave Dictionary of Economics. 2nd Edition.
Keith Weigelt (2006). Managerial Economics
Elmer G. Wiens The Public Firm with Managerial Incentives
NA, (2007). "Managerial economics," Encyclopædia Britannica online Concise Encyclopedia entry.