## MANAGERIAL ECONOMICS

By the end of this course the candidate should be able to:

- The theoretical and analytical tools from managerial Economics used in managerial decision making.
- Review empirical studies and illustrate their applications in decision
- Solve problems and cases involving managerial
- Read articles in professional journals that involve the use of managerial economic principles and research
- Analyse the changes that have taken place in the area of managerial Economics, their causes and the effects on decision

**subject content**

### SCOPE AND METHOD OF MANAGERIAL ECONOMICS

- Introduction
- Relationship between Managerial Economics and Macroeconomics
- The Use of Statistics
- Relationships with Management Principles
- Relationships between Managerial Economics and Business Administration
- The Behavioral Theory of the Firm

### OPTIMIZATION TECHNIQUES

- The Break Even Analysis
- Linear Cost and Revenue Functions
- Cost Functions
- Linear Revenue Functions
- Optimization Based On Nonlinear Profit Functions

### THE TECHNIQUES OF DETERMINING OPTIMUM VALUES

- The Relationship between Marginal Revenue and Marginal Cost
- Optimization of Multivariate Functions
- Constraint Optimization
- Solution using the Substitution method
- Solution using the Lagrangean multiplier method
- The Cobb Douglas Production Function
- The Use of Linear Programming in Solving Optimization Problems
- Solution Using the Graphical Method
- Solution Using the Simplex Method

### RISK ANALYSIS UTILITY THEORY AND THE USE OF SIMULATION IN DECISION MAKING

- Utility Theory and Risk Aversion
- The Friedman and Savage Hypothesis
- Risk Adjusted Valuation Models
- The Certainty Equivalent Approach to Risk Adjustment
- The Adjustment in the Discount Rate
- The Use of Decision Trees
- The Use of Simulation in Decision Making
- Uses of Simulation in Business Administration
- Simulation Procedure

### GAMES OF CHANCE AND THE USE OF QUEUING THEORY IN DECISION MAKING

- The Game Theory Terminology
- Solution to Games Involving Risk
- The Relationship between Game Theory and the Utility Theory
- Methods of Solving Games Involving Uncertainity
- Principles of Rational Choice
- The Two Person Zero Sum Games
- Games without Pure Strategies and Game Dominance
- The Dominance Rule
- The Collective Bargaining Example
- The Mixed Strategy
- The Queuing Theory
- Economics of Queue Lines
- Waiting Line Characteristics
- Distribution of Arrivals

### THE DEMAND THEORY AND TECHNIQUES OF DEMAND ESTIMATION

- The Demand Function
- The Industry versus Firm Demand
- The Uses of the Coefficient Of Elasticity
- Direct Vs Derived Demand
- The Acceleration Principle
- The Identification Problem
- Collection of Primary Data
- Type of Sample Populations
- Market Studies and Experiments
- Regression Analysis

### PRODUCTION THEORY

- The Production Function
- The Marginal Rate of Substitution
- Diminishing Returns To Factor Inputs