Managerial Economics notes – University notes

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

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