Department of Management Sciences

COMSATS Institute of Information Technology

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ECO 403 Managerial Economics SEMESTER I Spring 2010

Course Instructor: Junaid Ahmed

Email: junaidkhan@ciit.net.pk
Room No: 308-A Block

Course Description:

A study of the application of microeconomic theory as applied to the managers’

responsibilities within the organization. The course emphasizes the quantitative and
qualitative application of economic principles to business analysis.

Course Requirements:

Principles of Economics, Business Statistics and Mathematics

Course Objectives:

The successful completion of this course will position the students to:

a) Utilize basic supply and demand analysis (graphical and quantitative) to predict
the likely impact of events on the price and quantity sold of resources, products
and services.

b) Calculate price and income elasticity of demand and estimate elasticity

empirically and predict the effect of a given change in price on revenue.

c) Estimate demand, cost, and profit functions, determine the statistical significance,
calculate the elasticity and infer the implications of that information to market
demand and supply conditions.

d) Identify which of the four primary market structures most appropriately correlates
to an industry and draw inferences regarding firm behavior and performance.

e) Use basic game theoretic analysis to describe the behavior of firms in an

oligopolistic industry.

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Reference Books:

1. Thomas J. Webster: Managerial Economics – Theory and Practice

2. Peterson, H. Criag and Chris Lewis: Managerial Economics.
3. Salvator, Dominic: Managerial Economic, New York: McGraw-Hill.
4. Evan, J. Douglas and Scott Callan: Managerial Economics – Analysis and
Strategy.

Grading:
Sessional I: 10%
Sessional II: 15%
Quizzes and Assignments: 25%
Final: 50%

Topical Outline:
1- Introduction to Managerial Economics

a) Definition of Managerial Economics

b) The Definition of Firm and Industry

2- Introduction to Mathematical Economics

a) The application Linear and Non-Linear function in Economics

b) Rules of Exponents
c) The Derivative of a function
d) Economic Optimization
e) Rules of Differentiation
f) Profit Maximization: The First and Second Order Condition
g) Partial Derivatives and Multivariate Optimization: The First and
Second Order Condition

3- Supply and Demand Analysis

a) Market Equilibrium and its Application

b) Elasticity of Demand and its Application

4- Empirical Demand Functions

a) Direct Methods of Demand Estimation

b) Demand Estimation by Regression Analysis with its
Application

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5- Demand Forecasting
a) Quantitative Forecasting
b) Time Series Analysis
c) Smoothing Techniques
d) Single Equation Models and their Relevant Application

6- Production Theory and Estimation

a) Production Function with One Variable Input

b) Production Function with Two Variable Inputs
c) Optimal Combination of Inputs
d) Return to Scale and its Managerial Application
e) Technology and International Competitiveness

7- Cost Theory and Estimation

a) The Economic Concept of Cost

b) Special Topics in Cost Theory
c) Estimating Cost Function and its Application

8- Market Structure

a) Perfect Competition
b) Monopoly
c) Monopolistic Competition
d) Oligopoly Models and their Application
e) Kinked Demand Curve Model
f) Price Leadership
g) The Sales Maximization Model and its Practical Relevance

9- Pricing of Goods and Services

a) Pricing of Multiple Products

b) Price Discrimination with Practical Application
c) Cost Plus Pricing with its Practical Importance