MANAGERIAL ECONOMICS

UGANADA MARTYRS UNIVERSITY
COURSE OUTLINE
Course name: MANAGERIAL ECONOMICS 1

Course code: 1106

Level of course: 1 Semester 1

Credit units: 4 CU

Lecturer : KIMONO PAUL Tel. 0782427900/0704 427900
Email: paulkimono@yahoo.com


Brief course description
The course assumes previous knowledge of economics. It aims to provide an overview of the main principles, theories and techniques of economics and their relevance to the management of enterprises in market economies. The subject includes a review of the fundamentals of business economics: how markets work in all economic systems, the role of governments in regulating and managing the economy, the economics of government/business/consumer relations, the economics of firms and industries, enterprise economics and economic techniques to assist management decision making, including the basics of cost-benefit analysis.
Objectives
1. To explain economic tools and techniques
2. To discuss the sustainable competitive advantage of firms
3. To calculate optimal price of a product based on relevant cost, demand, and competitive factors.
4. To explain least-cost production techniques based on available technological options and factor prices.
5. To explain the economic profit generated by a given investment project or business enterprise.
6. To discuss opportunity costs and the investment decision.
7. To compute various elasticities of demand (with respect to own price, cross price, income, and advertising) for a given product based on the demand function.
8. To explain the market structures, the degree of strategic and price competition, barriers to entry, economies of scale, and value creation

Learning Outcomes
After successfully completing the course unit, students should be able to:
1. Apply economic tools and techniques for the analysis of business decisions
2. Analyze the sustainable competitive advantage of firms
3. Recommend strategies to business enterprises to achieve environmental and social corporate responsibility.
4. Calculate optimal price of a product based on relevant cost, demand, and competitive factors.
5. Identify least-cost production techniques based on available technological options and factor prices.
6. Measure the economic profit generated by a given investment project or business enterprise.
7. Recognize opportunity costs and know how they should enter into an investment decision.
8. Compute various elasticities of demand (with respect to own price, cross price, income, and advertising) for a given product based on the demand function.
9. Analyze industries in terms of market structures, the degree of strategic and price competition, barriers to entry, economies of scale, and value creation

Out-of-Class Study

While students may have preferred individual learning strategies, it is important to note that most learning will be achieved outside of class time. Lectures can only provide a structure to assist your study. An “ideal” strategy (on which the provision of the course materials is based) might include:

• Reading of the relevant chapter(s) of the text and any readings before the lecture. This will give you a general idea of the topic area.
• Attendance at lectures. Here the context of the topic in the course and the important elements of the topic are identified. The relevance of the topic should be explained.
• Attempting the review questions given at the lectures, and checking the answers. Preparing notes for the class discussion of the Submission Questions.
• Presenting (if allocated), or contributing to the class discussion of the Submission Questions.

Detailed course description (contents)
Introduction: Basic concepts in Economics (8 hours)
• Definition of economics
• Methodology, Models and Assumptions
• Fundamental Questions in Economics (The economic problem):
• Scarcity, Choice and Opportunity Cost
• Production Possibility Curve (PPC)
• Shifts in the PPC
• Relationship between Production Possibility Curve, Choice and Opportunity Cost
• Slope and Shape of a Production Possibility Frontier and their implications
• Externalities

Economic systems and solutions to the fundamental economic questions (4 hours)
• The Traditional Economic System
• The Command or Centrally Planned Economy
• Pure Capitalism
• Mixed Economy

Market Analysis (10 hours)
• The Demand Function
• A Demand curve
• Change in Quantity Demanded Vs Change in demand
• The Market Demand Curve
• The Supply Curve
• Change in Quantity Supplied and Change in supply
• The Market Supply Curve
• Market Equilibrium
• Consumer’s Surplus
• Producer’s Surplus
• Price Ceiling Vs Price floor

Elasticity (8 hours)
• Elasticity of Demand
• Price Elasticity of Demand
• Point elasticity and Arc Elasticity
• Arc elasticity
• Factors that Affect the Coefficient of Price Elasticity of Demand
• Cross Elasticity
• Income Elasticity of Demand
• Factors that affect the Coefficient of Income Elasticity of Demand
• Applications of Price Elasticity of Demand

Production theory (8 hours)
• Basic Concepts in Production Theory
• The Production Function
• Average Product (AP)
• Marginal Product (MP)
• Relationship between a Production Function, Marginal Product and Average Product curves
• (DRS)

Theory of costs (6 hours)
• Types of Costs
• Variation of Costs in the Short run
• Relationship between the Short run Cost Curves
• Economies and Diseconomies of Scale

Market structures (6 hours)
• Perfect competition
• Monopoly
• Oligopoly
• Monopolistic competition
Consumer theory (2 hours)
• Cardinal utility approach
• Marginal utility approach (indifference curve theory)
Game Theory and Pricing Strategies (8 hours)
• Simultaneous Move, One Shot Games
• Basic Pricing Strategies
• Strategies that Yield Even Greater Profits
• Pricing Strategies for Special Cost and Demand Structures
• Pricing Strategies in Markets with Intense Price Competition

Mode of delivery
Lectures
Class discussions and presentations
Mode of assessment
Take-home assignment 10%
Two Class Tests 30%
Lecture room presentation 10%
Final Examination 50%
References
Baumol, W. J. and Blinder, A. S. (1991) Economics Principles and Policy. San Diego: Harcourt Brace Jovanovich.
Begg, D., Fisher, S. and Dornbusch, R. (1991) Economics. London: McGraw Hill.
Craven, J. (1990) Introduction to Economics: An integrated approach to Principles. Cambridge: Blackwell.
Dwivedi, D. N. (2004) Managerial economics. 6th edition. Vikas publishing house LTD
Salvatore, D. (2004) Managerial Economics in a global economy. United Kingdom: Thomson/ South western.
Truett, L. J. and Truet, D. M. (1987) Microeconomics Times. Mirrou / Mosby College Publishing St. Louis
Bibliography
Additional readings will be provided during the semester. The following books are recommended as supplementary readings for this course:

Baumol, W. J., Blinder, A. S., Gunther, A.W. and Hicks, J. R. L. (1992) Economics: Principles and Policy, Australian Edition, Harcourt Brace Jovanovich,.
Colander, D. C. (2004) Economics 5th Edtion. London: McGraw Hill Irwin.
Frank, R. (2005) Microeconomics and Behaviour. 6th edition. London: McGraw-Hill.
Lipesy, R. G., Steiner, P.O. and Purvis, D. (1987) Economics. 8th edition. Harper and Row
Samuelson, P. A .et al, (1989) Economics. 13th edition. London: McGraw-Hill.
Taylor, J. B and Frost, L. (2002) Microeconomics. 2nd edition. Australia: John Wiley & Sons.