Introduction to Managerial Economics

Introduce managerial economics, its objectives and principles, and its use in demand, law of demand, elasticity, and environmental analysis, illustrated by a Zen garments case.

Managerial economics blends economic theory with business practices to aid decision making and planning, guided by microeconomic theory of the firm, for decisions about customers, competitors, suppliers, and internal operations.

Learn how managerial economics uses demand theory, production and cost analysis, and econometrics to guide decisions on what, how, and for whom to produce under scarce resources.

Explain the principles of managerial economics, including opportunity cost, marginal and incremental analysis, discounting, and time perspective, and show how managers allocate resources to maximize profit.

Identify the objectives of a business firm: profit maximization and shareholder wealth maximization. Explain value creation linking share price to firm value and define the degree of operating leverage.

Analyze the environmental influences on a business and explain pricing methods, including cost-based and competition-based approaches with price in line, market plus, and market minus.

Explore how cost analysis guides managerial pricing by examining cost of production, competition, target segment willingness to pay, price elasticity, discount policies, and market structures.

Explore market structure classification by seller count and product differentiation, including monopoly, oligopoly, differentiated oligopoly, monopolistic competition, and pure competition, with brand, industry, product, and generic competition in managerial economics.

Explore demand as the quantity buyers are willing to purchase at a given price, while income, tastes, related goods prices, advertising, population, and expectations shape the demand function.

Explore how the law of demand links price to quantity demanded in an inverse relationship, illustrated by demand schedules and curves for A, B, C, and D and market demand.

Examine why the demand curve slopes downward through the income and substitution effects and the law of diminishing marginal utility, showing how lower prices raise purchasing power and marginal utility.

Identify exceptions to the law of demand, including conspicuous goods as status symbols and Giffen goods with income-dominated effects. Note how price expectations influence demand.

Explain price elasticity of supply and how the supply curve varies across markets, with elasticity differing at multiple points along the curve from the supplier's perspective.

Identify and explain determinants of price elasticity of supply, including capacity additions, related infrastructure growth, perishability, production length, marginal cost, and long-run versus short-run effects.

Managers apply managerial economics to optimize decision making, pricing, and production by analyzing demand, market structures, capital budgeting, and cost-benefit considerations.

Discover how managerial economics clarifies a firm's objectives and environment to improve decision making in complex situations, using principles like opportunity cost, marginal analysis, and demand trends.