Managerial Economics

Lecture No. 1
The Nature and Scope
of Managerial Economics
Aims
We will review the contemporary economic principles in the context of
business people:

• Market processes,
• demand patterns,
• cost structures,
• market conditions
• pricing policies, and
• the impact of regulation on business decisions
Case studies and problems illustrate how economic concepts can
be applied to specific industries to the problems of formulating
rational managerial decisions, corporate and marketing
strategies.
 Questions
• How do markets work?
• How do customers value products?
• What are the relevant production and cost measures for
decision making?
• How does competition affect business decisions in different
market structures?
• What prices should be set?
• What would be the impact of changes in interest rates on costs,
accounting, or capital budgeting?
• How important are the managerial and marketing decisions in
case of:
• Changes in foreign exchange rates, technology, incomes,
government regulations, sources of energy, the balance of
payments?
“It’s easy to identify successful or failed strategies (and
the reasons for their failures) in the review of literature.
But it’s much more difficult to identify successful or failed
strategies before they succeed or fail.”
Managerial Economics Defined
• Managerial Economics is microeconomics applied to decisions made
by business managers.

• The application of microeconomic theory and the tools of decision

science that examine how an organization can achieve its aims or
objectives most efficiently.
• Microeconomics is the study of individuals consumers and firms,
markets and game theory
 Managerial Decision Problems

Economic theory Decision Sciences

Microeconomics Mathematical Economics
Econometrics

MANAGERIAL ECONOMICS
Application of economic theory
and decision science tools to solve
managerial decision problems

OPTIMAL SOLUTIONS OF
MANAGERIAL DECISION PROBLEMS
Goal of the Course
• Managerial economics can also be termed as applied microeconomics
with a primary focus to guide the managers
• It is the study of firms and markets, how they operate and how the
market mechanism works
• The goal is to provide a range of economic tools and concepts to
analyze market outcomes, and then help understand how to apply
them in practice
Course Content
1. Fundaments of Microeconomics
2. Demand
3. Elasticity Microeconomics
4. Supply Tool Kit
5. Competitive Mkts
6. Economic Efficiency
8. Monopoly
9. Pricing Policy
Strategy
10. Strategic Thinking
Tool Kit
11. Oligopoly