Duration: 3 hours for 13 weeks [ECTS: 4]

Course outline

1. The nature and scope of managerial economics, definition of Managerial Economics, basic process of decision making, Theory of the firm, Nature and function of profits.
2. Optimization techniques and new management tools, methods of expressing average and marginal relationships, optimization analysis, constrained optimization, new management tools for optimization.
3. Demand theory, demand for a commodity, price elasticity  income elasticity  and cross-price elasticities of demand, use of elasticities in managerial decision making.
4. Linear Programming (LP), a simple LP maximization problem with two variables, construction of the mathematical model, objective function and constraints, feasible solution space, graphical solution of LP models, sensitivity analysis, examples of LP applications with more than two variables.
5. Inventory Theory, reasons for stocking physical goods, inventory policy, process of operating inventory systems, single-item Economic Order Quantity (EOQ) model with zero and non-zero lead-times, single item EOQ models with (a) price breaks, and (b) backorders.
6. Pricing in practice, pricing of products with interrelated demands, plant capacity utilization and optimal product pricing, optimal pricing of joint products produced in fixed and variable proportions, transfer pricing (a) with no external market for the intermediate product, and (b) with a perfectly and imperfectly competitive market for the intermediate product, cost-plus pricing, incremental analysis in pricing.

Learning outcomes

By the end of this course, students will be able to:

1. Calculate/estimate either from available data or from the mathematical form of demand curve price elasticities of demand, income elasticities and cross-price elasticities and use the values obtained in conducting economic policies,
2. Develop linear programming (LP) models for economic and business problems, solve LP problems with two decision variables graphically, and perform the necessary sensitivity analysis,
3. State the optimal inventory policy in economic order quantity models with deterministic demand,
4. Apply/analyze multi-product pricing practices, transfer pricing, and cost-plus pricing.