Institute of Business Administration

ECO501- Managerial Economics

Fall 2020

Course Instructors: Dr Khadija Bari & Dr. Lalarukh Ejaz

Email: kbari@iba.edu.pk; lejaz@iba.edu.pk

Course Description:

Managerial Economics is concerned with the application of economic principles and

methodologies to business decision problems. In this course students will increase their
understanding of economics and learn a variety of techniques that will allow them to solve
business problems relating to costs, prices, revenues, profits, and competitive strategies.

The over-riding goal of the course is to make students better decision-makers in a business or
institutional context but the principles and techniques are also applicable to personal financial
and economic decisions. A subsidiary purpose of the course is to sharpen analytical skills so that
students will be better able to recognize and solve decision problems in different contexts.

The course, accordingly, is concerned with both theory and practice: the theory serves to sharpen
analytical skills, and the practice will give experience in the application of the principles and
techniques to real-world business problems.

Teaching Method

This course will combine case teaching, discussion method with lectures, and problem solving.
The cases and readings assigned for this course are selected to help you understand the principles
of strategic decision making in actual business settings. Through active participation in class, and
smaller group discussions you will experience the multiple decisions facing a firm to understand
strategic decision making.

Participant Responsibilities

To maximize learning by the discussion method, a high involvement on the part of each
participant is necessary. Your first responsibility is to come to class prepared. Preparation
consists of a thorough knowledge of the assigned material and demonstrated effort on homework
problems and discussion questions. In addition, if you can make time available, discuss the
textbook chapters, case, articles or homework with other students before class. Your second
responsibility is to take an active part during class discussions. Though you may be called
upon to present your views or answers to problems at any time, the emphasis will be on
voluntary participation.

Finally, we will take a business-like attitude towards this course. View the class discussions
with faculty and fellow students as a business meeting. It is expected that your laptop would be
used only for class related materials and not for conduct of personal business (such as email,
chat, face book and so on).

Other than class participation and a final exam, there is one more deliverable for the class., that is
of pop up quizzes. These quizzes will be based on the course material provided and discussions
held on topics that are taught in class and will be conducted at the completion of each topic listed
below.

Course Content

The following is a tentative outline of this course. Depending on the pace and progress, some
material is subject to change.

Week Topics Reading

Paul Keat & Paul
Young(PKPY)
Ivan Png & Dale
Lehman
1 Introduction to Managerial Economics Ch. 1 (PKPY)
Economics and managerial decision making Ch. 1 (IPDL)
2 Demand and Supply Ch. 3 (PKPY)
Demand function. Supply function. Market equilibrium. Ch. 2 & 4 (IPDL)
Changes in market equilibrium. Mathematics of supply
and demand.

3 Elasticity Ch.4 (PKPY)

Price elasticity of demand. Income elasticity and cross- Ch.3 (IPDL)
price elasticity of demand. Price elasticity of supply.
Application of elasticity.

4 Demand Estimation and forecasting Ch.5 (PKPY)

Estimation of demand functions by using data. Ch.3 (IPDL)
Application of forecasting
6 Theory and Estimation of Production Ch. 6 (PKPY)
Production function. Estimation of production function.
Production in the short run and long run
 7 The theory and Estimation of Cost Ch.7 (PKPY)
Estimation of cost function. Fixed, variable, average, Ch.7 ( IPDL)
marginal, total costs and their relationship.

8 Economies of Scale and Scope Ch. 2 (BDSS)

Expansion path. Returns to scale. Difference between
Economies of scale and scope
9 Competitors and Competition Ch. 8 & 9 (PKPY)
Firm and industry. Perfect competition, monopolistic Ch. 8 & 11 (IPDL)
competition, oligopoly, monopoly, and their pricing and Ch. 8 (BDSS)
output decisions
10 Special pricing practices Ch.10 (PKPY)
Ch10 (BDSS)
11 Game theory and Asymmetric Information Ch.11 (PKPY)
13 Industry Analysis (Optional) Ch.11 (BDSS)

Grading:
The course grade will consist of the following:

Grading Component % of grade

1 Course preparation/ 10%

class participation
2 Pop up Quizzes (10-13 approx.) 40%
3 Final Exam 50%
Total 100%

Counseling hours:

Dr Khadija Bari: Thursdays 10 am-1 pm; Room 17- 7th floor Aman Towers City Campus or by
appointment over Zoom

Dr Lalarukh Ejaz: Monday and Thursday 545- 645 pm; Room 13- 7th floor Aman Towers City
Campus or by appointment over Zoom

References (Please use latest available editions)

 Paul G. Keat and Philip Young ‘Managerial Economics’ 8th ed. Prentice Hall 2014
 Ivan Png and Dale Lehman ‘Managerial Economics’ 3rd ed. Blackwell 2007
 Besanko, Dranove, Shanley, and Schaefer ‘Economics of Strategy’ 5th ed. Wiley 2012
 Christopher R Thomas and S Charles Maurice ‘Managerial Economics’ 9th ed. McGraw-
Hill