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Instructor        Dr. Yasmine Kamal        Yasmine_k@feps.edu.eg Objectives The course focuses on the fundamental principles of microeconomics most relevant to managers. These include demand, costs, production, pricing, market structure, market equilibrium, and strategic interaction. Profit maximization by firms, market equilibrium in different competitive settings,  and pricing strategies are studied. Course Prerequisites Microeconomics Main Textbook   Baye , Michael R. and Prince, Jeffrey,  Managerial Economics and Business Strategy , McGraw-Hill Irwin, 9 th  edition 2017. Other textbooks: Managerial Economics by  Christopher Thomas and S. Charles Maurice, 12 th  edition. Managerial Economics by Paul  Keat  and Philip Young, 7 th  edition.

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Assessment 70%  of the grade for the  final exam 20%  for the  mid-term exam 10%  for the  year's work  (Assignments, quizzes,..)

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Course Content    Chapter 1 The Fundamentals of Managerial Economics  Chapter 3 Quantitative Demand Analysis  Chapter 5 The Production Process and Costs  Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets  Chapter 10 Game Theory: Inside Oligopoly  Chapter 11 Pricing Strategies for Firms with Market Power  Chapter 13 Advanced Topics in Business Strategy  Selected parts of Chapter 14 (as time permits)

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Summarize how goals, constraints, incentives, and market rivalry affect economic decisions. Distinguish economic versus accounting profits and costs. Explain the role of profits in a market economy. Apply the five forces framework to analyze the sustainability of an industry’s profits. Apply present value analysis to make decisions and value assets. Apply marginal analysis to determine the optimal level of a managerial control variable. Identify and apply six principles of effective managerial decision making.

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A person who directs resources to achieve a stated goal. Directs the efforts of others. Purchases inputs used in the production of the firm’s output. Directs the product price or quality decisions.

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The science of  making decisions  in the presence of  scarce resources . Resources  are anything used to produce a good or service, or achieve a goal. Decisions  are important because scarcity implies trade-offs.

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The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal. Should a firm purchase components – like disk drives and chips – from other manufacturers or produce them within the firm? Should the firm specialize in making one type of computer or produce several different types? How many computers should the firm produce, and at what price should you sell them?

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Basic principles comprising effective management: Identify goals and constraints Recognize the nature and importance of profits Understand incentives Understand markets Recognize the time value of money Use marginal analysis

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Well-defined goals Firm’s overall goal is to maximize profits Constraints make it difficult to achieve goals Available technology Prices of inputs used in production

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Recognize the Nature and Importance of Profits

Accounting profit Total amount of money taken in from sales (total revenue) minus the dollar cost of producing goods or services. Economic profit The difference between total revenue and cost  opportunity  cost. Opportunity cost The  explicit cost  of a resource  plus  the  implicit cost  of giving up its best alternative.

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The role of profits Profits are a signal to resource holders where resources are most highly valued by society.

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Changes in profits provide an  incentive  to how resource holders use their resources. Within a firm, incentives impact how resources are used and how hard workers work. One role of a manager is to construct incentives to induce maximal effort from employees.

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Two sides to every market transaction: buyer and seller Bargaining position of consumers and producers is limited by three rivalries in economic transactions: Consumer-producer rivalry Consumer-consumer rivalry Producer-producer rivalry Government and the market

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Often a gap exists between the time when costs are borne and benefits received. Managers can use  present value analysis  to properly account for the timing of receipts and expenditures.

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