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MANAGERIAL ECONOMICS
Dr. Gong Jie
National University of Singapore
Managerial Economics
Economics
Micro: individual decision maker (consumers, households,
workers, firms, etc.)
Marco: aggregate level
Managerial Economics
The study of making decisions in allocating scarce resources to
achieve a managerial objective
The application of microeconomics on effective management
Managerial Economics helps managers make rational choice.
Manager in narrow sense and in broad sense
Determination of
Prices
Consumer Theory
Producer Theory
Competitive Markets
Managerial Economics
Game Theory&
Oligopoly Markets
Simultaneous-Move Game
Sequential-Move Game
Class Preparation
Class participation: NO WEBCAST
Course readings
Microeconomics,
Assignments
Problems
Sets
Presentation
Tutorial
Practice
Tutorials
Tutorials start from week 3
No tutorial in recess week
Presentation
Each group presents once.
The groups and topics will be announced at first tutorial
class.
Grading
Homework Problem Sets
15 percent
Presentation
25 percent
Final exam
60 percent
Group project
15-min presentation in tutorial
Schedule to be announced in
IVLE & first tutorial
Monday, 24 Nov
Closed-book, covering all lecture
materials throughout the course
Monday, 24 Nov
Final Exam
Mathematics Required
Classroom Etiquette
Be on time to class
Switch off your cell phone
No side conversations
Laptops allowed ONLY for learning activities
Agenda
Essence of Economic Modeling
Opportunity cost
Economic models
Exogenous and endogenous variables
MARGINAL thinking!
Rental revenue!
Is that all?
Implicit Cost
Economic Modeling
Models are simplifications, like maps.
Resemble reality
Abstract from the rich details
Help understand the fundamental forces
Endogenous
Example
Q
Benefits
MB
Costs
MC
Net Benefits
30
30
24
48
18
14
34
60
12
24
10
36
64
40
16
24
Marginal Principle
MB > MC means the last unit of the endogenous
variable increased benefits more than it increased
costs.
MB < MC means the last unit of the endogenous
variable increased costs more than it increased
benefits.
To maximize net benefits, the managerial
control(endogenous) variable should be increased
up to the point where MB = MC.
B
MB =
Q
Slope (calculus derivative) of the total benefit curve
C
MC =
Q
Costs
Slope =MB
Benefits
B
Slope = MC
Q*
Economic modeling
Takeaway