COURSE GUIDE

COURSE GUIDE

Table of Contents
Welcome to BMME5103

xi

What will you get from doing this course?

Description of the Course
Aim of the Course
Course Learning Outcomes

xi

How can you get the most from this course?

Learning Package
Mind Map
Table of Content
Course Content
Organisation of Course Content
How will you be assessed?
Assessment Format
Assignments
Final Examination
Participation
What support will you get in studying this course?
Seminars
MyLMS Online Discussion
Facilitator
Library Resources
Learner Connexxions

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How should you study for this course?

Time Commitment for study
Proposed study strategy

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Final remarks

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WELCOME TO BMME5103 MANAGERIAL ECONOMICS

BMME5103 Managerial Economics is one of the required courses for the Master
of Business Administration and Master of Management programmes. The course
assumes you have little or no previous knowledge of economic theories but you
are required to tap into your experiences and relate them to the economic
theories, concepts and principles that will be discussed in the course. This is a
three-credit hour course conducted over a semester of 14 weeks.

WHAT WILL YOU GET FROM DOING THIS COURSE?

Description of the Course
The types of decision made by managers usually involve questions of resource
allocation within the organisation. Macro and global economic forces frequently
influence this decision. Managerial economics assists decision makers allocate
scarce resources effectively and efficiently in an imperfectly competitive
environment. It applies economic concepts and science techniques to develop
vital tools for effective managerial decision in business and administrative
organisations.
The course begins with a discussion on values and goals of firms, giving special
attention to profit and profit maximisation. This is followed by examining the
most critical factor to the existence of the firm itself, which is the behaviour of the
consumer, by analysing demand for the firms products or services and
identifying factors affecting the demand. Then the course focuses its attention to
the firm itself; analysing critically the theories pertaining to production and cost
of producing the products and services.
The last part of the course brings together the demand and cost concepts within
the context of market structure. Firms need to understand the market structure it
is operating in so that it can apply the appropriate strategy to compete
successfully. The course concludes with a discussion on various pricing strategies
which are deemed appropriate with specific business situations.

Aim of the Course

The objective of the course is to enhance students understanding and application
of economic analysis to managerial decisions. We believe this goal can best be
accomplished by providing a clear and brief statement of the principles of
microeconomic decision making and supplementing this material with problems,
examples and cases that illustrate how such principles are applied.

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Course Learning Outcomes

After completing this course, you should be able to apply economics theory
together with decision science methodology to business and administrative
decision-making. Specifically, you should be able to:
1.

Apply economic concepts and optimisation techniques in managerial

decision-making;

2.

Conduct demand analysis, evaluate factors affecting demand and use

selected forecasting models;

3.

Allocate production resources effectively and efficiently using production

and cost theories;

4.

Determine optimal price and output levels in various types of market

structures; and

5.

Adopt special pricing strategies such as price discrimination, multiple

product pricing and transfer pricing.

HOW CAN YOU GET THE MOST FROM THIS COURSE?

Much of what we discuss here is not too difficult if you put some thought into
your study of it. One way to sharpen your economic IQ is to keep an eye on the
news and business and economic periodicals such Business Times, Malaysian
Business and The Wall Street Journal. You will find, as we have, that the success
or failure of many business undertakings hinges on how well management has
understood many of the concepts we discuss in the topics to follow. We will cite
some experiences of real businesses and as you work your way through the
course, we expect you will develop some definite opinions about which firms
have played their cards wisely and which ones have not. All of this, we hope,
will help you to play yours well in the future.

Learning Package
In this Learning Package, you are provided with THREE kinds of course materials:
1.
The Course Guide you are currently reading;
2.
The Course Content (consisting of 10 topics); and
3.
The Course Assessment Guide (which describes the assignments to be
submitted and the examinations you have to sit for) will be given to you in
a separate folder.
Please ensure that you have all of these materials.

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Mind Map
The diagram below portrays the role of managerial economics in business
decision making process, which starts with problems identification and
definition and end with the implementation of the optimal decision.

Management Decision Problems

Product Price and Output Levels
Make or Buy
Production Technique
Inventory Level

Economic Concepts and

Framework for Decisions
Demand Analysis
Production and Costs
Market Structure
Pricing Techniques

Decision Sciences
Tools and Techniques of Analysis
Decision Techniques
Optimisation
Forecasting
Numerical Analysis

Managerial Economics
Use of economic concepts and decision science
methodology to solve managerial decision
problems

Optimal solutions to managerial decision problems

Table of Content
Topic 1

Introduction to Managerial Economics

Topic 2

Fundamental Economic Concepts and Optimisation Techniques

Topic 3

Demand and Supply Analyses

Topic 4

Estimation of Demand

Topic 5

Business and Economic Forecasting

Topic 6

Theory of Production

Topic 7

Cost Analysis

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Topic 8

Prices, Output, and Strategy: Pure Competition and Monopoly

Topic 9

Prices and Output Determination: Monopolistic Competition and

Oligopoly

Topic 10

Pricing Techniques and Analysis

Course Synopsis
This course is divided into three parts and each part consists of between 2-5
topics. There are 10 topics all together.
Part 1 focuses on the application of microeconomic to business and
administrative problems. Topics include demand analysis, demand estimation
and business and economic forecasting.
Topic 1:

Provides an introduction to managerial economics, focusing on

the value and goals of the firm.

Topic 2:

Reviews basic economic concepts and optimisation techniques,

particularly marginal analysis and differential calculus.

Topic 3:

Discusses the theory of demand and introduces the elasticity

properties of the demand function.

Topic 4:

Examines the procedures that are used in empirical estimates of

demand functions.

Topic 5:

Introduces various methods in business and economic forecasting.

Part 2 deals with production and cost analysis decisions faced by managers of
economic enterprises.
Topic 6:

Discusses the theory of production decisions. It includes the

determination of the type and amount of resources that are used
in the production of the desired amount of output.

Topic 7:

Discusses the theory of cost analysis, which will be combined with

revenue estimates to determine the optimal level and the mixes of
output.

Part 3 demonstrates the profit-maximising price-output decisions faced by firms

in various types of market structure.

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Topic 8:

Discusses the price-output decisions in pure competition and

monopoly.

Topic 9:

Discusses price-output decisions in monopolistic competition and

oligopoly.

Topic 10:

Describes pricing techniques including price discrimination and

transfer pricing.

Organisation of Course Content

In distance learning, the module replaces the university lecturer. This is one of
the main advantages of distance learning where specially designed materials
allow you to study at your own pace, anywhere and at anytime. Think of it as
reading the lecture instead of listening to a lecturer. In the same way that a
lecturer might assign something for you to read or do, the module tells you what
to read, when to read and when to do the activities. Just as a lecturer might ask
you questions in class, your module provides exercises for you to do at
appropriate points.
To help you read and understand the individual topics, numerous realistic
examples support all definitions, concepts and theories. Diagrams and text are
combined into a visually appealing, easy-to-read module. Throughout the course
content, diagrams, illustrations, tables and charts are used to reinforce important
points and simplify the more complex concepts. The module has adopted the
following features in each topic:

ACTIVITY
These are situations drawn from situations to show how knowledge of
the principles of learning may be applied to real-world situations. The
activities illustrate key points and concepts dealt with in each chapter.

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SELF-CHECK
Questions are interspersed at strategic points in the topic to encourage
review of what you have just read and retention of recently learned
material. The answers to these questions are found in the paragraphs
before the questions. This is to test immediately whether you
understand the few paragraphs of text you have read. Working
through these tests will help you determine whether you understand
the topic and prepare you for the assignments and the examination.

The main ideas of each topic are listed in brief sentences to provide a review of
the content. You should ensure that you understand every statement listed. If
you do not, go back to the topic and find out what you do not know.

Key terms discussed in the topics are placed at the end of each topic to make you
aware of the main ideas. If you are unable to explain these terms, you should go
back to the topic to clarify.

At the end of each topic, a list of articles and topics of books is provided that is
directly related to the contents of the topic. As far as possible, the articles and
books suggested for further reading will be available in OUMs Digital Library
which you can access and OUMs Library. Also, relevant Internet resources are
available to enhance your understanding of selected curriculum concepts and
principles as applied in real-world situations.

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HOW WILL YOU BE ASSESSED?

Assessment Format
There are TWO aspects to the assessment of the course ! assignments and final
examination. See the table below for the weighting and important dates for each
type of assessment.
Weighting

Type

Due Date

1.

Facilitator-Marked Assignment

50%

4th Seminar

2.

Final Examination

50%

Examination week

TOTAL

100%

1.

ASSIGNMENT (50%)
There is ONE Facilitator-Marked Assignment (FMA) in this course. You
need to complete the materials before working on the FMA. More specific
instructions are contained in the Course Assignment Guide provided.

2.

FINAL EXAMINATION (50%)

The final examination for BMME 5103 will be THREE HOURS long and
comprises of two parts:
Part A:
(120 minutes)

This part consists of four compulsory questions.

You should take about 30 minutes to answer
each question.

Part B:
(50 minutes)

This part consists of five short answer questions.

You are to choose and answer only three
questions. You should take about 15 minutes to
answer each question.

Planning
(10 minutes)

Set aside about 10 minutes to plan and review

the content of your answer.

Sample Part A Questions:

Suppose the government wants to encourage Malaysians to lose weight
and as a result, attempts to change eating habits away from "junk" food
and towards healthier foods. How might the government shift the
quantity demanded of the different types of food, and how might they
shift the demand?

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You have been recruited as a consultant to assess the viability of

opening an upscale specialty shop for womens clothing. The firm
employing you intends to carry exclusively name-brand designers.
Should you determine that regression analysis may be beneficial in
addressing this question, what type of data and variables might you use
to estimate the potential profitability of a new entrant in this market?
Sample Part B Questions:
What does it mean to say that the demand for a good has increased?
You are asked to estimate the demand for a product. How might you
determine which variables to include in your analysis?
The questions in the final examination are closely related to the questions in
the Self-Check and Activity exercises. All areas of the course will be
assessed. Hence, you may find it is useful to review the Self-Check and
Activity segments.

WHAT SUPPORT WILL YOU GET IN STUDYING THIS

COURSE?
Seminars
There are 15 hours of seminars or face-to-face interaction supporting the course.
These consist of FIVE seminar sessions of 3 hours each. You will be notified of
the dates, times and location of these seminars, together with the name and
phone number of your facilitator, as soon as you are allocated a seminar group.

MyLMS Online Discussion

Besides the face-to-face seminar sessions, you have the support of online
discussions. You should interact with other students and your facilitator using
MyLMS. Your contributions to the online discussion will greatly enhance your
understanding of course content, how to go about doing the assignments and
preparation for the examination.

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Facilitator
Your facilitator will mark your assignments. Do not hesitate to discuss during the
seminar session or online if:
You do not understand any part of the course content or the assigned
readings;
You have difficulty with the self-tests and activities; and
You have a question or problem with the assignments.

Library Resources
The Digital Library has a large collection of books, journals, thesis, news and
references which you can access using your student ID.

Learner Connexxions
This is an online bulletin which provides interesting and relevant information to
help you along the programme. There are many useful study hints and you can
read about the experiences of other distant learners.

HOW SHOULD YOU STUDY FOR THIS COURSE?

1.

Time Commitment for Studying

You should plan to spend about six to eight (8) hours per topic, reading the
notes, doing the self-tests and activities and referring to the suggested
readings. You must schedule your time to discuss online. It is often more
convenient for you to distribute the hours over a number of days rather
than spend one whole day per week on study. Some topics may require
more work than others, although on average, it is suggested that you spend
approximately three days per topic.

2.

Proposed Study Strategy

The following is a proposed strategy for working through the course. If you
run into any trouble, discuss it with your facilitator either online or during
the seminar sessions. Remember, the facilitator is there to help you.
(a)

The most important step is to read the contents of this Course Guide
thoroughly.

(b)

Organise a study schedule. Note the time you are expected to spend
on each topic and the date for submission of assignments as well as
seminar and examination dates. These are stated in your Course

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Assessment Guide. Put all this information in one place, such as your
diary or a wall calendar. Whatever method you choose to use, you
should decide on and jot down your own dates for working on each
topic. You have some flexibility as there are 10 topics spread over a
period of 14 weeks.
(c)

Once you have created your own study schedule, make every effort to
stick to it. The main reason students are unable to cope is because
they get behind in their coursework.

(d)

To begin reading a topic:

Remember in distance learning much of your time will be spent
READING the course content. Study the list of topics given at the
beginning of each topic and examine the relationship of the topic
to the other nine topics.
Read the topic overview showing the headings and subheadings
to get a broad picture of the topic.
Read the topic learning outcomes (what is expected of you). Do
you already know some of the things to be discussed? What are
the things you do not know?
Read the introduction (see how it is connected with the previous
topic).
Work through the topic. (The contents of the topic has been
arranged to provide a sequence for you to follow)
As you work through the topic you will be asked to do the self-test
at appropriate points in the topic. This is to find out if you
understand what you have just read.
Do the activities (to see if you can apply the concepts learned to
real-world situations)

(f)

When you have completed the topic, review the learning outcomes to
confirm that you have achieved them and are able to do what is
required.

(g)

If you are confident, you can proceed to the next topic. Proceed topic
by topic through the course and try to pace your study so that you
keep yourself on schedule.

(h)

After completing all topics, review the course and prepare yourself for
the final examination. Check that you have achieved all topic learning
outcomes and the course objectives (listed in this Course Guide).

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FINAL REMARKS
Once again, welcome to the course. To maximise your gain from this course you
should try at all times to relate what you are studying to the real world. Look at
the environment in your institution and ask yourself whether the ideas discussed
apply. Most of the ideas, concepts and principles you learn in this course have
practical applications. It is important to realise that much of what we do in
education and training has to be based on sound theoretical foundations. The
contents of this course provide the principles and theories explaining human
learning whether it be in a school, college, university or training organisation.
We wish you success with the course and hope that you will find it interesting,
useful and relevant in your development as a professional. We hope you will
enjoy your experience with OUM and we would like to end with a saying by
Confucius ! Education without thinking is labour lost.