Managerial Economics for Leaders

2. Course Description

This course bridges the gap between economic theory and strategic business decision-making. Unlike traditional economics, this course focuses on the "Micro-foundations of Strategy." Students will learn to predict competitor behavior using Game Theory, optimize pricing using Elasticity Models, and make data-driven production decisions using Cost Analysis.

3. Course Objectives (Learning Goals)

1. To analyze market demand and consumer behavior to formulate optimal pricing strategies.
2. To apply Game Theory (Nash Equilibrium) to predict and counter competitor moves in oligopolies.
3. To optimize production and cost structures for operational efficiency.
4. To understand the impact of macroeconomic indicators (GDP, Inflation) on business strategy.

4. Course Outcomes (COs)

Mapped to Bloom’s Taxonomy and Taxila’s Program Outcomes.

CO Code	Course Outcome Description	Bloom's Level	Primary PO Mapping
CO1	Explain fundamental economic concepts like Opportunity Cost, Marginal Analysis, and Market Structures.	Understand (L2)	PO1 (Mgmt Knowledge)
CO2	Apply demand forecasting techniques and elasticity formulas to set revenue-maximizing prices.	Apply (L3)	PO2 (Critical Thinking)
CO3	Analyze cost functions and production data to determine the optimal scale of operations.	Analyze (L4)	PO1 (Tech/Data)
CO4	Evaluate strategic moves in oligopolies (Cartels, Price Wars) using Game Theory matrices.	Evaluate (L5)	PO3 (Leadership)
CO5	Design a competitive strategy for a new product launch considering market structure and barriers to entry.	Create (L6)	PO5 (Entrepreneurship)

 

5. CO-PO Articulation Matrix

Correlation: 3 (High), 2 (Medium), 1 (Low)

CO Code	PO1 (Mgmt/ Tech)	PO2 (Crit. Think)	PO3 (Lead/ Team)	PO4 (Comm.)	PO5 (Entrep.)	PO6 (Global/ ESG)	PO7 (Ethics)	PO8 (Life Learn)
CO1	3	2	-	-	1	1	-	1
CO2	3	3	-	-	2	-	-	2
CO3	3	3	-	-	1	-	-	2
CO4	2	3	3	1	2	1	2	-
CO5	2	2	1	2	3	-	-	3
AVG	2.6	2.6	1.3	1.0	1.8	1.0	1.0	2.0

 

6. Assessment Scheme (Taxila Standard)

 

Component	Marks	Description	Mapped CO
Simulation	20	Taxila Lab Simulations: Three proprietary simulations.   • Sim 1 (7 Marks): The Pricing War (Elasticity).   • Sim 2 (7 Marks): The Production Optimizer.   • Sim 3 (6 Marks): The Oligopoly Game (Game Theory).	CO2, CO4
Case Study	10	"Strategic Dilemma": Analysis of a Game Theory case (e.g., Cola Wars).	CO4
Presentation	10	"Market Entry Strategy": Group presentation on launching a product in a specific market structure.	CO5
Mid Term	10	Written exam covering Modules 1 & 2 (Demand & Cost).	CO1, CO2
Project	10	"Demand Forecasting": Using regression in Excel to forecast demand.	CO2
Class Participation	10	Participation in case discussions and daily preparation.	All
End Term	30	Comprehensive written exam covering all modules.	All
Total	100

 

7. Detailed Syllabus & Session Plan

Each session includes specified Pre-Class Preparation from the Textbook/Cases.

Module 1: Demand Analysis & Pricing Strategy (Sessions 1-5)

• Session 1: The Economic Way of Thinking

Topic: Scarcity, Opportunity Cost, Marginal Analysis.

Pre-Class Prep: Read Salvatore, Chapter 1 ("The Nature and Scope of Managerial Economics").

Pedagogy: Interactive Lecture.

• Session 2: Demand Theory

Topic: Law of Demand, Determinants of Demand, Shift vs. Movement.

Pre-Class Prep: Read Salvatore, Chapter 3 ("Demand Theory").

Pedagogy: Conceptual Discussion.

• Session 3: Elasticity & Revenue

Topic: Price Elasticity, Income Elasticity, Cross Elasticity. Relationship between Elasticity and Revenue.

Pre-Class Prep: Read Case: Pricing the EpiPen: This is Going to Sting (HBS).

Pedagogy: Case Discussion (Ethics of Pricing).

• Session 4: Taxila Lab Simulation 1

Topic: "The Pricing War": Students set prices for a commodity product in a competitive market to maximize revenue.

Pre-Class Prep: Review formulas for Point Elasticity from Salvatore.

Pedagogy: Simulation Lab (Taxila Lab Sim 1).

• Session 5: Demand Forecasting

Topic: Qualitative methods (Delphi) vs. Quantitative (Time Series/Regression).

Pre-Class Prep: Read Salvatore, Chapter 5 ("Demand Forecasting").

Pedagogy: Excel Lab (Running a Regression for Demand).

Module 2: Production & Cost Analysis (Sessions 6-10)

• Session 6: Production Theory

Topic: Law of Variable Proportions, Isoquants, Isocosts.

Pre-Class Prep: Read Salvatore, Chapter 6 ("Production Theory").

Pedagogy:

Graphing Workshop.

• Session 7: Cost Analysis

Topic: Fixed vs. Variable, Sunk Costs (The "Concorde Fallacy"), Economies of Scale.

Pre-Class Prep: Read Case: Tesla’s Gigafactory: Economies of Scale (HBS/IIMA).

Pedagogy: Case Discussion.

• Session 8: Taxila Lab Simulation 2

Topic: "The Production Optimizer": Balancing labor and capital inputs to minimize cost for a given output.

Pre-Class Prep: Review the condition for Producer Equilibrium ($MP_L/w = MP_K/r$) in Salvatore, Chapter 6.

Pedagogy: Simulation Lab (Taxila Lab Sim 2).

• Session 9: Profit Maximization

Topic: The Golden Rule: $MR = MC$. Shut-down point.

Pre-Class Prep: Read Salvatore, Chapter 8 ("Market Structure: Perfect Competition").

Pedagogy: Problem Solving.

• Session 10: Market Structures I (Perfect Competition & Monopoly)

Topic: Price determination in Perfect Competition vs. Monopoly. Deadweight Loss.

Pre-Class Prep: Read Case: De Beers: Controlling the Diamond Market (HBS).

Pedagogy: Case Discussion.

Module 3: Strategic Markets & Game Theory (Sessions 11-15)

• Session 11: Market Structures II (Monopolistic Competition)

Topic: Product Differentiation, Advertising Wars.

Pre-Class Prep: Read Salvatore, Chapter 9 ("Monopolistic Competition").

Pedagogy: Brand Analysis Activity.

• Session 12: Market Structures III (Oligopoly)

Topic: Kinked Demand Curve, Cartels, Price Leadership.

Pre-Class Prep: Read Case: The OPEC Cartel: A Test of Unity (IIMA).

Pedagogy: Case Discussion.

• Session 13: Game Theory Fundamentals

Topic: Nash Equilibrium, Prisoner's Dilemma, Dominant Strategy.

Pre-Class Prep: Read Salvatore, Chapter 10 ("Game Theory and Strategic Behavior").

Pedagogy: In-class Games.

• Session 14: Taxila Lab Simulation 3

Topic: "The Oligopoly Game": A multi-round game where student teams represent competing firms deciding on "High Price" vs. "Low Price".

Pre-Class Prep: Review "The Prisoner's Dilemma" concept in Salvatore, Chapter 10.

Pedagogy: Simulation Lab (Taxila Lab Sim 3).

• Session 15: Pricing Strategies

Topic: Price Discrimination (1st, 2nd, 3rd Degree), Bundling, Peak-Load Pricing.

Pre-Class Prep: Read Case: Dynamic Pricing at Uber (HBS).

Pedagogy: Case Discussion.

Module 4: Macro-Environment & Capstone (Sessions 16-20)

• Session 16: Circular Flow & GDP

Topic: Understanding the Macro economy context for business.

Pre-Class Prep: Read Salvatore, Chapter 12 (Selected sections on Macro).

Pedagogy: Lecture.

• Session 17: Inflation & Business Cycles

Topic: Impact of Inflation and Recession on Managerial Decisions.

Pre-Class Prep: Read current news article on "RBI Monetary Policy".

Pedagogy: Discussion on Indian Economy.

• Session 18: Strategic Project Briefing

Topic: Project work time.

Pre-Class Prep: Data collection for project.

Pedagogy: Group Work.

• Session 19: Capstone Presentation (Part 1)

Topic: Presentation Assessment (10 Marks).

Pedagogy: Student Presentations.

• Session 20: Capstone Presentation (Part 2)

Topic: Presentation Assessment (10 Marks) & Course Wrap-up.

Pedagogy: Student Presentations & Feedback.

8. Textbooks & Resources

1. Mandatory Textbook: Managerial Economics in a Global Economy by Dominick Salvatore (Oxford University Press).
2. Case Studies: Selected cases from Harvard Business School (HBS) and IIM Ahmedabad (IIMA).
3. Lab Resources:

Taxila Lab Sim 1: The Pricing War.

Taxila Lab Sim 2: The Production Optimizer.

Taxila Lab Sim 3: The Oligopoly Game.