To achieve the grade 12, students
should meet the following learning objectives with no or only minor
mistakes or errors: Upon the end of the course, the student will be
able to:
- Understand how economic principles can be practically applied
to decision making within the firm.
- Forecast both qualitatively and quantitatively the effects of
changes in demand and cost conditions both for an industry and an
individual firm.
- Analyze the cost structure of a firm and decide on costs
factors that are relevant for economic decisions.
- Obtain the demand curve for an individual product using real
world data and basic statistical and econometric methods.
- Decide on the optimal price for an individual product using
real world data and estimated demand curves.
- Evaluate the possibilities and limitations of alternative
pricing strategies such as group pricing, bundling, versioning,
penetration pricing, and quantity discounts.
- Understand the tradeoffs involved in the choice between
in-house production and outsourcing.
- Evaluate the attractiveness of alternative vertical
arrangements between seller and buyer such as exclusive
dealerships, exclusive territories, licensing, and
franchising.
- Understand the fundamental issues in bidding for contracts and
products.
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This is a course in applied microeconomics that that focuses on
decision making within the firm. It shows how economic principles
taught in introductory microeconomic courses can be applied to
general problems that may face anyone in a management position. The
course emphasizes real world cases and scenarios and aims at
bridging the gap between theory and practice.
The main topics of the course are: putting the perfectly
competitive market framework into use, cost and demand analysis,
pricing strategy, make or buy decisions, and strategic issues in
auctions and procurement.
One of the fundamental parts of an introductory microeconomics
course is the analysis of perfectly competitive markets. In this
course, it is illustrated how the insights from such exercise can
be used even if the market in question is not “perfectly
competitive”, how to estimate actual supply and demand functions,
and how to use these to forecast the future development of prices
and firm profits.
It is crucial for a firm to understand its cost structure, and
assess the cost factors are relevant for a particular decision. In
this course the aim is to learn how to classify costs and how to
estimate cost functions, and to use these in actual production and
pricing decisions.
Every product has a demand curve – it is just a question of
finding, and making use of, it. The course covers methods of
obtaining estimates of demand curves from various sources of data.
Using estimates of demand and costs, the focus is on getting the
pricing of the product right. Here we also cover pricing for firms
that sell several different products, and examine the feasibility
of changing the pricing structure to extract additional value. In
particular, the focus is on how to apply various forms of price
discrimination such as group pricing, bundling, versioning,
penetration pricing, and quantity discounts.
Over the last few decades there has been a general trend to
outsource the production of various inputs to other firms. However,
the “make or buy” decision is not straightforward and here we
examine some of the trade-offs. Related to this is how a firm
should deal contractually with its suppliers and buyers, and the
course covers the use of business strategies such as licensing,
exclusive contracts, and franchising.
As firms are relying more on markets and other firms in obtaining
inputs and selling outputs, the use of bidding and “auctions” has
become far more prevalent than it used to be. In this course, both
the “sellers’” and “buyers’” strategies are discussed in both
auction (where a seller wants to obtain a high price) and
procurement (where a buyer wants to get a low price) settings.
The course´s development of personal competences
During the course, students will develop the skills necessary to
use microeconomic principles to make economically sound managerial
decisions. The student will learn how to analyse real world data
and apply the results in practice. By being exposed to multiple
industries and topics the student should have an improved
understanding for the use of theory in situations he/she might
encounter in the future.
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