West Chester University
Department of Economics

Economics 647                         Tom Andrews Ph. D.
Managerial Economics            Anderson Hall 313
Fall 2006                                   610-436-1082

T 2-3
W 11:00-2
R     8:30-9:30        

Text: Dominick Salvatore, Managerial Economics: in a Global Perspective, 5th edition.


This course is essentially a course in applied microeconomics. Students should learn the ability to use economic thinking to enhance critical thinking and problem solving skills to improve the efficiency of organizational decision making. In addition, students will become familiar with economic models and technology for quantitative analysis.


1. Homework Assignments (up to 20% of grade)

At least 5 homework assignments will be given. Each is worth 5% of your final grade with the credit deducted from your lowest exam score. Homework is optional, but if it is turned in it will be graded and counted (so don't turn in junk). Homework will be assigned one week before due date, and will usually consist of problems from the end of chapters. Homework is important in terms of final grades, and as a preparation for exams. Collaboration with fellow students is allowed, though answers should not be identical. Homework will be graded on a scale of one to ten.

****Under No Circumstances Will Homework Be Accepted Late*******

2. Demand tutorial project (25 percent) See instructions below.

3. Three Exams (up to 75% of Grade)
EXAM 1 25%
EXAM 2 25%
EXAM 3 (final) 25%

Each exam will consist of short answer essay questions and problems.

Make-up exam policy: Make-up exams will only be given for well documented emergencies. In all other cases missed exams will be counted as zeros.


Attendance is strongly suggested. Students are responsible for all material covered during class. If a class is missed you should get copies of the notes from students who were present.

Course Outline:

I. Introduction Week 1

Chapter One: pp. 4-17
-Define managerial economics
-Theory of the Firm
    objective and value of the firm
    profits and the function of profit
Optimization Techniques: Chapter 2 pp. 37-63
-Economic Relationships: Total, Average and margin.
-Optimization and constrained optimization with really basic calculus (no product, quotient, chain rule 54-56 or lagrange multipliers 64-65)
-Profit Maximization with calculus Appendix to Chapter 2
In-Class Exercise on Optimization

Homework Problems: Chapter 1 #13 (don't do part c)
                                      Chapter 2 #11

II. Demand Analysis Week 2

-Review Supply and Demand (Appendix ch1)

A. Theory (Chapter 3) 89 -119 (skip appendix)
Individual and market demand
Price Elasticity of Demand
Income Elasticity of Demand
Other Elasticities

Demand relationship

In-class  Exercise on Demand Theory

Second In-class Exercise on Demand Theory      Solution

Chapter 3 Homework Problems:1, 15 .

B. Estimation (Chapter 4) 138-177 week 3 and 4

Regression Analysis (In this section concentrate on
understanding and interpreting the results of a regression.
You do not need
to be able to calculate the parameters and statistics by hand, but you should
be able to understand what they mean.)

Demand estimation in-class exercise: Data  Text

Chapter 4 Homework Problems: 15 data .

C. Forecasting (Chapter 5) 189-213 week 5&6

Time series Analysis
Smoothing techniques
Econometric Models (single equation)

practice data

in-class exercise: Text    Data

more practice text     data

Almond Practice

Chapter 5 Homework Problem: 15 a,b,c,e instead of d, for #15 estimate demand for the third quarter of 1978 .

sample EXAM2    TEXT     DATA  Turn in a diskette with your work  one solution

III. Production and Cost

A. Production Theory  225-257 (Chapter 6 Skip Appendix)
Production Functions
One variable input (short-run production)
Two variable inputs (Long-run production)
Estimating Production functions and Returns to scale: Cobb Douglas Example

Chapter 6 Homework Problem: 15 .

B. Costs (Chapter 7 read the Appendix)
Short-run Costs
Long-run Costs
Estimating Cost Functions 302-308  Cost estimation example    Solution

Another problem  Cost data has been added to a previous example

  Chapter 7 Homework Problems: 2, 13 (do not calculate the breakeven output in part b) .

Almond problem         Price Discrimination Homework

Practice Exam  (partial answers) 

IV Market structure and pricing practices

A.     Market structure (Chapter 8)
Perfect competition
monopolistic Competition

Chapter 8 Homework Problem: 15 .

B. Oligopoly (Chapter 9)

B. Pricing Practices (Chapter 11 Skip Appendix)

Price Discrimination
Transfer Pricing
Pricing in Practice

Chapter 11 Homework Problem: 15.

C. Risk Analysis (Chapter 13) 

Measuring Risk
Incorporating Risk

Chapter 13 Homework Problem: 15 .

Final Exam

Demand Tutorial Instructions


Construct a Demand tutorial using Microsoft Excel.  The tutorial should demonstrate the changes in quantity demanded and changes in demand for a market demand curve estimated from actual data.  The assignment should give you the opportunity to review and understand the theoretical relationships underlying the demand curves.  In addition, the exercise will require a review of statistics particularly regression, and develop facility with Excel.


1. Construct a theoretic demand model for a commodity of your choice. Make a list of the necessary variables (dependent and independent), and the expected relationship between each independent variable and the dependent variable. Tip: Only try to estimate models where data is available. It does little good to theorize about toothpaste if you cannot find data on toothpaste. Start with an idea that has a chance of working...peruse the available data.. Tip: Price data is harder to come by than quantities. If you have prices you can usually get quantities, but quantities may not be associated with prices. Pick prices first


2. Attempt to estimate the theoretical model using the data from the


2a. collect the relevant data

Here are some places to start (focus on prices) read the READ ME files!

Fruit and Tree Nut Yearbook
Spreadsheet Files


Vegetables and Melons Yearbook (89011)


Food Consumption, Prices and
Expenditures (89015)




2.b. Once you have established your data set, estimate the demand relationship and evaluate your success. Was the necessary data available? What variables were missing? Are the signs correct? Are the results significant? Include this information (including your explanation of the theoretical model) in text boxes in the final product. Explanations should be error free.


3. Use the data and the resulting model to construct a tutorial for demand using excel.   The tutorial should demonstrate how demand would shift when there is a change in one or more of the independent variables. It should also illustrate marginal revenue and elasticity.


Submit both hard and electronic versions of your analysis. Both versions of submission should be free of grammatical and typographical errors and have a professional appearance


Your evaluation will be based on the following:


Each of the above bullets should correspond to a separate sheet in your workbook.


Name___________ Tutorial Evaluation rubric







Theoretical Demand Model


All necessary variables (dependent and independent), are adequetly described and the expected relationship between each independent variable and the dependent variable is clearly stated and supported by standard demand theory

Incomplete list or description of necessary variables. The expected relationship between each independent variable and the dependent variable is stated and supported by standard demand theory

Incomplete list or description of necessary variables. The expected relationship between each independent variable and the dependent variable is not clearly stated or supported by standard demand theory

Incomplete or incorrect list of variables no theoretical relationship.

No Theory

Data Collection

Data collected is the appropriate to the problem, no obvious missing variables

Some readily available variables were not collected

Only the bare minimum requirement of variables was collected

Less than the minimum number of variables was collected

No data

Model Estimation

Model reflects the appropriate choice of independent and dependent variables.

Some inappropriate independent variables

Inappropriate dependent variable

Inappropriate independent and dependent variables

No model

Evaluation of regression

Evaluation is clear and identifies all problems with signs and or statistical significance

Evaluation is clear and identifies all problems with signs but not with statistical significance

Evaluation does not identify all problems with signs or statistical significance

Little evaluation of signs or significance

No evaluation

The tutorial functions according to the model, is attractive and clearly shows the shifts in the curve when variables change.

The tutorial functions according to the model but is unattractive or does not clearly show the curve shifting.

The tutorial does not function according to the model, and is unattractive

The tutorial does not function.

No tutorial