Module Identifier MBM1010  
Academic Year 2003/2004  
Co-ordinator Professor John R Cable  
Semester Semester 1  
Course delivery Lecture   Introduction plus 8 x 2 hour sessions  
  Other   Reading programme and group-based activities  
Assessment TypeAssessment Length/DetailsProportion
Semester Exam2 Hours  75%
Semester Assessment One piece of coursework  25%
Supplementary Exam2 Hours  100%

General description

This module is designed for students without significant background in economics. The aim of the course is to introduce selected economic concepts and demonstrate their application in practical decision-making contexts. On completion of the course students will understand how economics can be used to formulate and inform business and everyday problems, in particular those involving choice.

Module Outline (Lecture Themes)


Resource allocation and markets; Decision making involving choice; Strategic interaction.

Section I: Demand, Supply and Market Equilibrium

Unit 1: Demand

Factors affecting demand. Elasticity. Anticipating revenue effects of price changes. Application: Cambrian Railways. Other elasticities. Example: Demand for cigarettes.

Unit 2: Supply

The firm and its objectives. Cost structure: fixed and variable costs; total, average and marginal costs; the cost of durable inputs; sunk costs; opportunity costs. Revenue structure: total, average and marginal revenue under competition and monopoly.

Unit 3: Market Equilibrium

Equilibrating mechanisms; Disturbances and Shifts in Equilibrium; Dynamically Unstable Markets; Asymmetric information.

Section II: Optimisation

Unit 4: Equating at the margin:   

(i) Output determination: profit maximization and break-even analysis.

(ii) Making the most of a budget. Spending alternatives. Preferences and returns. The budget constraint. Optimising choice.

(iii) Producing at Minimum Cost. Balancing input proportions. Factor Utilisation. Technical efficiency. Economic efficiency.

Section III: Strategic Behaviour

Unit 5: Market Rivalry

Alternative market structures. Oligopoly: the rivals? dilemma. Dominant strategies and Nash Equilibrium. Co-operation in repeated plays. Cartels. Entry and entry deterrence.

Unit 6: Principals and Agents

Principal-agent relationships within the firm: owners and managers. Hidden information and hidden action. Moral hazard. Incentive contracts. Alternative contracts: wage contract; rent contract; profit related pay. Incentive contracts in practice.

Unit 7: Bidding, Contracting and Auctions

Bidding strategy. Auctions. The winner?s curse. Example: the UK 3G Mobile Licence Auctions.

Unit 8: Revision Session

Reading Lists

** Recommended Text
Brickley, J. Smith, C, and Zimmerman,J. (2001) Managerial Economics and Organisational Architecture McGraw Hill
** Supplementary Text
Townsend, H. (1995) Foundations of Business Economics Routledge
Dobbs, I. (2000) Managerial Economics Oxford
Dixit, A. and Nalebuff (1991) Thinking Strategically Norton
Axelrod, R. (1984) The Evolution of Co-operation Basic Books
McMillan, J. Games, Strategies and Managers Oxford
Campbell, D. (1995) Incentives: Motivation and the Economics of Information Cambridge
Further references will be given in lectures


This module is at CQFW Level 7