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Microeconomic Foundations of Business
ECN 7000-51(M 6.30-9.00), Spring 2001
Prof. Farhoud Kafi
West Gate #12.
Tel.: 781-239-5545.
Office Hours: M - W 4 -5 PM, or by appointment.
Email: kafi@babson.edu,
OVERVIEW
MFB is a foundation course and is designed to provide you with a framework to analyze
the economic environment in which firms operate. Some of the topics such as; supply and
demand analysis, consumer choice, demand and supply elasticity; production and cost
functions will be basics and will be covered in the first half of the course. In the second
half, we will look at the market structure and firms strategic behavior under different
market conditions.
COURSEWORK, EXAMS, AND GRADE
Course requirements include; timely completion of assigned readings, regular attendance,
2 one hour quizzes, midterm, final exam, and company evaluation.
Important dates:
Quiz 1
: February 19
Midterm : March 12
Quiz 2
: April 16
Final Exam: May 7
Class participation and assigned works
Company evaluation
TOTAL =
10%
30%
10%
30%
10%
10%
100%
As a part of your course assignment, you must select a company, review the financial
statement (as well as their business/financial strategy if available). Write a two to three
page summery of how the company is doing, would it be a good investment, should they
change their strategy etc. You can work as a team.
TEXTBOOK
Keat, Paul G. and Young, Philip K.Y., MANAGERIAL ECONOMICS: Economic Tools
for Today’s Decision Makers, Third Edition, 2000 by Prentice Hall, New Jersey.
Recommended: Taking Technology To Market by Roger E. Levien, Crisp publication,
Inc. 1997
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LECTURE OUTLINE AND REQUIRED READING
Week 1
Introduction to economic terms and concepts. Firm’s objective and motives in the market
place. Decision process. Concept of demand and supply. Structure of equilibrium.
Chapters 1,2, and 3. (For review of math, look at the appendix to chapter 2).
Week 2
Movement of demand and supply curve, inter-relation between factors and product
market. Consumer behavior and objectives; an alternative to Marshal’s demand analysis.
Chapter 3, and Class Handout
Week 3
Consumer choice and budget constraint, indifference analysis and welfare implication.
Class Handout
Week 4
Market response to changes. Concept of elasticity. Review of models for estimating the
market demand. Chapters 4 and 5. (Appendix 4A provides few applications of these
concepts).
Week 5
The Theory of Production. Production function and optimum output. Short term and long
term consideration. Average and Marginal product. Chapter 7. (Appendix A and B
provide example of multiple input and how to solve for input).
Week 6.
The Theory of Cost. Importance of cost to the management. Production cost in the short
and long term. Chapter 8. (Appendix A and B provides a base for mathematical
calculations of costs).
Week 7
MIDTERM EXAM
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Week 8
Competitive Strategy. How firms operate in a perfectly competitive market. Barriers to
entry and Monopoly. Chapter 9
Week 9
Behavior of firms under monopoly conditions. Monopoly pricing strategy in the regulated
market. Chapters 9
Week 10
Product differentiation and imperfectly competitive market. Role of advertising in this
market. Monopolistic competition and oligopoly market. Pricing decision by large firms.
Firm’s behavior in the imperfectly competitive market. Chapter 10.
Week 11
Brake-Even analysis. Operating leverage and volume-cost-profit analysis. Chapter 11.
Week 12
Special pricing strategies in the oligopolistic market. Cartel arrangement, Price
leadership, Kinked Demand, and price discrimination. Chapter 12
Week 13
Prisoner's-Dilemma and game strategy. If time permits we will cover capital budgeting
and risk and uncertainty. Chapters 13 -14.
FINAL EXAM