1. Economic Analysis for Managers (ECO 501)
Khurrum S. Mughal

2. Theme of the Lecture Theory of Demand Production Theory Introduction
Regression Analysis
Regression equation for demand
Managerial Decision Making and Link with Elasticities
Economic Forecasting
Production Theory Introduction
The Production Function

3. Regression Analysis Qty (Q) Price (P) 100 15 90 18 85 19 110 14 120 13
105 16 3

4. Regression Analysis Qty (Q) Price (P) Q-Mean P-Mean (P-Mean)2
100 15 -1 1 90 18
-10 2 4
-20 85 19
-15 3 9
-45
110 14 10 -2
120 13 20 -3
-60
-30
105 16 5
800
128 40
-175
Sum
Mean 4

5. Managerial Decision Making
Tasty Company Markets Coffee Brand “X”………
Qx = Px + 0.8I + 2.0Py - 0.6Ps A
Qx: Sale of Coffee brand in millions of pounds per year
Px: Price in dollars per pound
I: Personal disposable income, trillions of dollars per year
Py: Competitors price in dollars per pound
Ps: Price of sugar in dollars per pound
A: advertising expenditure hundreds of thousands of dollars per year
Compute Qx when Px= $2, I= $ 2.5, Py= $ 1.80, Ps= $ 0.50, A= $1, then Compute Elasticities 5

6. Regression equation for demand of Chevrolets
Qc = 100, Pc + 2,000N + 50I + 30PF – 1,000PG + 3A
Qc quantity demanded of cars per year
Pc price in dollars
N population in millions
I per capita disposable income in dollars
PF price of Ford cars in dollars
PG price of gasoline in cents per liter
A advertising expenditure in dollars per year

7. Indicate the change in the number of Chevrolets purchased per year (Qc) for each unit change in explanatory variables.
Qc = 100, Pc + 2,000N + 50I + 30PF – 1,000PG + 3A
Qc quantity demanded of cars per year
Pc price in dollars
N population in millions
I per capita disposable income in dollars
PF price of Ford cars in dollars
PG price of gasoline in cents per liter
A advertising expenditure in dollars per year

8. Compute QC when PC= $9,000, I= $ 10,000, PF= $ 8000, PG= 80 cents, A= $1, N= 200 million
Qc = 100, Pc + 2,000N + 50I + 30PF – 1,000PG + 3A
Qc quantity demanded of cars per year
Pc price in dollars
N population in millions
I per capita disposable income in dollars
PF price of Ford cars in dollars
PG price of gasoline in cents per liter
A advertising expenditure in dollars per year

9. Derive equation for demand curve and plot the graph if the average value of N=200 million, I= $10,000, PF= $8,000, PG = 80 cents, and A= $ 200,000
Qc = 100, Pc + 2,000N + 50I + 30PF – 1,000PG + 3A
Qc quantity demanded of cars per year
Pc price in dollars
N population in millions
I per capita disposable income in dollars
PF price of Ford cars in dollars
PG price of gasoline in cents per liter
A advertising expenditure in dollars per year

10. Forecasting Macroeconomic Forecast Micro-forecast
General level of economic activity
Micro-forecast
Firm’s demand and sales
Historical market share
Planned marketing strategy

11. Forecasting Expert Opinion Consumer Surveys Delphi Technique
Bias/ambiguity in questions or bias in sample can bias the results
Levis 501 Jeans,
Black Flag Roach Disk,
Population Census of a province in China

12. Forecasting Market Experiments Observational Research Consumer Clinics
Consumer perception of a product
Pricing strategy
Consumer reaction to an ad campaign
Risks Involved:
Potential Loss of Customers due to change in price
Cannot hold everything constant
Observational Research
Consumer Clinics

13. Theme of the Lecture Theory of Demand Production Theory Introduction
Regression equation for demand
Managerial Decision Making and Link with Elasticities
Economic Forecasting
Production Theory Introduction
The Production Function

14. Production Function General equation for Production Function:
Q = f (K,L), where
L = Labour
K = Capital
Maximum rate of output per unit of time obtainable from given rate of Capital and Labour
An engineering concept: Relates out puts and inputs
Devoid of economics

15. Production Function Cobb-Douglas Production Function Q = A Kα Lβ
Assume a production function:
Q = 100 K0.5 L0.5
Combination K L
Output A 6 1
245 B 3 2 C D

16. Production Function Substitutability between factors of production
Returns to Scale
Returns to Factor