UNIT 201: ECONOMIC DECISION MAKING

Overview

This unit focuses on management decision making from the perspective of economic principles. Students will be introduced to the nature of managerial economics and the decision making process and most importantly the concept of value maximisation. The basic valuation model is presented as the underlying economic model of the firm and all subsequent discussion will turn on the decisions to enhance the value of the firm. The approach used in this unit is a practical problem solving treatment of economic theory and analysis, extensively supplemented by descriptive and diagrammatical presentation.

This is a program meant for practical application.

Aims

After studying this unit you should be able to:

• explain the basic economic valuation model in the context of modern business
• apply the laws of supply and demand to the organisational context, including using qualitative and quantitative methods to forecast demand
• critically analyse production processes and cost functions
• identify the main forms of market structure and recommend pricing and other strategies appropriate for each
• apply capital budgeting techniques to make long-term investment decisions, building in adjustments for risk
• understand the forms of government intervention in the economy and the implications of competition and deregulation policy for management practices
• critically evaluate major macroeconomic issues present in the national and international economy in terms of their implications for management decision making.

Topics

• The goals of firms and of public institutions
• Demand and supply
• Estimating demand and forecasting
• Production theory
• Cost analysis
• Models of pricing and output decisions
• Pricing decisions in practice
• Capital budgeting and consideration of risk
• Benefit-cost analysis
• Some important aspects of the role of government.

Co- Unit Chairs

Tom Murphy
BEc. (Hons I) MSc. (Econ) Lancaster

Tom Murphy holds the degrees of Bachelor of Economics from the University of New England and Master of Science (Economics) from the University of Lancaster. He is currently Chief Executive Officer of the Western Research Institute (WRI). Tom previously held academic positions as senior lecturer in Economics and Director of the Regional Economics Research Unit in the Faculty of Commerce, Charles Sturt University, Bathurst and positions at the University of New England and Macquarie University. He has also held the positions of Economic Analyst with the Office of National Assessments in Canberra, with responsibility for the ASEAN economies and Senior Consultant with KPMG Peat Marwick Management Consultants.

Professor Greg Walker
BCom (Hons), Dip Ed, MCom, PhD

Greg is currently Adjunct Professor in the Faculty of Business at Charles Sturt University. He recently retired from his formal positions as Head of Campus, Associate Dean of the Faculty of Business and Head of School of Marketing and Management following an extensive teaching and management career at CSU. He has published in both journals and textbooks and has also worked as an economic consultant in both the public and private sectors. His research interests include banking and finance, macroeconomic policy, business and competition policy and regional economic development.

Study Guide Author

Professor John Hicks
BCom (Hons), Dip Ed, MA (Hons), PhD

Professor John Hicks is Dean of the Faculty of Commerce at Charles Sturt University. He holds a PhD in Economics and has taught at universities in Australia, Canada and New Zealand. Professor Hicks has published widely in professional journals and is joint author of an economics text. He has also worked as an economic consultant in both the public and private sectors. His research interests include labour economics, environmental economics and monetary theory and policy.