Why are markets commonly believed to be the best way of allocating resources and organizing economic activity? This course will answer this critical question while examining its implications for pricing, market entry and exit, short-term and long-term business strategies, and the forecasting of key market variables. The course introduces fundamental topics in the economic analysis of markets, and some of the analytical tools used to study them, as a means to build an economic intuition and fostering an understanding of a variety of market conditions and market forces.
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After taking this course, you will be able to:
- Explain the basics of supply and demand curves.
- Characterize variable and fixed costs.
- Identify short-run and long-run market exit prices.
- Construct short-run and long-run supply curves.
- Construct demand curves.
- Identify short-run and long-run equilibria in competitive markets.
- Predict short-run and long-run market prices.
- Interpret a market price path.
- Explain firm entry, exit, and profitability in competitive markets.
What you'll learn
- How to explain the basics of supply and demand curves.
- How to characterize variable and fixed costs.
- How to analyze short-run and long-run equilibria in competitive markets.
Syllabus
Module 1: How the Costs of Doing Business Determine Success and Failure
Welcome to Managerial Economics: Buyer and Seller Behavior. In this course, we will cover the topics of How the Costs of Doing Business Determine Success and Failure, From Cost Structures to Market Supply Curves, and The Economic Outcomes of Competitive Markets. Module 1 introduces the strategic lens of game theory, focusing specifically on Prisoner’s Dilemma situations. This game-theoretic lens helps lay the groundwork for understanding competitive markets, where each market actor, including all buyers and sellers, are doing the best they can to maximize their individual payoffs. Through a simple market simulation and an initial reading of the Adamantium case study, the module then develops intuition for models of supply and demand in competitive markets, including pricing, product allocation, and firms’ cost structures.
Module 2: From Cost Structures to Market Supply Curves
Module 2 takes a deep dive into short-run market analysis. With a second reading of the Adamantium case study, Module 2 focuses on how cost structures translate to firm-level and market-level short-run decisions and supply curves, how variable and fixed costs create thresholds on the prices that may sustain short-run and long-run firm profitability, how a firm’s short-run decisions significantly differ from long-run decisions, and how all of this begins to map to a market’s equilibrium.
Module 3: The Economic Outcomes of Competitive Markets
Module 3 introduces entry (break-even) and exit prices, how they map to a market’s long-run supply curve, and why they are fundamental in determining firm profitability. Through examples, including a conclusion to the Adamantium case study, all of the supply and demand concepts in the course are tied together. The module showcases the predictive power of market analysis in determining where markets are going to go in terms of price, capacity, and firm entry and survival. The module then demonstrates the capstone ability of economic models of supply and demand: interpreting market price paths.
Summative Course Assessment
Module 4
This module contains the summative course assessment that has been designed to evaluate your understanding of the course material and assess your ability to apply the knowledge you have acquired throughout the course. Be sure to review the course material thoroughly before taking the assessment.
