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Syllabus for

Academic year
TEK255 - Managerial economics
Syllabus adopted 2012-02-24 by Head of Programme (or corresponding)
Owner: MPQOM
7,5 Credits
Grading: TH - Five, Four, Three, Not passed
Education cycle: First-cycle
Major subject: Industrial Engineering and Management

Teaching language: English
Open for exchange students
Block schedule: X

Course module   Credit distribution   Examination dates
Sp1 Sp2 Sp3 Sp4 Summer course No Sp
0107 Examination 7,5 c Grading: TH   7,5 c   Contact examiner,  18 Jan 2013 pm M,  20 Aug 2013 pm V

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Professor  Hans Löfsten


For single subject courses within Chalmers programmes the same eligibility requirements apply, as to the programme(s) that the course is part of.

Course specific prerequisites

Students taking this course are expected to have had some exposure to economics and some knowledge of calculus would also be helpful although not necessary.



In today's dynamic economic environment, effective managerial decision making requires timely and efficient use of information. The aim of this course is to provide students with a basic understanding of the economic decisions and analytical tools that can be used in decision making problems. A subsidiary aim of the course is to sharpen analytical skills so that students will be better able to recognize and solve decision problems in different contexts and for fortcoming Master courses. In this course, we want to provide an integrated overview of the most important methods in managerial economics from the point of view of the manager of the firm. The main theoretical principle of the course is the concept of corporate value. Using this as the central organizing principle, we will cover the following topics: - Economic theory - basic concepts - Costing and Capital budgeting methods


Learning outcomes (after completion of the course the student should be able to)

Managerial Economics is concerned with the application of economic principles and methodologies to business decision problems. In this course students will increase their understanding of economics and learn a variety of techniques that will allow them to solve business problems relating to costs, prices, revenues, profits, and competitive strategies.

The course, accordingly, is concerned with both theory and practice: the theory serves to sharpen analytical skills, and the practice will give experience in the application of the principles and techniques to real-world business problems.

Students who successfully complete the course will have a good understanding of economic concepts and tools that have direct managerial applications. Students will learn to use economic models to isolate the relevant elements of a managerial problem, identify their relationships, and formulate them into a managerial model to which decision making tools can be applied.

At the end of this course, students should be able to:

  • Economic theory - basic concepts

  • Cost analysis - cost behaviour and cost estimation

  • Decision making with relevance costs and a strategic emphasis

  • Different approaches to costing (Standard costing, Activity-Based Costing etc)

  • Use cost information for planning, decision-making and control, given the appropriate context.

  • Time valuation of money and investment metods

  • Demonstrate analytical thinking and communication skills.



Economic theory lays down the efficiency conditions governing the allocation of existing resources (i.e. resources being used in current production) and future resources. There are several types of measure of efficiency, which require the concepts of input and output. Input refers to the resources which are consumed or expended in taking a course of action. Thus input refers to the cost of a course of action. Output may be measured in terms of either resources which result from taking the course of action. The type of measure of efficiency depends on whether the amounts of input and/or output are specified in the definition of the relevant outcome. One of the problems is that a production process does not maintain a constant output per unit of input. Inputs and outputs vary, and this variation must be taken into account.

The course then continues with costing methods and capital budgeting techniques and theories explaining a firm s capital structure. The basic costing methods of conventional costing were designed around the turn of the century. Recently years doubts have been proposed about the suitability of these costing methods and cost management may, in certain situations, be hindered by difficulties of identifying cost relationships and cost structures. Accurate and relevant cost information is critical to any organization that hopes to maintain, or improve, its competitive position.

Cost management information is a broad concept and includes information that the manager needs to effectively manage the firm or not-for-profit organization and included both financial information about costs and revenues as well as relevant non financial information about productivity, quality, and other key success factors for the firm. Applying these tools should lead to the continuous reduction of resources used while simultaneously holding or even increasing value.

Longer term corporate finance decisions - generally relating to fixed and capital structure - are referred to as capital investment decisions, i. e. capital budgeting. The decision here will be based on several inter-related criteria. In general, management must "maximize the value of the firm" by investing in projects which are Net Present Value (NPV) positive, when valued using an appropriate discount rate; these projects must also be financed appropriately.



The course comprises a series of lectures on costing methods, investment methods etc as well as a case presentation. As a major part, the course comprises a project work in which students work in groups of 4-5 persons.



We have chosen a broad selection to reflect the two themes of the course. This material should be viewed as support for a better understanding of the lectures and should be used as reference material in the project work presentations as well as a basis for the examination (home dissertation).

  • - Textbook

  • - Compendium of articles



Written examination in two parts: (1) an exam (3 credits) and (2) group case work (2 credits)


Page manager Published: Thu 03 Nov 2022.