Mechanical Engineering | Course catalogue

Economics of technology and management

Course objectives

Knowledge and understanding The course deals with the decision making processes of firms. In particular, students are expected to learn the basic principles of • microeconomic analysis of the firm, • firm technology strategy, • economic evaluation of investment projects, • financial accounting Applying knowledge and understanding Students will be able to apply basic methods and models of microeconomics, organization theory and corporate finance in order to: • identify the determinants of firms’ strategic choices, • analyze the relationship between technological change in the industry and firms’ strategies • evaluate the profitability of investment projects • analyze the financial statement of a company Making judgements Lectures, practical exercises and problem-solving sessions will provide students with the ability to assess the main strengths and weaknesses of theoretical models when used to identify firms’strategies. Communication By the end of the course, students are able to discuss ideas, problems and solutions provided by the microeconomics of the firm and corporate finance both with a specialized and a non-specialized audience. These capabilities are tested and evaluated in the final written exam and possibly in the oral exam. Lifelong learning skills Students are expected to develop those learning skills necessary to undertake additional studies on relevant topics in microeconomics and corporate finance with a high degree of autonomy. During the course, students are encouraged to investigate further any topics of major interest, by consulting supplementary academic publications, specialized books, and internet sites. These capabilities are tested and evaluated in the final written exam and possibly in the oral exam, where students may have to discuss and solve some new problems based on the topics and material covered in class.

Channel 1

CHIARA GROSSO Lecturers' profile

Program - Frequency - Exams

Course program

PART I 1. Prerequisites: Analyzing Economic Problems; Demand and Supply Analysis 2. Technology Technological sets and production function. Total, average and marginal productivity. Isoquants and marginal rate of technical substitution. Elasticity of substitution and types of technology. Long run vs short run. Returns to scale and returns to varying proportions. Elasticity of scale. Technological Progress. High tech labour vs low tech labour. 3. Costs The cost function and isocosts. Conditional input demands and Shephard’s lemma. Price and output elasticity of input demands. Expansion path. Short run vs long run cost functions. Total costs. Variable, fixed and quasi-fixed costs. Sunk costs. Average and marginal costs. Economies of scale and the minimum efficient scale. Economies of scope and learning curves 4. Competitive markets Economic profits and opportunity costs. Profit maximization in the long run. Duality of production, cost and profit functions. Hotelling’s lemma. Short run profit maximization. Profit maximization and return to scales. Supply curves and producer’s surplus. Short run vs long run supply curves. Market demand. Individual supply and market supply. Perfect competition. Short run and long run market equilibrium. Meaning of 0-profits. Pareto efficiency; Applications (taxes, subsidies and quotas) 5. Monopoly Demand elasticity. Elasticity and revenues. The monopolist maximization problem. Inefficiency of monopoly and deadweight loss. Causes of monopoly. Subadditivity of costs and economies of scale. Natural monopoly. Price discrimination (first degree, second degree, third degree). 6. Innovation Product innovation vs process innovation. Drastic innovation. Willingness to pay for innovation. Innovation and market structure. PART II 1. Financial accounting The Balance Sheet and Account Categories: Assets, Liabilities, Owners 'Equity. The Income Statement: Revenues, Cost of Sales, Gross Margin, Expenses, Net Income. Relation between Balance Sheet and Income Statement. The Statement of Cash Flows. Misconceptions about Depreciation. Sources and Uses of Cash. Working capital flows. Analysis of the Cash Flow Statement. Part III 1. Value Future Values and Present Values. Net Present Value. Risk and Present Value. Present Values and Rates of Return. Calculating Present Values When There Are Multiple Cash Flows. The Opportunity Cost of Capital. Perpetuities and Annuities. Continuous Compounding. Real and Nominal Rates of Interest. Calculating the Present Value of an Investment. 2. Investment Decisions Net Present Value and Other Investment Criteria. Discounted Payback. Internal Rate of Return. Pitfalls of IRR. Making Investment Decisions with the Net Present Value. Relevance of Cash Flow. Estimation of Cash Flows on an Incremental Basis. Treating of Inflation. Investment Timing. Equivalent Annual Cash Flows and Inflation. Equivalent Annual Cash Flow and Technological Change

Prerequisites

Analyzing Economic Problems; Demand and Supply Analysis

Books

Microeconomics | 4th Edition, Ronald R Braeutigam, David Besanko (ISBN-13: 9780470563588, ISBN: 0470563583) • Chapter 1 • Chapter 2 (only sections 2.1, 2.2 and 2.3) • Chapter 6, including Appendix • Chapter 7, including pag 283-284 of the Appendix • Chapter 8 (excluding section 8.4 at pag 315,316 and 317), including Appendix • Chapter 9, including Appendix • Suggested reading: Chapter 10 • Chapter 11 (excluding section 11.7) • Chapter 12 (excluding sections 12.5 and 12.6) Robert N Anthony, David Hawkins and Kenneth A. Merchant, Accounting: Texts And Cases (13th Edition). Mc Graw Hill. Chapter 2: Basic accounting concepts: the balance sheet Chapter 3:Basic accounting concepts: the income statement Chapter 5: Revenue and monetary assets Chapter 6: Cost of sales and inventories Chapter 7: Long-lived non monetary assets and their amortization Chapter 8: Sources of capital: debt Chapter 9: Sources of capital: equity Chapter 11: The statement of cash flows Chapter 13: Financial statements analysis Brealey, R. A., Myers, S. C., Allen, F., Principles of corporate finance (12th Edition). Mc Graw Hill. Chapter 2: How to Calculate Present Values Chapter 5: Net Present Value and Other Investment Criteria Chapter 6: Making Investment Decisions with the Net Present Value Rule

Frequency

NOT MANDATORY

Exam mode

Written exam (exercises and theoretical questions)

Lesson mode

The course consists of a balanced mix of lectures, practical exercises and problem-solving sessions that are intended to provide students with the main concepts, methods and models in the field of economics