1. 10b11pd311 economics title: managerial economics course code: 10b11pd311 (2 – 1 – 0)...
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10B11PD311 Economics
Title: Managerial EconomicsCourse Code: 10B11PD311 (2 – 1 – 0)
ObjectiveThe course is designed to enable students to appreciate the contribution of economics to the business process and to evaluate economics of corporate objectives, market structure and costs.
Learning OutcomesThe course will develop students' capacity to:1. Think critically about the contribution of economics in business. 2. Understand the constraints the environment places on the
organization's pursuit of its goals
3. Analyze the economic environment in which an org. operates. Methodology
The course will commence with making the students understand the basic economic theories and subsequently learn about practices followed by the organizations. The tutorials focus on the core topics, articles on these topics and make use of IT tools.
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10B11PD311 Economics
Text Book Managerial Economics, (Fourth edition) H.Craig Petersen, W. Cris
Lewis
Reference books Managerial economics in a global economy, Dominick Salvatore Managerial economics, Damodaran, Suma Managerial economics, Dwivedi, D.N. Managerial economics, H.L.Ahuja Managerial economics, Truett Lila J. Managerial economics, Hirschey, Mark Modern Economic Theory, K.K.Dewitt & Navalkur S.K. Misra & V. K. Puri, Indian Economy, Himalaya Publishing House,
2011.
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Topic
Introduction
Basics of Demand, Supply and Equilibrium
Theory of Consumer Choice
Demand forecasting
Production Theory & Analysis
Cost Theory and Analysis
Market Structure
Macro Economics: Issues
Macro Economics: Concepts
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Exam % of Marks Duration Coverage
T-1 20 1 hrSyllabi covered up-to T-1.
T-2 20 1hr
Syllabi covered between T-1 & T-2.
End Sem. Exam 35 2 hr
Full Syllabi
Assignments Tutorials, Projects, Quizzes & Regularity in attendance. 25
Entire Semester
As decided and announced by the teacher concerned in the class at the beginning of the course
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10B11PD311 Economics
Economy – A system that provides living to the people
Economic activity – any activity performed for earning money for the satisfaction of human wants.
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10B11PD311 Economics
A social science concerned with those aspects of social behavior and those institutions which involve the allocation of scarce resources among unlimited and competing uses, to produce and distribute goods and services in the satisfaction of human wants, which are innumerable and insatiable.
Scarce Resources
Unlimited Wants
Alternative uses of resources
Produce & distribute goods & services
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WEALTH
WELFAREGROWTH
SCARCITY
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10B11PD311 Economics
Wealth Definition by Adam Smith a science which studies the nature, causes and
growth of the wealth of nations Adam Smith – Father of economics
Criticism No attention was paid to man for whom wealth is
really meant.
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10B11PD311 Economics
Welfare Definition by Alfred Marshall
study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the use of the material requisites of well being. Thus it is, on the one side, a study of wealth; and on the other, and more important side the study of man.
Criticism Non-material goods are not acknowledged by
Marshall. Limited to those activities which increase human
welfare.
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10B11PD311 Economics
Scarcity Definition by Lionel Robbins
is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.
Four characteristicsMan has unlimited wants or ends.The means or resources to satisfy them are limited.These resources are not specific & have alternate uses.Man has therefore to choose between wants.
CriticismAggregates of the entire economy (national income, total output etc.) and the problem of unemployment and instability
are not covered The causes and growth patterns of national income and per capita income are left untouched.
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10B11PD311 Economics
Growth Definition by Paul A. Samuelson
is a study of how man and society choose, with or without the use of money, to employ scarce productive resources which could have alternate uses, to produce various commodities over time and distribute them for consumption now and the future among various people and groups of society.
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10B11PD311 Economics
Concerns of Modern Economics
Allocation of society’s resources among alternative uses
Efficiencies and inefficiencies of economic system
Distribution of the society’s output among individuals and groups
Ways in which production and distribution change over time
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10B11PD311 Economics
Consumers
Producers
Administrators
Planners
Academicians
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10B11PD311 Economics
Studies individual units like individual household, pricing of a firm, wages of a worker, profits of an entrepreneur, and so on.
Theory of DemandTheory of ProductionPrice determination in Commodity marketPrice determination in Factor market
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10B11PD311 Economics
Microeconomic issues
choices: what, how and for whom
the concept of opportunity cost
rational economic decision making: marginal costs and marginal benefits
microeconomic objectives efficiency
equity
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10B11PD311 Economics
Deals with the average and aggregates of the system rather than the particular items in it, and attempts to define these aggregates in a useful manner and examines their relationship.
Theory of National Income GDP/GNP/NDP
Theory of Employment Unemployment, its types and rate
Theory of Money Commodity money (barter), modern money (paper),
banking and insurance, interest rates. Three purpose – transaction, saving and speculative
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10B11PD311 Economics
Theory of General Price Level Wholesale Price index, consumer price index
Theory of International Trade Balance of payment, foreign exchange rate and
purchasing power parity theoryEconomics of Growth
Four factors – human resource, natural resource, capital formation and technological changes and innovation
Business cycles, investment and savings
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10B11PD311 Economics
Macroeconomic issuesgrowthunemployment inflationbalance of payments problemscyclical fluctuations
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Examples of microeconomic and macroeconomic concernsProduction Prices Income Employment
MicroEconomics
Production/Output in Individual Industries and Businesses How much steelHow many officesHow many cars
Price of Individual Goods and Services Price of medical carePrice of gasolineFood pricesApartment rents
Distribution of Income and Wealth Wages in the auto industryMinimum wagesExecutive salariesPoverty
Employment by Individual Businesses & IndustriesJobs in the steel industryNumber of employees in a firm
MacroEconomics
National Production/Output Total Industrial OutputGross Domestic ProductGrowth of Output
Aggregate Price Level Consumer price indexProducer Price index Rate of Inflation
National IncomeTotal wages and salaries
Total corporate profits
Employment and Unemployment in the Economy Total number of jobsUnemployment rate
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• Production The process by which resources are transformed into useful forms
• Resources/ Inputs Anything provided by nature or previous generations that can be used directly or indirectly to satisfy human wants.
• Capital Things that have been already been produced that are in turn used to produce other goods and services
• Producers Those people or groups of people, whether private or public, who transform resources into usable products.
• Outputs Usable products
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10B11PD311 Economics
Illustrates the principles of constrained choice, opportunity cost and scarcity.
A graph that shows all the combinations of goods and services that can be produced if all of society’s resources are used efficiently
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0 1 2 3 4 5 6 7 8Units of clothing (millions)
Un
its o
f foo
d (
mill
ion
s)A production possibility curveA production possibility curve
Units of food Units of clothingUnits of food Units of clothing
aa 8m 0.08m 0.0 7m 2.2m7m 2.2m 6m 4.0m6m 4.0m 5m 5.0m5m 5.0m 4m 5.6m4m 5.6m 3m 6.0m3m 6.0m 2m 6.4m2m 6.4m 1m 6.7m1m 6.7m 0 7.0m0 7.0m
aa
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Units of food Units of clothingUnits of food Units of clothing
8m 0.08m 0.0 b 7m 2.2mb 7m 2.2m 6m 4.0m6m 4.0m 5m 5.0m5m 5.0m 4m 5.6m4m 5.6m 3m 6.0m3m 6.0m 2m 6.4m2m 6.4m 1m 6.7m1m 6.7m 0 7.0m0 7.0m
bb
Un
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Units of clothing (millions) 24
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xww
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10B11PD311 Economics
The production possibility curveThe production possibility curve microeconomics and the production microeconomics and the production
possibility curve:possibility curve: choices and opportunity costchoices and opportunity cost
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Increasing opportunity costsIncreasing opportunity costsU
nits
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ood
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illio
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Units of clothing (millions) 28
10B11PD311 Economics
The production possibility curveThe production possibility curve microeconomics and the production microeconomics and the production
possibility curve:possibility curve: choices and opportunity costchoices and opportunity cost increasing opportunity costincreasing opportunity cost
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Increasing opportunity costsIncreasing opportunity costsU
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Units of wheat (millions) 30
10B11PD311 Economics
The production possibility curveThe production possibility curve microeconomics and the production microeconomics and the production
possibility curve:possibility curve: choices and opportunity costchoices and opportunity cost increasing opportunity costincreasing opportunity cost
macroeconomics and the production macroeconomics and the production possibility curve:possibility curve: production production withinwithin the curve the curve
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v
Production insidethe production
possibility curve
O
Making a fuller use of resourcesMaking a fuller use of resourcesF
ood
Clothing32
v
x
O
Making a fuller use of resourcesMaking a fuller use of resourcesF
ood
Clothing33
v
x
y
O
Making a fuller use of resourcesMaking a fuller use of resourcesF
ood
Clothing34
10B11PD311 Economics
The production possibility curveThe production possibility curve microeconomics and the production microeconomics and the production
possibility curve:possibility curve: choices and opportunity costchoices and opportunity cost increasing opportunity costincreasing opportunity cost
macroeconomics and the production macroeconomics and the production possibility curve:possibility curve: production production withinwithin the curve the curve shifts in the curveshifts in the curve
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NowNow
Foo
d
ClothingO
Growth in potential outputGrowth in potential output
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NowNow
5 years’ time5 years’ time
O
Foo
dGrowth in potential outputGrowth in potential output
Clothing37
10B11PD311 Economics
Managerial economics consists of the use of economic modes of thought to analyze business situations.
McNair and Meriam
The purpose of Managerial Economics is to show how economic analysis can be used in formulating business policies by Identifying possible courses of action Evaluating the revenues and costs associated
with each course of action Choosing the one course that best meets the goal
or objective of a firm
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10B11PD311 Economics
The application of economic theory and the tools of decision science to examine how an organization can achieve its aims or objectives most efficiently.
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10B11PD311 Economics
HouseholdsThe consuming units in an economy
FirmsThe producing units in an economy
Product or Output marketsThe market in which goods and services
are exchanged Input or Factor markets
The markets in which the resources used to produce products are exchanged
Labor marketCapital marketLand market
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Goods and services
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Goods and services
Consumerexpenditure
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Goods and services
Consumerexpenditure
Services of factors of production (labour, etc)44
Goods and services
Consumerexpenditure
Services of factors of production (labour, etc)
Wages, rentdividends, etc.
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Goods and services
Consumerexpenditure
Services of factors of production (labour, etc)
Wages, rentdividends, etc.
GOODS MARKETS
FACTOR MARKETS
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Engineering is a great applied science that studies how to make solutions to practical scientific problems.
•While engineering deals with how to solve these problems, economics is the complementary science of how to optimize these solutions. •Economics analyses production mathematically and statistically. For engineering, microeconomics is the invaluable tool to determine optimization with given resource constraints •The best solutions in engineering are not always the best-designed or the ones of highest quality but also the ones which are cost-effective and efficient given constraints. Economics can master these concepts.
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