Presentation 2013

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Presentation 2013

  1. 1. MANAGERIAL ECONOMICS SESSION PLAN 1 - 2 Introduction to Economics: Scarcity and Efficiency, Economic role of Government Chapter 1 3 -6 Supply and Demand Analysis Chapter 2 & 8 8 - 10 Consumer Behaviour Chapter 3 & 4 12 - 16 Production and Cost analysis Chapter 5 & 6 18 - 20 Profit maximization and Competitive Markets Chapter 7 & 8 21 - 22 Monopoly Chapter 9 & 10
  2. 2. 24 Monopolistic competition Chapter 11 25 - 27 Oligopoly Chapter 11 & 12 30 Pricing Techniques and Transfer Pricing Chapter 10, appendix Text book: Microeconomics-Robert S Pindyck & Daniel Rubinfeld, Prem L Mehta – Pearson
  3. 3. Evaluation • 7 Evaluation Test – Numericals 7 marks • 11 Evaluation Case Study Presentation Continuous evaluation 8 marks • 17 Midterm examination 20 marks • 23 Evaluation Quiz MCQs 5 marks • 29 Group presentations of project on industry Market structures 10marks Pre Mid- Semester Mid Semester Examination Post Mid- Semester End Semester Examination 15% 20% 15% 50% (4 to 5 questions, 1 to2 caselets)
  4. 4. Economics • Economics is the study of how society manages its scarce resources. • Managerial economics applies microeconomic theory to business problems – How to use economic analysis to make decisions to achieve firm’s goal of profit maximization • Economics – Microeconomics Branch of economics that deals with the behavior of individual economic units—consumers, firms, workers, and investors—as well as the markets that these units comprise. • Macroeconomics Branch of economics that deals with aggregate economic variables, such as the level and growth rate of national output, interest rates, unemployment, and inflation.
  5. 5. What microeconomics is about….. • It is about limits • Allocation of scarce resources • It is about trade-offs • Shows how these trade-off are made. • It emphasizes the role of prices • Describes how prices are determined • Explains how consumers, producers or firms attain their equilibrium. Equilibrium-best attainable
  6. 6. Theories and models • Explanation and predictions are based on theories which explain observed phenomenon in terms of a set of basic rules and assumptions. • Theories are used to construct models which is a mathematical representation
  7. 7. WHAT IS A MARKET? • market Collection of buyers and sellers that, through their actual or potential interactions, determine the price of a product or set of products. • market definition Determination of the buyers, sellers, and range of products that should be included in a particular market • arbitrage Practice of buying at a low price at one location and selling at a higher price in another.
  8. 8. Market Definition—The Extent of a Market ● extent of a market Boundaries of a market, both geographical and in terms of range of products produced and sold within it. Market definition is important for two reasons: A company must understand who its actual and potential competitors are for the various products that it sells or might sell in the future. Market definition can be important for public policy decisions. WHAT IS A MARKET?
  9. 9. Market Definition—The Extent of a Market ● extent of a market Boundaries of a market, both geographical and in terms of range of products produced and sold within it. Market definition is important for two reasons: • A company must understand who its actual and potential competitors are for the various products that it sells or might sell in the future. • Market definition can be important for public policy decisions. WHAT IS A MARKET?
  10. 10. REAL VERSUS NOMINAL PRICES ● nominal price Absolute price of a good, unadjusted for inflation. ● real price Price of a good relative to an aggregate measure of prices; price adjusted for inflation. ● Consumer Price Index Measure of the aggregate price level. ● Producer Price Index Measure of the aggregate price level for intermediate products and wholesale goods.
  11. 11. Fundamental Economic Problems • Scarcity • Unlimited Wants/choices Production possibility frontier • Concepts Illustrated by the Production Possibilities Frontier – Efficiency – Tradeoffs – Opportunity Cost – Economic Growth
  12. 12. The Production Possibilities Frontier Copyright©2003 Southwestern/ThomsonLearning Production possibilities frontier A B C Quantity of Cars Produced 2,200 600 1,000 3000 700 2,000 3,000 1,000 Quantity of Computers Produced D
  13. 13. PPF • Shape of the PPF • Straight line OR concave • Outward shift of the PPF • Positive or negative output gap
  14. 14. Fundamental economic questions • What goods and services to produce? Does the economy uses its resources to build more hospitals, roads, schools or luxury hotels? Do we make more iPhones and iPads or double-espressos? • How best to produce goods and services? What is the best use of our scarce resources? Should school playing fields be sold off to provide more land for affordable housing? • Who is to receive goods and services? Who will get expensive hospital treatment - and who not? Should there be a minimum wage?
  15. 15. Kinds of economic systems • Free enterprise Economy • Government controlled/ Command Economy • Mixed Economy
  16. 16. Free Enterprise Economy • Private ownership • Private gains as motivating force • Freedom of choice • Factor mobility • Free competition • Eg- Hongkong, USA
  17. 17. Government controlled/ Command Economy • Means of production are owned by the state/society • Social welfare is the objective • Curbed freedom of choice • Market forces and competition are eliminated • Eg-North Korea and Cuba
  18. 18. Mixed Economy • Both private and public sector • Government controls guide and control the economy, providing infrastructure and promotes private sector economic activities. • Most popular form

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