Economics as is taught theoretically and business seem often at opposite ends. Yet we have unique ways of concepts one learns in economics to be applied in firm analysis extendable to industry analysis. the file suggests the template for the same

1. Firm Analysis using Economics
©Prof. Prashant Kulkarni
Template for Business Economics Approach for Firm Analysis
Firm Name- mention the firm
name here
Sector- Mention the sector here Product range- Mention the list
of products
Demand of the firm Define with respect to the firm
Demand function Express the variables in the form
of demand function
Indicate how do you measure
those variables
Price Elasticity of demand Mention probable degree of
sensitivity to various variables
Likely values of elasticity
Income Elasticity of demand Mention probable degree of
sensitivity to various variables
Likely values of elasticity
Other possible elasticity List out in order of importance
with probable degree of
sensitivity
Likely values
Supply of the firm Identify what does firm supply
Supply function Express variables in the form of
supply function
Indicate how do you measure
those variables
Elasticity of supply List of variables that can
influence elasticity of supply.
Indicate in order of importance
Likely sensitivity of those
variables
Complements List of complements Justification of the same
Substitutes List of substitutes Justification of the same
Utility function Variables in utility function Indicate how do you measure
these variables
Diminishing marginal utility Products which are builit upon
this concept can be illustrated
Justification for the same
Production function Variables affecting production of
the firm
Indicate how do you measure
those variables
Cost structure Decompose into different types
of costs
Indicates how do you measure
them
Returns to scale Identify possible returns to scale Justify the same
Economies of scale Identify the possible economies
of scale
Justify the same
Economies of scope Identify existing economies of
scope
Identify potential future
economies of scope
Diseconomies of scale/scope Any possible pointers to
current/future diseconomies
Justify the same
Nature of market Identify the market structure Indicate the possible
concentration ratio/Herfindal
index
Degree of differentiation Indicate the possible indicators
of differentiation
Linkage between market
structure and elasticity
Did you find any linkage between
possible values of elasticity and
nature of market
Linkage between substitutes Did you find any linkage between

2. Firm Analysis using Economics
©Prof. Prashant Kulkarni
and market structure number of substitutes and
nature of market
Moral hazard Any possible product that can
face the possibility of moral
hazard
Adverse selection Any product developed to
counter the possibility of
eliminating adverse selection
Product variations Any product variations to
accommodate for catering
differing price elasticities of
different segments
Price discrimination Price discrimination types
practiced in the firm
Justify the same
Marginal costs Any products based on concept
of marginal costs
Justify the same
GDP /GVA growth rate and the
firm
What measures of firm
performance are likely to be
affected
Price stability and firm Why price stability is important
wrt firm under question
Indicate what performance
measures/variables are affected
Price Indices Understanding the relevant
effect
Interest rates Influence of interest rates wrt
firm under question
Specific variables under impact
Corporate tax rate Variables that are affected by
corporate tax changes
Indirect tax rates /GST Variables affected by changes in
indirect taxes
Money supply Variables influenced by changes
in money supply
Likely sensitivity of those
variables
Stability of demand Variables affected by volatility in
demand patterns
Measures to identify stability of
demand
Changes in government revenue
expenditure
Identify how it influences firm’s
profit projections
Variables measured to identify
specific factors under
consideration
Changes in government capital
expenditure
Identify how it influences firm’s
profit projections
Variables measured to identify
specific factors under
consideration
Fiscal deficit Performance measures affected
by fiscal deficit changes
Government borrowings from
market
Performance measures affected
by changes in government
borrowing patterns
Repo/reverse repo changes Firm performance measures
affected by these changes
Credit controls Measure impact on the firm

3. Firm Analysis using Economics
©Prof. Prashant Kulkarni
under question
Current account deficit Performance measures affected
by current account deficit
changes
FDI inflows Impact on firm under question
through identifying specific
variables
Remittances Impact on firm’s performance
measures
Exchange rate stability Impact on specific variables on
the firm under question
Index of Industrial Production Impact of the figures under
consideration
Index of Consumer confidence Application of the same in terms
of future planning
(Demand/supply forecasting)
Index of Business Confidence Application of the same in terms
of future planning
(Demand/supply forecasting)
Monetary-fiscal interactions (IS-
LM)
Impact study of the same wrt the
firm under consideration
Credit growth rate Impact on the likely demand
changes for the firm
Impact on the likely demand
changes for the firm