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MANAGERIAL ECONOMICS– ECN16101

UNIT  CONTENTS

1Managerial  Economics:  Definition,  Nature  and  Scope  Management:  Meaning  of

Managerial  Economics;  Nature  of  Managerial  Economics,  Contribution  of  Economic  Theory  to  Managerial  Economics,  Contribution  of  Quantitative Techniques to Managerial Economics; Scarcity and Decision-making; Scope of Managerial Economics.

2 Fundamental Concepts of Managerial Economics:  Marginal and Incremental Principle; Equi-marginal  Principle;  Opportunity  Cost  Principle;  Time  Perspective  Principle; Discounting  Principle;  Role  of  Managerial  Economist;  Importance  of  Management Decision-making.

3Supply Analysis:  Concept of Supply;  Determinants of Supply (Law of Supply);  Elasticity of Supply.

4Production Analysis: Production Decision; Production Function; Production Function: One Variable  Input  Case:  Short-run  Analysis,  Law  of  Variable  Proportion  of  Diminishing Marginal  Returns,  Three  Stages  of  Production,  Optimal  use  of  the  Variable  Input; Production  Function  with  two  Variable  Inputs:  Long-run  Production  Function,  Isoquants, Marginal  Rate  of  Technical  Substitution  (MRTS),  Isocost  Lines,  Optimal  Factor Combinations, Equilibrium of a Multi-product Producer; Expansion Path, Changes in Inputs Prices,  Rate of Capital Input (k);  Returns to Scale;  Economic Region of Production (Ridge Lines);  Empirical Production Functions;  Importance of Production Functions in Managerial Decision-making.

5Theory  of  Cost:  Need  and  Significance  of  Cost  in  Managerial  Decision-making;  Cost Concepts,  Future  and  Past  Costs,  Incremental  and  Sunk  Costs,  Out-of-Pocket  and  Book Costs,  Replacement  and  Historical  Costs,  Explicit  Costs  and  Implicit  or  Imputed  Costs, Actual Costs and Opportunity Costs,  Direct (Separable or Traceable) Costs and Indirect (or Common  Non-traceable)  Costs,  Shutdown  and  Abandonment  Costs,  Private  and  Social Costs,  Fixed and Variable Costs,  Short-run and Long-run Costs,  Total Cost, Average Cost and Marginal Cost;  Cost-Output Relationship;  Costs in the Short-run,  Short-run Total Cost and Output,  Short-run Average Costs and Output,  Marginal Cost (MC);  Costs in the Longrun,  Long-run Average Cost Curve is derived from Short-run Cost Curves,  Explanation of the U-shape of the Long-run Average Cost Curve; Economies of Scale; Economies of ScopeApplication of Cost Analysis, Optimum Output Level, Optimum Inventory Level, Optimum Scale.

6 Market  Structure  and  Price  Determination:  Various  Forms  of  Markets,  Perfect

Competition,  Imperfect  Competition,  Monopoly;  Price Determination in Various Types of Markets, Price Determination under Perfect Competition, Price Determination in Monopoly, Price Determination in Monopolistic Competition, Price Determination in Oligopoly.

7 Pricing  Strategies:  Pricing  of  Multiple  Products,  Products  with  Interdependent  Demand,  Pricing of Joint Products;  Transfer Pricing,  No External Market,  A Perfectly Competitive Market for the Transferred Product;  Cost Plus Pricing;  Incremental/Marginal Cost Pricing; Ramsey Pricing; Cycle Pricing; Product Tying; Other Pricing Practices, Price Skimming and Penetration Pricing, Value Pricing and Prestige Pricing, Going Rate and Sealed Bid Pricing;

Government Intervention and Pricing.

8 Profit Analysis:  Meaning and Nature of Profit,  Gross Profit and Net Profit,  Normal Profit and Supernormal Profit, ,Accounting Profit and Economic Profit;  Theories of Profit,  Risk and Uncertainty Theory of Profits,  Profit as a Reward for Market Imperfection and Friction in Economy (Dynamic Theory of Profit),  Innovation Theory of Profits,  Profit as a Reward for Organising other Factors of Production;  Depreciation,  Straight Line Method,  Declining Balance Method (DBM),  Sum of the Year?s Digit Method (SYDM);  Valuation of Stocks; Treatment  of  Capital  Gains  and  Losses;  Treatment  of  Deferred  Expenses;  Profit  Planning and Forecasting, Profit Planning, Profit Measurement.

9 Cost-Volume-Profit  (CVP)  Analysis:  CVP  Relations;  Objectives  of  Cost-Volume-Profit Analysis;  Profit-Volume (P/V) Ratio;  Break-even Analysis,  Uses of Break-even Analysis, Assumptions  of  Break-even  Analysis,  Methods  of  Break-even  Analysis,  Advantages  of Break-even  Analysis,  Three  Alternatives  for  Computing  BEP,  Break-even  Models  and Planning for Profit, Drawbacks of Break-even Analysis (BEA).

10 Investment  Analysis:  Meaning  and  Significance  of  Capital  Budgeting;  Techniques  or Methods of Investment Evaluation,  Payback Period (PBP) Method,  Average Rate of Return on Investment,  Net Present Value (NPV) Method,  Internal Rate of Return (IRR) Criterion, Profitability Index Criterion;  Public Investment Decisions,  Public Investment as a Contrast to  Private  Investment,  Organisation  of  Public  Investment  Decisions;  Social  Cost-benefit Analysis,  Steps involved in Cost-benefit Analysis,  Shadow or Social Price,  Social Discount Rate; Comparing Costs and Benefits: Decision Rules.

11 Macro  Economics  Concepts  and  National  Income:  Definition  of  National  Product, Income and Expenditure;  Measures of Aggregate Income,  Gross and Net Concept,  National and Domestic Concepts,  Market Prices and Factor Costs,  Gross National Product and Gross Domestic Product,  GNP as a Sum of Expenditures on Final Products,  GNP as the Total of Factor Incomes,  Net National Product,  NNP at Factor Cost (or National Income),  Personal Income,  Disposable  Income,  Value  Added;  National  Income  Identities;  Approaches  to Measurement  of  National  Income,  Product  Approach,  Income  Approach,  Expenditure Approach;  Interpreting  National  Income  Measures,  Real  vs.  Money  National  Product, Problem of Computation of Per Capita Income.

12Inflation  and Monetary Policy:  Rate of Inflation;  Types of Inflation,  Creeping Inflation, Galloping  Inflation  and  Hyper  Inflation,  Demand  Pull  Inflation,  Cost  Push  Inflation, Demand Pull vs. Cost Push Inflation;  Measurement of Inflation,  GNP Deflator,  Consumer Price Index (CPI), Wholesale Price Index (WPI), Control of Inflation; Deflation, Definition, Effects  of  Deflation;  Monetary  Policy,  Objectives  of  Monetary  Policy,  Instruments  of Monetary Policy, Monetary Policy in IS-LM Framework; Business Cycle.

13 Balance  of  Payments:  Current  Account;  Capital  Account;  Official  Reserve  Account (ORA);  Total  Balance  of  Payments;  Equilibrium  and  Disequilibrium  in  Balance  of Payments,  Transitory and Fundamental Disequilibrium,  Causes of Disequilibrium (Deficit), Correction of Disequilibrium (Adverse Balance of Payments).

14Fiscal Policy: Meaning and Objectives of Fiscal Policy;  Components of a Budget;  Revenue Budget;  Capital  Budget;  Mobilisation  of  Resources;  Expenditure  of  Central  Government; Budget of State Governments;  Financial Power of Central and State Governments,  List I: Union  List,  List  II:  State  List;  Fiscal  Policy  and  Economic  Growth,  Role  of  Taxes  in Economic  Growth,  Taxes  as  in-build  Stabilizers;  Public  Debt  in  India;  Deficit  Financing, Revenue  Deficit,  Budget  Deficit,  Fiscal  Deficit,  Primary  Deficit,  Deficit  Financing  and Economic Growth; Impact of Fiscal Policy on Business.