MEM-P10

MEM-P10
PGDM 2010-12: Term-I

Microeconomics for Managers
Course Instructor: Dr. Biresh Sahoo

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OBJECTIVE
The objective of this course is to acquaint the students with basic concepts and techniques of microeconomic analysis and their applications to managerial decision-making. Microeconomic analysis explains the behaviors of individual decision-making units such as business firms and consumers. The emphasis is on elucidating how the tools of standard price theory can be employed to formulate a decision problem, establish a decision criterion, and generate some of the information required to evaluate the alternative courses of action, and, finally, choose among the alternatives.

METHOD OF EVALUATION
Quizzes (Known & Surprise) : 30%
Assignment and classroom
participation : 10%
Mid-term examination : 30%
End-term examination : 30%
Total : 100%

TOPICS
Module I: Consumer Behavior and Demand Analysis [8 sessions]
The purpose of this module is to acquaint with the basic concepts of economic theory of consumer behavior, the demand function and demand curve, demand elasticities and their applications and techniques of demand estimation.

I.1 Utility; Indifference curve; Marginal rate of substitution; Budget line; Consumer's equilibrium

I.2 The demand-supply framework and the concept of a market

I.3 Determinants of consumer demand and producer supply

I.4 The demand curve; price elasticity; cross elasticity; income elasticity

I.5 Relationship among price elasticity, total revenue, average revenue and marginal revenue

I.6 Applications of the theory of consumer behavior and demand analysis:

I.6.1 Which tax system is better - direct versus indirect tax?

I.6.2 Which subsidy is better – cash versus kind subsidy?

I.6.3 Indexing social security payments

I.6.4 Why do some tennis clubs have an annual membership charge in

addition to their hourly court fees?

I.6.5 The welfare effects of changes in housing prices

I.6.6 Can good news for farming be bad news for farmers?

I.6.7 Does drug interdiction increase or decrease drug-related crime?

Module II: Production Decisions and Cost-Output Relationship

[7 sessions]

The focus of this module is to clarify the nature of economic costs and their relationship to choice of output and technology.

II.1 Analysis of production process; total, marginal, and average product

II.2 Input combinations choice; Returns to scale; Production function

II.3 Various indicators of firm performance:

a) Analysis of Technical efficiency, Cost efficiency, Revenue efficiency, Allocative efficiency; Productivity growth, Technical progress, and Capacity utilization (CU)

b) Analysis of Productivity (and Eco-productivity) growth and its drivers; Analysis of Technological CU and its underlying causal factors; and Analysis of Profit and Cost changes and their underlying drivers

II.4 Various concepts of costs

II.5 Cost-output relation in the short run and long-run

II.6 Long-run costs and economies of scale

II.7 Minimum efficient scale, Firm size, and Plant size

II.8 Learning curves, Economies of scale and scope

II.9 Derived demand for inputs

II.10 Cost-volume-profit analysis

II.11 Applications of the theory of production

II.11.1 Measuring credit risk/audit risk of company/people

II.11.2 Ratio analysis; stock selection, industry ranking

II.11.2 Performance evaluation of firms/employees

Module III: Pricing under Alternative Market Structure

[5 sessions]

This module discusses standard pricing rules under different assumptions about the structure of the market in which the firm operates. It also examines certain pricing practices such as mark-up pricing, product line pricing and their relationship with optimal pricing rules of economic theory.

III.1 The Organization of the firm and the Nature of industry

III.2 Pricing in a perfectly competitive market

III.3 Monopoly

III.4 Monopolistic competition

III.5 Oligopoly

III.6 Pricing strategy

Text Book

Salvatore, D. and Srivastav, R. (2009)

Managerial Economics: Principles and Worldwide Applications

, New Delhi: Oxford University Press

Reading Lists

Michael R. Baye,

Managerial Economics and Business Strategy

, McGraw-Hill International Edition

Robert H. Frank,

Microeconomics and Behavior

, New York: McGraw-Hill Publishing Company.

Hall R. Varian,

Intermediate Microeconomics: A Modern Approach

, New York: W. W. Norton & Company.

Created By: Debasis Mohanty on 05/27/2010 at 09:15 AM
Category: PGP-I Doctype: Document

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