Course Outline: Managerial Economics (ECO1001)

Area: Economics | Credit: 3

Programme: PGDM | Duration: August - November, 2022| Term: I
Instructor(s) Name: Dr. Sahana Roy Chowdhury
Email : [email protected]
Phone (Extn no.) : 033 6652 9669
Meeting Hours : Mon – Fri : by prior appointment

PART 1
INTRODUCTION
The main focus of the course is to make the students aware of how economic concepts can be
used for managerial decision making. The course provides the basics of microeconomic
principles and their applications in managerial decision making. It encompasses concepts like
market demand and supply, the theories of production and cost using examples from different
sectors of the economy. The course also covers different forms of market, e.g. competitive and
imperfectly competitive markets such as monopoly, oligopoly etc., competitive strategies and
strategic interactions of firms through game theory and their pricing strategies. The course is
application oriented and applications of the theories/ concepts will be the main focus. The
students, after completing the course, will have a grasp on how economists think about business
problems and will be able to apply tools from the course to a variety of these problems and
connect real life scenarios with the things learnt regarding how a market works.

COURSE OBJECTIVES (CO)

The course aims at providing insights into:

• Demonstrate an understanding of the economic principles in managerial decision-

making.
• Be familiar with the principles of rational decision-making behaviour
• Be able to analyse and interpret economic data for use in decision-making situations and
provide solutions highlighting key data and assumptions
• Have a clear idea about the basis on which economic policies are made

COURSE LEARNING OUTCOMES (CLO)

At the end of this course, students would be able to:
CLO1 – Understand and analyse the causes and consequences of different market conditions.
(PLO3)

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 CLO2 – Apply the principle of marginal analysis in analysing the decision making of an
economic agent, say consumer, producer or the government (PLO1)

CLO3 - To analyse price and output decisions of firms under various market structure and
apply this knowledge to design pricing mechanisms by firms in different contexts (PLO2, 6)

COURSE CONTENT
Unit I: Introduction Managerial Economics
Introduction, Branches of Economics, Nature, Scope & Objective of Business Economics,
Basic concepts of economic way of thinking
Unit II: Market demand & supply
Demand & Supply, The demand & Supply Schedule, Demand Function & Supply function,
Law of Demand & Supply Individual and Market Demand & Supply Determinants of Demand
& Supply, Demand & Supply Curve, Equilibrium with supply & Demand Curve, Demand &
Supply Shifts, Effects of a shift in Supply or Demand, Interpreting Changes in Price &
Quantity, Types of Elasticity of Demand & Supply, Calculating Elasticity, Measurement of
Elasticity, price, income and cross elasticity, elasticity and revenue, Government Intervention
– direct and working through the market, Consumer Equilibrium marginal rate of substitution
and relative prices, individual and market demand.
Unit III: Theory of production and cost
Production function, Factors of Production, Total Average & Marginal product, Short & Long
Run Production Function, Return to Scale, Law of diminishing Marginal product, Concept of
cost and Total, Marginal & Average Cost, Short Run & Long Run Cost, Relationship Between
Marginal & Average cost, Shapes of Cost Curves in different industries
Unit IV: Market structure.
Meaning & Characteristics of Perfect Competition, Price & output Determination under perfect
Competitive Market, Short Run & Long Run Equilibrium, monopoly, Oligopoly and strategic
behaviour using simple games
Unit V: Pricing strategies
Uniform Pricing, Pricing under imperfect competition, price discrimination and other forms of
pricing practices

PRESCRIBED TEXT BOOK

Dominick Salvatore and Siddhartha K. Rastogi, Managerial Economics: Principles and worldwide
applications, 9th edition, Oxford [SR]

References
i. Stiglitz and Walsh, Economics, Student Edition in India, W.W. Norton, 4th edition [SW]
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 ii. Pindyck, R., Rubinfeld, D., Microeconomics, Pearson and Prentice Hall, 8th edition [PR]

OTHER READINGS AND REFERENCES

For understanding economics in general:
i. Michael Goodwin, Economix: How and Why Our Economy Works and Doesn't
Work in words and pictures

Articles/ Research Papers: (for better understanding and grasp of topics)

1. David H. Autor, Why Are There Still So Many Jobs? The History and Future of Workplace
Automation, Journal of Economic Perspectives, 29.3, Summer 2015, pp. 3- 30. (Cost Minimisation,
theory of production)
2. Wallace E. Oates and Robert M. Schwab, The Window Tax, Journal of Economic Perspectives, 29.1,
Winter 2015, pp. 163-180. (Competitive Market)
3. Lawrence M. Kahn, Cartel Behavior and Amateurism in College Sports, Journal of Economic
Perspectives, 21.1, Winter 2007, pp. 209- 226 (Oligopoly)

Apart from these, articles from newspapers/ Economist etc. will be referred as and when
required.

Internet resources: There are several web sites that have interesting economic information
and analysis, viz. www.ft.com (Financial Times), www.economist.com (The Economist). For
economic data, Indian government web sites are good: http://home.nic.in and www.rbi.org.in.

POLICY ON PLAGIARISM:
Plagiarism of any kind and to any extent would attract penalties. The assessment would be
‘zero’ for that particular component, with no further opportunity to improve. Repetition of the
offence would result in failure in the subject.

ASSESSMENT SCHEME AND WEIGHTAGE:

{a} MID-TERM & END-TERM

Weightage Duration (in Open/close CLO

Evaluation
(%) minutes) Book Tested
End-Term 30 90 Close CLO3

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 {b} OTHER ASSESSMENTS

Sl. Unit of
Evaluation Item Weight Time CLO
No. Evaluation

1 Quiz Individual 25% 8th session CLO 2

2 Case study and Individual 25% 12th session CLO 1

conceptual
application
exercises
Project CLO 3
Group +
3 Presentation and 20% 19th - 20th session
Individual
Viva-voce

PART 2: SESSION PLAN

Session. Topics Pedagogy Reading
Introduction to Managerial
Economics : Basics of Economic
Lecture and SR, ch 1
1 Analysis, Key Concepts and
discussion
Overview, Thinking like an PR, Chapter 1
Economist SW, Chapters 1 and 2
Lecture,

Conceptual and
Market Demand and Supply:
numerical SR, ch 2
Demand and Supply Analysis, applications, PR, Chapter 2
2-7 Equilibrium and comparative
statics, Elasticity, Elasticity and Discussion of
Revenue, Government caselets,
Intervention
Application exercises

4
 Consumer Behaviour: Concept
Lecture,
of budget line, concept of
Discussion/Solution
preferences in terms of MRS, SR, ch 3
8 of applications
Individual Demand and market
demand, consumer surplus, PR, Chapter 3 (parts)
Demand estimation
Assessment: Quiz
Theory of Production:
Lecture,
Production function, average
9-10 and marginal productivity, one SR, ch 6
Applications – with
and more variable inputs, returns caselets PR, Chapter 6
to scale
Lecture,
Theory of Cost : short and long SR, ch 7
10-12 Case discussion: Lille
run cost curves PR, Chapter 7
Tissages (HBS)
Assessment: Assignment
Market Structure: Perfect
Lecture,
Competition: definition, short
13-14 Application exercises, SR, ch 8,9
and long run equilibrium; break
Discussion
even and shutdown points
PR, Chapter 8
Imperfect Markets: Monopoly, Lecture,
15 antitrust policies; role of caselets SR, ch 10
competition commission in India PR, Chapter 10
Oligopoly, Game Theory of
Strategic Behaviour : Prisoners’
dilemma, Nash equilibrium, Lecture, caselets, SR, ch 12
15 - 16
illustration with business application exercises
situations, discussion of select PR, Chapter 12
oligopoly forms, cartels
Pricing Practices: Price
Lecture SR, ch 11
Discrimination, Peak-load Off-
17-18 Caselets
load Pricing. Two-part Tariff, PR, Chapter 11
Application exercises
Dumping, Bundling
19-20 Assessment: Project Presentation and Viva

Assessment: End Term

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 PART 3: SUPPLEMENTARY INFORMATION

* Project Details :
The group project topics will be given around 16th session. The powerpoint presentation in soft
copy, for each group should be sent within the deadline (to be communicated in due course) and
then individual viva will be conducted.

PLO MAPPING FOR THE COURSE

Addresse CLO
PLO# Program Learning Outcome dby No.
Course?
(Yes / No)
Application of Fundamentals
PLO1 Traits: Demonstrate application of functional / conceptual knowledge to Y CLO2
businesssituations
Problem Identification and Solution
PLO2 Traits: Demonstrate ability to identify a problem, critically assess Y CLO3
variousalternatives and suggest appropriate solution

Integrative Thinking
PLO3 Traits: Demonstrate ability to identify inter-linkages among Y
functional areas within an enterprise and assess the impact of external CLO1
environment on its performance

Effective Communication
PLO4 N
Traits: Demonstrate proficiency in Oral and Written Communication
Ethical Responsibility
PLO5 Traits: Demonstrate awareness and assess impact of ethical N
behavior onbusiness
Leadership
PLO6 Traits: Demonstrate capability to take leadership role in a Y CLO 3
businesssituation