INTERNATIONAL MANAGEMENT INSTITUTE

COURSE OUTLINE: MANAGERIAL ECONOMICS PGDM 2013-15

INSTRUCTORS Dr. Rajeev Anantaram (ranantaram@imi.edu) Dr. Arnab Deb (arnab.deb@imi.edu) 1. COURSE DESCRIPTION

In a scenario characterized by increasing uncertainty and competition, managers will be called upon to make increasingly complex decisions that will have a crucial bearing on the prospects of the firm they work for. Indeed, even Public Sector Undertakings (PSUs) are increasingly faced with the challenge of operating like private sector firms, combining public interest with the objectives of profit maximization. It follows that a thorough grounding in the economic principles is not merely helpful, but necessary for a successful manager in todays global environment. Managerial economics is based on the principles of microeconomics, which essentially deals with the understanding of consumer behavior, decision making in firms and market structure. This course seeks to provide students with a rigorous exposure to underlying economic concepts and principles, explaining both the strengths and limitations of these theories Such a holistic understanding is important for managers to be able to meaningfully apply the tools of economic analysis to real life situations. The dominant objective of the course however is economic application: to provide students with the ability to apply the tools and concepts covered towards effective decision making in the allocation of scarce resources, planning corporate strategy and implementing them effectively.

2.

COURSE OBJECTIVES

This course makes no claim to train students to become professional economists, focusing instead on providing a working knowledge of the concepts students would need to be effective managers. After completion of this course a student is expected to:

Be familiar with the basic principles of economic decision-making Comprehend the methods, content and scope of economic principles in managerial decision-making Apply the principles and concepts discussed to real life problems 3. PREREQUISITES High school algebra and an ability to understand and interpret graphs is sufficient mathematical background for this class. 4. PEDAGOGY The class will be centered around the class lectures, which is typical for courses of this genre. Students are however strongly encouraged to participate in proceedings, both by feeling free to seek clarification and asking pertinent questions. To enable meaningful participation, students need to regularly review the material covered in class, stay in-step with readings and complete assignments, where applicable. This would benefit both students understanding, while enriching the learning environment in the class. 5. TEXT BOOK

McGuigan, Moyer and Harris (MMH), Economics for Managers, 12th Edition, Cengage Learning, India Latest Edition This core text will be supplemented with additional readings as required. REFERENCES Dominick Salvatore, Managerial Economics in a Global Economy, 7th Edition, OUP USA, 2011 (ISBN: 0199811784, 9780199811786) James Brickley, Clifford W Smith, Jerold Zimmerman, Managerial Economics & Organizational Architecture, 4th Edition, McGraw-Hill Companies, Incorporated, 2007 (ISBN13 9780073523019) Salvatore and Srivastava, Managerial Economics, 7th Edition, OUP India, 2012 (ISBN: 0198075340, 9780198075349)

6.

ADDITIONAL RESOURCES

Financial Times (www.ft.com); The Economist (www.economist.com); Business Standard (www.business-standard.com); Wall Street Journal (http://online.wsj.com); Ted Talk (http://www.ted.com/talks); and Various Blog by Economists like Greg Mankiw, Daron Acemoglu (http://gregmankiw.blogspot.in/, http://whynationsfail.com/). 7. QUIZZES & EXAMS

Grades for the course will be mainly based on a weighted average of quizzes, a midterm and a final exam. There will be no make-up quizzes or extra-credit opportunities. Make-up opportunity for missed mid-term/end-term will be allowed only for genuine reasons (as per the rules defined in the Student Handbook) with prior approval from Dean, Academic. Meaningful class participation has been incentivized by allotting 10 per cent of the final grade. 8. GRADING METHOD

The final grade will be calculated as follows: Components End Term Mid Term Quizzes (3) Class Participation Weight (%) 35 25 30 10

CLASS RULES It is important for both students and faculty to conduct themselves professionally to ensure the smooth functioning of a class. Failure to do so unfairly imposes costs on others, for no fault of theirs. Class rules include punctuality, no bilateral communication in class, and shutting of cell phones. Texting and using laptops in class is strictly forbidden. It is expected that students would scrupulously comply with the rules to ensure that the class can function to the satisfaction of all concerned. 11. TOPICAL OUTLINE AND TENTATIVE TEACHNG PLAN

9.

Session

Topic

Text Book Chapters & Additional Reading*

Module 1: Introduction to Managerial Economics a. b. c. d. Roadmap Expectation Course Policies and Assessment Plan Ten Principles of Economics

---------------------------------Chapters 1, 2 and Appendix C (MMH)

2-3

a. Rationale and Objectives of a firm b. Concept of Profit c. Use of Differential Calculus in Economics

Module 2: Analysis of Demand and Supply a. Market Forces of Demand and Supply b. Determinants/Shifters of Demand and Supply c. Market Equilibrium d. Elasticity of Demand: Own Price, Cross Price and Income Elasticity of Demand e. Comparative Statics f. Market Equilibrium and Government Intervention
i. ii. Price Floor and Price Ceiling Incidence of Tax

4-5

Chapters 3 (MMH)

6-7-8

a. Consumers Preference: Indifference Curve Analysis b. Optimal Choice of a Consumer: Utility Maximization Problem and Derivation of Individual Demand c. Impact of Price Change on Optimal Choice of a Consumer: Income and Substitution Effect d. Estimating Demand Function ** Quiz 1: On Materials Covered from 1st through 7th Session

Supplementary Material: Consumer Choice Using Indifference Curve Analysis, Chapter 4 (MMH)

Module 3: Production and Cost Analysis a. Concept of Production Function b. Production Function with One Variable Input: Production in the Short Run c. Production Function with Multiple Variable Inputs: Production in the Long Run d. Returns to Scale e. Isoquant f. Marginal Rate of Technical Substitution and Elasticity of Substitution g. Examples of Production Functions: Cobb Douglas and Translog Production Function

9-10

Chapters 7 and 7A (MMH)

MID TERM EXAMINATION (August 05, 2013 August 08, 2013)

a. Concept of Total Cost of Production b. Components of Total Cost: Fixed Cost and Variable Cost c. Short Run and Long Run Cost Functions d. Input Demand e. Economics of Scale f. Economics of Scope

11-12-13

Chapter 8, 8A, and 9 (MMH)

Module 4: Market Structure and Pricing Strategy 14-15-16 a. Equilibrium Output and Price in Competitive Market 5 Chapters 10, 11 (MMH)

b. Pricing and Output Decision of a Monopolist c. Equilibrium Output and Price in Monopolistic Competitive Market d. Comparison of Efficiency across these three Markets e. Price Discrimination **Quiz 2: On Materials Covered from 11th through 16th Session a. Characteristics of an Oligopolistic Market b. Cournot Model : Ignoring the Interdependence c. Cartel and other forms of Collusion d. Quantity Leadership: Stackleberg Model e. Price Leadership Model of Oligopoly **Quiz 3: On Materials Covered from 17th through 19th Session END TERM EXAMINATION (September 15, 2013 September 21, 2013)

17-18-19 -20

Chapters 12 and 13, and 14 (MMH)