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Chapter 32
Case Study Folio


 
After completing this chapter, the student should be able to:
1. Comprehend a variety of case studies in the field of
managerial economic decisions.
2. Understand the complexities and approaches to
decision making in practice.
3. Gauge the applications of managerial economics in
real business life.

Managerial Economics
Himalaya Publishing House Theory and Applications
Dr. D. M. Mithani
Chapter 32
Case Study Folio

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‡ A case represents real business situation/management


problem to be tackled by a manager or the decision
maker. Cases reconstruct actual decision made in real
situations that a manager has come across (Duncan:
1994).

Managerial Economics
Himalaya Publishing House Theory and Applications
Dr. D. M. Mithani
Chapter 32
Case Study Folio

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‡ Reasons for the Rover¶s Decline
± Decrease in demand
± Buyer¶s expectations about falling price
± Over supply
± High stock inventory
± Lack of cost economy
± High degree of uncertainties
± Strong Exchange rate and dear export markets
± BMW executives¶ blunder
Managerial Economics
Himalaya Publishing House Theory and Applications
Dr. D. M. Mithani
Chapter 32
Case Study Folio

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1. Discuss the factors responsible for the decline of


Rover sales.
2. Discuss the consequences of business for mass
production car firms in the over capacity discussion
of world car market.

Managerial Economics
Himalaya Publishing House Theory and Applications
Dr. D. M. Mithani
Chapter 32
Case Study Folio

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Managerial Economics
Himalaya Publishing House Theory and Applications
Dr. D. M. Mithani
Chapter 32
Case Study Folio

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Jones and Mustifiule (1996), conducted a study on demand for breakfast
in the United States collecting a sample survey data from the supermarket
in the Columbus city. Accordingly, the price-elasticity of demand for the
top ten brands was estimated to be -0.7. This implies that the demand for
food such as breakfast cereal is price inelastic.
On this count, the following managerial business decision can be
inferred:
‡ The producers of the breakfast cereals could raise the price of the
product without casusing any substantial contraction of demand.
‡ Eventually, profits can be increased assuming costs remaining
constant.
‡ In the case of inelastic demand product, simultaneous raising of price
and possible cutting of its costs, would imply an enhancement of
profits.
Managerial Economics
Himalaya Publishing House Theory and Applications
Dr. D. M. Mithani
Chapter 32
Case Study Folio

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Managerial Economics
Himalaya Publishing House Theory and Applications
Dr. D. M. Mithani
Chapter 32
Case Study Folio

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1. Collect information about the trends of the OPEC, such
as the member countries, their capacities and quotas in
oil production.
2. Explain the price strategy model.
3. Collect data of the OPEC trend of world oil prices from
1970s-2008.
4. What is the secret of OPEC¶s success?

Managerial Economics
Himalaya Publishing House Theory and Applications
Dr. D. M. Mithani
Chapter 32
Case Study Folio

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‡ Ranjan, Rajiv (1995) has empirically estimated the price
elasticities of demand for India¶s export on the basis of data for
the period 1970-71 to 1993-94, using two stage least squre
(25LS) method of estimation. The estimates are captured in
Table 32.3.

Managerial Economics
Himalaya Publishing House Theory and Applications
Dr. D. M. Mithani