Economics for Managers Essay

Gujarat University, Mohammedan – MBA Programmer Details of the Courses Offered Annexed E Course Code: CIO Economics for Managers (FEM.) 1 . Course Objective This course is designed to impart knowledge of the concepts and principles of Economics, which govern the functioning of a firm/organization under different market conditions. It further aims at enhancing the understanding capabilities of students about macro-economic principles and decision making by business and government. . Course Duration The course will have 45 sessions of 60 minutes duration. 3. Course Content Assignment of sessions to the modules of course is as follows: Module No. I Session Marks (Nun. Exam) 09 20 Modules/Sub-Modules Ten principles of economics How people make decisions; How people interact; How the economy works as a whole.

Thinking like an economist The scientific method; Role of assumptions; Economic diagram; Production models; The circular-flow possibilities frontier; Micro and macro economics; Positive versus normative economics; Why economists disagree” The market forces of supply and demand Markets and competition; Individual demand; Demand schedule and emend curve; Market demand versus individual demand; Shifts in the demand curve; Supply schedule, Supply and demand- equilibrium, analyzing changes in equilibrium.

Elasticity and its application The elasticity of demand; The elasticity of supply, application of elasticity. Case: Pricing, admission to a museum. Consumers, producers and the efficiency of markets Consumer surplus; Producer surplus; Market efficiency- the benevolent social planner; evaluating the market equilibrium; Market efficiency and market failure The costs of production GIG/syllabus MBA/ 09-10 onwards page 30 of 235

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Gujarat University, Mohammedan – MBA Programmer Costs – total revenue, total cost and profit, costs as opportunity costs, cost of capital as an opportunity cost, economic profit versus accounting profit; Production and costs – the production function, from production function to the total cost curve; various measures of cost – FCC, PVC, AC, MAC, cost curves and their shapes and relationship; Costs in the short run and long run – relationship between SIR and LORD TACT, economies and discomposes of scale. 9 Firms in competitive markets What is a competitive market; Profit minimization and the nominative firm’s supply curve; The supply curve in a competitive market? Case: Near empty restaurants and off-season miniature golf. Monopoly Why monopolies arise; How monopolies make production and pricing decisions; The welfare cost of monopoly – deadweight loss, social cost; Public policy towards monopolies; Price discrimination – the analytics of price discrimination, examples of price discrimination (movie tickets, airline prices, discount coupons, financial aid, quantity discounts).

Case: The De Beers Diamond Monopoly. Oligopoly Markets with only a few leers – duopoly, competition, monopolies and cartels, the equilibrium tort an oligopoly, how the size of an oligopoly affects the market outcome; Game theory and the economics of cooperation – prisoners’ dilemma, oligopolies as a prisoners’ dilemma, other examples of prisoners’ dilemma (arms race, advertising, common resources), the prisoners’ dilemma and the welfare of society, why people sometimes cooperate.

Case: OPEC and the World Oil Prices Oligopoly – cont’d. Public policy towards oligopolies – 09 restraint of trade and the antitrust laws, controversies over antitrust policy, resale price maintenance, predatory pricing, tying.

Case: An Illegal Phone Call Monopolistic competition Competition with differentiated products – firms in the short run, the long-run equilibrium, monopolistic versus perfect competition (excess capacity, mark up over marginal cost), monopolistic competition and the welfare of society; Advertising – the debate over advertising, 20 page 31 of 235 Gujarat University, Mohammedan – MBA Programmer advertising as a signal of quality, brand names. Case: Advertising and the price of eyeglasses.

The theory of consumer hospice The budget constraint; Preferences – representing preferences with indifference curves, four properties of indifference curves, two extreme examples of indifference curves; Optimization – the consumer’s optimal choices, change in income, change in prices, income and substitution effects, deriving the demand curve; Four applications – do all demand curves slope downward, how do wages affect labor supply, how do interest rates affect household saving, do the poor prefer to receive cash or in-kind transfers Measuring a nation’s income The economy’s income and expenditure; The measurement of GAP; The components of GAP; Real v/s nominal GAP; GAP and economic wellbeing. Case: International difficulties in GAP and Quality of life.

Measuring the cost of living The consumer price index; Correcting economic variables for the effects of inflation, Impact of Inflation on various sections of society- producers and consumers. 09 Production and growth Economic growth around the world; The role and determinants of productivity; Economic growth and public policy; The importance of long-run growth. Saving, investment and the uncial system Financial institutions in the US economy; Saving and investment in the National Income Accounts; The market for Alienable funds, Supply and Demand for Alienable Funds. The monetary system, Money growth and inflation The meaning of money; Functions and Kinds of Money, The classical theory of inflation; The Cost of initiation.

Open-economy macroeconomics – Basic concept TTS The international tool to goods and capital – the flow of goods (exports, imports, net exports), the flow of capital (net foreign investment), the equality of net exports and net foreign investment; savings, investment and their relationship to the international flows; The prices for international transactions (real and nominal exchange rates); A first theory of exchange-rate determination (purchasing power parity) Aggregate demand and aggregate supply 09 Three key facts about economic fluctuations; Explaining short- run economic fluctuations; The aggregate demand page 32 of 235 Gujarat University, Mohammedan – MBA Programmer curve; The aggregate supply curve; Two causes of economic fluctuations (the effects of shifts in aggregate demand and supply).

The influence of monetary and fiscal policy on aggregate demand How monetary policy influences aggregate demand – the theory of liquidity preference, the downward slope of the aggregate demand curve, changes in the money supply, the role of interest-rate targets in Fed policy; How fiscal policy influences aggregate demand – changes in government purchases, the multiplier effect, a formula for the spending multiplier, other applications of the multiplier effect, the crowding-out effect, changes in taxes; Using policy to stabilize the economy – the cases for and against active stabilization policy. The short-run trade-off between inflation and unemployment The Phillips Curve – origins, aggregate demand, aggregate supply and the Phillips Curve; Shifts in the Phillips Curve – the role of expectations; Shifts in the Phillips Curve – the role of supply shocks; The cost of reducing inflation – the sacrifice ration, rational expectations and the possibility of costless disinflation, the Blocker disinflation, the Greenshank era.

Five debates about macroeconomic policy (pros and cons) Should monetary and fiscal policymakers try to stabilize the economy; Should monetary policy be made by rule rather than by discretion; Should the Central Bank aim for zero inflation; Should fiscal policymakers reduce the government debt; Should the tax laws be reformed to encourage saving. 4. Teaching Methods: The course will use the following pedagogical tools: (a) Lectures and case discussion covering a cross section of decision situations. (b) Discussions on issues and techniques (c) Projects/ Assignments/ Quizzes/ Class participation etc Page 33 to 23 Gujarat University, Mohammedan – MBA Programmer 5.

Evaluation: The evaluation of artisans will be on continuous basis comprising following elements: A B C Projects/ Assignments/ Quizzes/ Class participation etc Mid-Semester examination End -Semester Examination Weight-age 30% (Internal & Continuous Evaluation) Weight-age 20 % (Internal Evaluation) Weight-age 50% (External Evaluations) 6. Text Book: Sir. No. TTL TO TO Author’s N Gregory Manama; Pinprick & Refined 8/e Christopher R. Themes, S. Charles Maurice Name of the Book Principles of Economics Microeconomics Managerial Economics – Concepts and Applications Publisher Thomson Southwestern Pearson Data McGraw Hill Edition and Year of Publication ND edition, 2002 Indian reprint 5th edition Latest Edition 7. Reference Books: Sir. Author’s No.

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