Course No.: MBU 141. Number of credits: 4 Number of lectures-tutorial practical:

Transcription

1 Curse N.: MBU 141 Curse title: Managerial Ecnmics Number f credits: 4 Number f lectures-tutrial practical: Curse crdinatrs: Ms Prnima varma Curse Descriptin Managerial ecnmics is a branch f ecnmics that deals with ecnmic fundatins f managerial decisin- making. Specific tpics t be cvered include applicatins f supply and demand, market structure, laws f prductin, market failure, gvernment interventin and game thery. The curse, accrdingly, is cncerned with bth thery and practice: the thery serves t sharpen analytical skills, and the practice will give experience in the applicatin f the principles and techniques t real-wrld business prblems. Curse Objective In this curse students will increase their understanding f ecnmics and learn a variety f techniques that will allw them t slve business prblems relating t csts, prices, revenues, prfits, and cmpetitive strategies. We will gradually develp these ecnmic cncepts and shw hw they can be applied t managerial decisins. Students will learn hw prices get determined in markets, hw market participants benefit in the frm f cnsumer surplus and prducer surplus, and what are the cnsequences f gvernment interventin. In additin t this, the students will learn different csts f prductin and hw they affect shrt run and lng run decisins, understand ecnmies f scale, disecnmies f scale etc. Curse Grading Plicy The verall curse grade will be allcated as fllws: Assignments-30 % Class Presentatin-20 % Examinatin -50 % N Tpics Alltted time (hrs.) Lectures Tutrials 1 Intrductin t Ecnmic Thery Cncept f industry - Demand and Supply Basics f Supply and Demand Market Equilibrium Market Elasticity, Ttal Revenue and Marginal Revenue Cnsumer Surplus and Prducer Surplus Practical 1. Pindyck, Rubinfeld (2005), pp. 3-18,

2 Pindyck, Rubinfeld (2005), pp Cnsumer thery 6 1 Cnsumer Behavir and Utility Thery Diminishing marginal Utility Diminishing marginal rate f substitutin Transitivity Incme and Substitutin effects 1. Pindyck, Rubinfeld (2005), pp & Prductin -Prductin Functin (laws f returns t scale and laws f diminishing returns) 10 2 definitin and mathematical expressin graphical representatin f returns t scale fr a hmgeneus prductin functin reasns fr increasing returns t scale reasns fr decreasing returns t scale -Isquants - Thery f csts shrt-run and lng-run csts average and marginal csts histrical and future csts. 1. Pindyck, Rubinfeld (2005), pp

3 4 Thery f firm and pricing 10 2 Perfect Cmpetitin, Mnply and Mnplistic Cmpetitin. Imperfect cmpetitin (duply) Price discriminatin (definitin and types f price discriminatin, necessary cnditins fr the existence f price discriminatin, price discriminatin and the price elasticity f demand) Oligply (classical and cllusive ligply) Average cst pricing Limit pricing Readings: 1. Pindyck, Rubinfeld Individual and Market Demand Pindyck, Rubinfeld (2005), pp Market Structure: Perfectly Cmpetitive Markets Pindyck, Rubinfeld (2005), pp Mnply Pindyck, Rubinfeld (2005), pp Mnplistic Cmpetitin Pindyck, Rubinfeld (2005), pp Oligply and Cartels Pindyck, Rubinfeld (2005a), pp Industrial Structure and Market Perfrmance Carltn, Perlff (2005), pp Business Strategies fr Sustainability 4 1 Business and the envirnment 1. Cntext, Origins, Pressures, and kinds f respnses

4 Readings: 1. Carl Frankel, in Earth s Cmpany: Business, Envirnment and the challenge f sustainability, 1998, Chapter 2&3 2. Pieter Winsemius and Ulrich Guntram, A Thusand Shades f Green: Sustainable strategies fr crprate advantage, Lndn: Earthscan, Game Thery -Overview f Game thery 4 -Prisner s Dilemma -Nash Equilibrium Readings: Michael R. Baye, Chapters 10&11 7 Public gds, externalities and welfare analysis - Intrductin t public gds - Prvisin f a public gd - Private prvisin f a public gd - Demand revealing mechanisms - Negative externalities (public bads) - Psitive externalities (public gds) - Slutins t prblems f externalities direct regulatin/ cmmand and cntrl market-based slutins - taxes and subsides, and tradable permits vluntary agreement - Cmpensatin mechanisms - Applicatin: Regulatin versus tradeable permits Infrmatin asymmetry (principle-agent prblem) Readings: Pindyck, Rubinfeld (2005a), pp Pindyck, Rubinfeld (2005a), pp

5 8 Gvernment Interventin and Market Failure 2 Price flrs and ceilings Qutas Taxes Ratining Prperty rights Readings: 1. Pindyck, Rubinfeld (2005a), pp Technlgical Innvatin and Patents 2 Technlgical changes Business strategies Innvatin and Intellectual Prperty Patents Readings: 1. Carltn, Perlff (2005), pp Further Readings: 1. Dminick Salvatre, Ravikesh Srivastava (2008), Managerial Ecnmics: Principles and Wrldwide Applicatins, OUP. 2. Michael R. Baye (2006), Managerial Ecnmics and Business Strategy, 5 th ed. Mcgraw-hill 3. Ivan Png (2005), Managerial Ecnmics, Asia Pacific Editin, Pearsn. 4. Suma Damdaran (2006), Managerial Ecnmics, OUP. Mdule Wise Teaching Plan Mdule 1: Mdule 1 gives and intrductin t ecnmic thery and discusses ne f the mst imprtant tls f micrecnmics: Supply-demand analysis. We explain hw a cmpetitive market wrks and hw the frces f demand and supply determines the equilibrium market price. 1. Discuss the cncept f supply and demand 2. Define, calculate and interpret the price elasticity f demand 3. Use demand/supply analysis t determine equilibrium market price and utput.

6 Mdule 2 Mdule 2 deals with the principles underlying cnsumer behavir. We see hw cnsumers make cnsumptin decisins, and hw they allcate resurces based n the budget cnstraints and why the nature f demand varies acrss the prducts. 1. Understand the varius assumptins behind cnsumer behavir. 2. Understand the ratinality behind cnsumptin decisins. 3. Understand the cncept such as budget cnstraints, Cnsumer equilibrium, Incme effect and substitutin effect. Mdule 3 Mdule 3 deals with thery f prductin, prductin functin and varius csts assciated with it. We see hw firms cmbine inputs, such as capital, labur, and raw materials t prduce gds and services in a way that minimizes cst f prductin. We will als see hw the cst f prductin f a particular firm is assciated with its rate f prductin and prductin experience. 1. Understand issues related t returns t scale 2. distinguish between different types f csts, the cnditins under which they can be used, and the advantages and disadvantages related t their use. Mdule 4 Mdule 4 deals with varius market structures. We als see hw the prductin decisins f individual firms determine the market supply curve and its characteristics. 1. Discuss the characteristics f the varius market structures such as pure cmpetitin, mnplistic cmpetitin, ligply and pure mnply. 2. Determine market price and utput under varius frms f market structure including perfect cmpetitin, mnply, mnplistic cmpetitin and ligply. Mdule 5 Business Strategies fr sustainability This mdule is framed arund the prpsitin that business rising t the challenges f sustainability nt nly succeeds in prtecting peple and the envirnment but als secure lng term cmpetitive and financial advantages. 1. Understand the ways in which sustainability issues and business peratins interacts. Mdule 6 Game Thery Mdule 7 Mdule 7 deals with public gds and externalities and slutins t the prblems f externalities.

7 1. Understand the cncept f public gds and the ptimal supply f public gds 2. Understand externalities, and hw they are calculated and regulated by gvernment. Mdule 8 Mdule 8 deals with varius types f market failures and the rle f Gvernment t crrect these failures. 1. Understand varius frms f market failures 2. T familiarize the students with varius measures-qutas, taxes, price flrs & Ceilings etc- that the Gvernments usually emply t crrect the distrtins. Mdule 9 This mdule will include tpics such as: ways ecnmists think abut technlgical changes; the prcess f technlgical learning; business strategies in technlgically dynamic markets, intellectual prperty rights, patents etc. 1. Understand the prcess f technlgical innvatin 2. Understand business strategies in technlgically dynamic markets 3. Understand issues assciated with IPR and patents.