Introduction to Business (Managerial) Economics

Transcription

1 Contents Unit 1 Introduction to Business (Managerial) Economics Meaning of Managerial Economics... 2 Definitions of Managerial Economics... 2 Features (Characteristics) of Managerial Economics... 5 Nature of Managerial Economics... 6 Scope of Managerial Economics... 8 Operational Issues or Internal Issues... 9 External Issues Meaning, Scope, Use and Limitations of Microeconomics Contributions of Economic Theory to Business Economics Relation of Business Economics with Traditional Economics Differences between Traditional and Managerial Economics Chapter Questions Unit 2 Theory of Demand, Supply and Equilibrium Price Meaning and Concept of Demand Types of Demand Demand Function Types of Demand Function Determinants of Demand Law of Demand Exceptions of the Law of Demand Individual Demand Schedule and Derivation of Individual Demand Curve Movement along and Shift of a Demand Curve Theory of Supply Meaning of Supply Supply Function Law of Supply Derivation of Single Producer's Supply Curve Movement along and Shift of a Supply Curve... 47

2 Market Equilibrium and Determination of Equilibrium Price Change in Equilibrium Due to Shift in Demand Curve and Supply Curve Numerical Exercise : Problems and Solution Chapter Questions Unit 3 Elasticity of Demand and Supply Concept of Elasticity Types of Elasticity of Demand Methods of Measurement of Price Elasticity of Demand Total Outlay or Expenditure Method Point Method of Measuring Elasticity of Demand Arc Elasticity of Demand Determinants of Price Elasticity of Demand Uses of Price, Income and Cross Elasticity of Demand Price Elasticity of Demand and Revenue of the Firm Price Elasticity of Supply Basic Concept Types of Price Elasticity of Supply Measurement of Elasticity of Supply (Geometry of Elasticity of Supply) Measuring Elasticity of Supply in the Case of a Non-Linear Supply Curve Measuring Elasticity of Supply by Arc Method Factors that Determine Elasticity of Supply Numerical Exercise: Problems and Solution Chapter Questions Unit 4 Theory of Consumer Behavior Concept of Utility Consumer s Utility Analysis Cardinal Approach Concepts of Total Utility and Marginal Utility Basic Assumptions of Cardinal Utility Analysis Law of Diminishing Marginal Utility Derivation of Demand Curve from the Law of Diminishing Marginal Utility

3 Law of Equi-Marginal Utility: Consumer s Equilibrium Derivation of Demand Curve from Equi-marginal Utility Approach Ordinal Approach to Utility Analysis Assumptions of Ordinal (Indifference Curve) Approach The Indifference Curve (IC) Approach to Utility Analysis Marginal Rate of Substitution (MRS) Indifference Map Properties of Indifference Curves of Two Goods Budget Constraint or Budget Line Budget Line Gymnastics (Change in the Budget Line) Consumer s Equilibrium under Ordinal Utility: Consumer s Equilibrium under Indifference Curve Approach Income Effect and the Income Consumption Curve The Case of Normal Goods Income Effect in the Case of an Inferior Good The Case of Neutral Goods Income Effect and Derivation of Engle Curve Price Effect and Price Consumption Curve (PCC) Price Effect in Case of Giffen Good Separation of Price Effect into Substitution and Income Effects Hicks and Slutsky Decomposition of Income and Substitution Effects Income and Substitution Effect for Inferior Goods Income and Substitution Effect for Giffen Goods Price Effect and Derivation of Demand Curve: Normal Good Engel Curve vs. Demand Curve Comparison of Cardinal Utility Analysis with Ordinal Utility Analysis Superiority of Ordinal Utility Approach Criticisms of Indifference Curve Numerical Exercise: Problems and Solution Chapter Questions Unit 5 Theory of Production Meaning of Production Production Function Short-Run and Long-Run Production Function Short-Run Production Function

4 Long-Run Production Function Total Product, Average Product and Marginal Product Cobb-Douglas Production Function Formulation Laws of Production Function Law of Variable Proportion Importance of the Law of Diminishing Returns Production with Two Variable Inputs: The Concept of Isoquant Isoquant Map Marginal Rate of Technical Substitution (MRTS) Diminishing Marginal Rate of Technical Substitution Properties of Isoquant Exceptions to the General Properties Isocost Line Shift in Iso Cost Line Least Cost Combination of Factors Expansion Path or Scale Line of the Firm Laws of Returns to Scale: Long Run Production Behaviour Increasing Returns to Scale (IRS) Constant Returns to Scale (CRS) Decreasing Returns to Scale (DRS) Numerical Exercise: Problems and Solution Chapter Questions Unit 6 Cost and Revenue PART A : COST AND COST CURVES Concept of Cost of Production Actual Cost and Opportunity Cost Explicit Cost and Implicit Cost Accounting and Economic Cost Historical Cost and Replacement Cost Short Run and Long Run Costs Short-run Total Cost Geometry of Short-run Total Costs Short-run Pre Unit Costs Numerical illustration of short-run cost concepts Geometry of short-run Per-Unit costs

5 Relation of AVC, AC and MC Relationship between AC and MC Derivation of Short-run Per-Unit Cost Curves from Total Costs Derivation of the Average fixed cost (AFC) Derivation of the Average Variable Cost (AVC) Curve Average Total Cost (ATC) or Average Cost (AC) Derivation of the Short-run Marginal Cost (MC) Reason for the U Shape of Short Run Average Cost Curve Why U-Shaped Cost Curves? Long Run Cost Curves Relationship between Short Run and Long Run AC and MC Curves Shape of the Long Run Average Cost Curve: Theoretical Reason and Empirical Evidence Empirical Evidence on the Shape of Long-Run Average Cost Curve 263 Economies of Scale Types of Economies of Scale Concept of Economies of Scope Numerical Exercise: Questions and Solution PART B: REVENUE AND REVENUE CURVES Concept of Revenue Concepts of Total, Average and Marginal Revenues Relation between AR and MR Relation under Perfect Competition Relation under Imperfect Competition Relation between AR and MR Curves in Imperfect Competition Market Relation between Price Elasticity of Demand and Revenue of the Firm Chapter Question Unit 7 Theory of Product Pricing Introduction to the Concept of Product Pricing Market Structure and Product Pricing Product Pricing in a Market of Perfect Competition Price and Output Determination under Perfect Competition Marginal Revenue Marginal Cost (MR MC) Approach

6 Short Run Equilibrium of the Industry Short Run Equilibrium of the Firm Long Run Equilibrium of Firm Derivation of Short Run and Long Run Supply Curve of A Firm and Industry Supply Curve of Decreasing Cost Industry Long run Supply Curve of Constant Cost Industry Product Pricing in Monopoly Market Reasons for Monopoly Price and Output Determination under Monopoly Short Run Equilibrium of the Monopoly Long Run Equilibrium of Firm under Monopoly Price Discrimination under Monopoly Degree of Price Discrimination Product Pricing in Monopolistic Competition Characteristics of Monopolistic Competition Equilibrium Output and Price Determination of a Firm under Monopolistic Competition The Short Run Equilibrium The Long Run Equilibrium Difference between Perfect Competition and Monopolistic Competition Equilibrium of Firm under Product Variation and Selling Expenses. 323 Oligopoly Business Market Price and Output Outcomes in Oligopoly Pricing Under Cartel Concept of Dumping Market Structure and Degree of Firm s Market Power The Herfindahl Hirschman Index (HHI) and Market Power Numerical Exercise: Questions and Solution Chapter Questions Unit 8 Theory of Factor Pricing Meaning of Factor Pricing Factor Market Structures Factor Pricing in Perfectly Competitive Markets The Demand Curve of a Firm for a Single Variable Input Shape of MRP and VMP Curves Optimum Condition for Hiring a Factor (Labour) by a Firm

7 Demand for a Factor Input when Several Inputs are Variable The Market/Industry Demand for a Factor The Supply of Labour (a Variable Factor) in Perfectly Competitive Markets The Work-Leisure Trade Off: Backward-Bending Labour Supply Curve Market Supply Curve for an Input (Labour) The Determination of the Factor Price in Perfectly Competitive Market Factor Pricing in Imperfect Competition Market Demand for a Variable Factor by a Monopolistic Firm when Many Factors are Used The Market Demand for and Supply of Labour Bilateral Monopoly Theory of Rent: Modern Theory of Rent Modern Theory of Rent The Concept of Quasi Rent Marginal Productivity Theory of Wage Explanation of the Marginal Productivity Theory of Wage Concept of Collective Bargaining and Minimum Wage Fixation Minimum Wage Fixation Theories of Interest Rate Loanable Funds Theory of Interest Liquidity Preference Theory of Interest Theories of Profit Economic and Business Profit Economic Profit Dynamic Theory of Profit Innovation Theory of Profit Numerical Exercise: Questions and Solution Chapter Questions Model Questions TU Exam Question Bibliography