Beruflich Dokumente
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PGDM : 2017 – 19
Term 1 (June – September, 2017)
(Lecture 01,02,03)
Course Description
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Text Book & References
Text:
Salvatore and Rastogi, Managerial Economics, 8th Edition
References:
Besanko et al., Economics of Strategy
Allen, Bruce, W., Weigelt, Keith, Doherty, Neil and Mansfield, Edwin,
"Managerial Economics: Theory, Applications and Cases", 7th
Edition, Viva-Norton Student Edition, 2013.
McGuigan, Moyer and Harris (MMH), Economics for Managers, 12th
Edition, Cengage Learning, India
Dominick Salvatore, Managerial Economics in a Global Economy, 7th
Edition
James Brickley, Clifford W Smith, Jerold Zimmerman, Managerial
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Economics & Organizational Architecture, 4th Edition,
Quizzes & Exams
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Grading Method
End Term 35
Mid Term 25
Quizzes (3) 30
Class Participation 10
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Class Rules
– Punctuality,
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Topical Outline & Tentative Teaching Plan
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What is Economics?
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What is Economics?
• Economics
– Study of how society manages its scarce resources
• Economists study:
– How people make decisions;
– How people interact with one another; and
– Analyze forces and trends that affect the economy as a
whole.
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Decision Making
• Making decisions
– Trade off one goal against another
– Student – time
– Parents – income
– Society
• National defense vs. consumer goods
• Clean environment vs. high level of income
• Efficiency vs. equality
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Decision Making
• Efficiency
– Society - maximum benefits from its scarce resources
– Size of the economic pie
• Equality
– Benefits - uniformly distributed among society’s members
– How the pie is divided into individual slices
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Decision Making
– Opportunity cost
• Whatever must be given up to obtain one item
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Decision Making
• Rational people
– Systematically & purposefully do the best they can to achieve
their objectives
• Marginal changes
– Small incremental adjustments to a plan of action
• Incentive
– Something that induces a person to act
– Higher price
• Buyers - consume less
• Sellers - produce more
– Public policy
• Change costs or benefits
• Change people’s behavior
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Decision Making
– Gasoline tax
• Car size & fuel efficiency; carpool; public transportation
– Unintended consequences
• Policymakers fail to consider how their policies affect
incentives
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Interaction
• Trade
– Specialization
• Allows each person/country to specialize in the
activities he/she does best
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Interaction
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Market Failure
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Interaction
• We need government
– Enforce the rules
– Maintain institutions - key to market economy
• Enforce property rights
• Property rights
– Ability of an individual to own and exercise control over
scarce resources
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Interaction
• Government intervention
– Change allocation of resources
– To promote efficiency
• Avoid market failure
– To promote equality
• Avoid disparities in economic wellbeing
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Market Failure and Government
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What is Microeconomics?
to examine
how an organization can achieve its aims or objectives in
the most efficient manner.
What is Managerial Economics
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What is Managerial Economics
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What is Managerial Economics
• Application of Economic Theory
– Economic Models
• Abstract from details
• Focus on most important determinants of economic
behavior – cause and effect
– For example, Model of Demand and Supply, Utility
Maximization Model, Cost Minimization Model, Dynamic
General Equilibrium Model etc.
– Mathematical Economics
• Expresses and analyzes economic models using the tools
of mathematics.
– Use of Linear Algebra, Calculus, Real Analysis, Coordinate
Geometry
– Econometrics
• Employs statistical methods to estimate and test
economic models using empirical data.
– Depending on the hypothesis we are testing and type of data that
best represents the model following are the basic econometric
models: Cross Sectional Modeling, Time Series Modeling, Panel
Data Modeling
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