IBS Hyderabad

Academic Year: (June 2019 – September 2019)

Course Handout

Course Name: Managerial Economics Semester: I

Faculty Name: Dr.Padmavathi.V

Room No: 005 Wing No: D
Consultation Hours: Every Thursday 4 to 5 PM

Email: padmavathi.v@ibsindia.org

Course Objectives:

 To discuss how the fundamental principles of microeconomics can be applied to managerial decision making.

 To introduce concepts of demand and supply, production, cost and pricing, markets and strategy

Learning Outcomes:

At the end of the course, the student will be able to:

 To demonstrate the use of economics concepts  in  the managerial decision making process
 To understand and appreciate the production and cost dynamics
 To evaluate and compare the various types of market structures
 To comprehend the concept of market failure and the role of government intervention

Recommended Text Book:

 Managerial Economics (Latest Edition): Principles and World Wide Applications, D. Salvatore; Indian adapted version by Siddhartha K. Rastogi, 8 th Edition,
Oxford University Press.

Suggested books:
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  Economics (2010): Paul A Samuelson and William D Nordhaus (Indian Adaptation by Sudip Chaudhuri and Anindya Sen) 19 th edition, McGraw Hill
Education (India) Private Limited, New Delhi
 Microeconomics : Robert S. Pindyck, D Rubinfeld & PL Mehta, 7th Edition, Pearson Prentice Hall, New Delhi

Additional readings

Online resources: Microeconomics : David Besanko & Ronald Braeutigam

Video links :

Session Plan

Key Concepts Learning outcomes Chapter

Sess Reading
Topic Case Study Title
ion in Text
Book
1 Introduction to Scarcity and efficiency, free goods, economic
5th Managerial goods,  To understand what managerial economics is all
June Economics, Choice, Opportunity cost, Partial equilibrium
about and
Partial and general equilibrium
 To understand the scope of managerial economics
general and how it is interlinked with other disciplines such
equilibrium, as business strategy, marketing etc
Microeconomics  To comprehend how key economic concepts
and (scarcity, choices, opportunity cost, , economic
Macroeconomics agents. difference of micro and macroeconomics,
partial and general equilibrium) linked with day to
day managerial decisions
2 Three economic The central problems of  To understand how decisions are made within the Switzerland, Cuba and India: The
12th problems, an economy: what, how economy (in different economic systems: Market Troika of Economic Problems in
Production and whom Economy. Command economy and Mixed Three Economies (ME003)
Possibility
economy ) about what, how, and for whom to
Frontier, shifts in
2
 Production produce
Possibility Frontier

3 Demand Definition of demand, Law  To describe the factors affecting demand curve Chapter - 2
13th of demand and its
exceptions, factors  To assess the impact of change in the price on the
affecting demand curve , demand curve
Movement along the
 To assess the impact of other factors on the
demand curve , shift in the
demand curve
demand curve , Individual
demand(Firm) and market
demand(Industry )

4 Supply Definition of supply, Law  To identify the factors affecting Supply curve   Chapter - 2
19th of supply, Factors
affecting supply,  To assess the impact of change in the price on the
movement along the Supply curve
supply curve and shift in
the supply curve,  To assess the impact of other factors on the Supply
individual(firm ) supply curve
and market
supply(Industry)
5 Global Oil Prices: Demand
20th Side vs Supply Side
Factors(MBM0015)
6 Market equilibrium o To understand price determination in a Chapter - 2
26th , Price floor, price market and show how market equilibrium
ceiling changes in response to changes in
determinants of demand and supply.

o To understand how government actions

such as taxes, price floors, and price
ceilings impact the functioning of a

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 market

7  Would Housing be a dream in

27th the Dream city of India?
( ME0013)
8 Elasticity of Concepts of elasticity, · To understand the linkage between elasticity and revenue Chapter 3
3rd demand and Degrees of elasticities, and apply it in managerial decision making (eg. pricing
July Supply price elasticity of demand, decisions etc)
income elasticity of
demand, cross price
elasticity of demand and
price elasticity of supply
Relationship of Revenue
and elasticity
9   Mobile Telephony in India:
4th Would Cheaper Rates bring
more Profits? (ME0007)
10 Consumer Utility, Cardinal  To understand the meaning of Utility, utility Caselets from text book for Supplemen
10th Behavior: cardinal Approach, law of function, diminishing marginal utility, discussion :P.No 68 and 69 tary
July Approach Diminishing Marginal Material
Utility , Consumer surplus  To understand the relationship between total utility (soft copy)
and marginal utility , law of equal marginal utility

11 Test 1-Objective test (MCQs)

11th
July
12 Consumer behavior Meaning of Indifference  To analyze how consumer on the basis of  
17th :Ordinal Approach, curve , features of ranking /preferences with budget constraint
July Indifference Curve Indifference curves , attains equilibrium
analysis, Budget constraints and
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 shifts in the budget line
13 Price effect Price Effect : Combination Understands an alternative approach to measurement of Supplemen
18th of income and substitution utility tary
July effect Material
(soft copy)

14 Production Production function, law  To get an idea or knowledge of different  

24th Function of diminishing returns, types of factor inputs and the process of
July output elasticity, marginal production
product, average product, ,
 To understand the nature of returns to
variable with the help of short run
production function

15 Production The principle of marginal  To understand of long run production function   Chapter - 7
25th Function:, Returns rate of technical  To analyze the nature of returns to scale when all
July to Scale substitution, isoquant, the inputs varied
isocost line, expansion
path, returns to scale
16   Gujarat Ambuja: Cost leader
31st in the Indian Cement Industry
July (OPEA002)
17 Costs in the Short Types of costs :Marginal  To understand the meaning of cost and its   Chapter - 8
1st run cost, Sunk cost, Implicit relationship with production function
Aug costs, explicit costs,
opportunity costs,  To understand the relevance of costs in
economic costs, managerial decision making
accounting costs,

Class Participation Evaluation -1

18 Costs in the Long Break-even point, shut-  · To understand the concepts of economies andBusiness Viability of Dish TV Chapter - 8
7th run down point economies diseconomies of scale and the relationship to the(ME0016)
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Aug of scale, diseconomies concept of return to scale
. of scale, economies of  · To understand the significance of economies of
scope, learning curve scope and learning by doing ( the learning curve)
19 Markets-perfect Perfect competition,  To understand the basics of market morphology   Chapter : 9
8th Competition features. demand curve,  To understand the role of seller in an competitive
Aug firms demand curve and environment
. industry demand curve
Equilibrium conditions

21 Markets-Perfect Price and output  To understand the what will be the nature of profit   Chapter : 9
14th Competition determination both in the if all the conditions of perfect competition will
Aug short run and long run prevail in the market
. Concept of Allocative  To understand what are the conditions which will
efficiency Government ensure allocative efficiency
intervention in markets
22 Test 2-Written test
21st
Aug
23 Monopoly Features of Monopoly –  To identify the sources of monopoly Chapter : 9
22nd sources of monopoly and  To measure the extent of monopoly with the help
Aug measurement of monopoly of HHI and concentration ratio
. Demand curve,
equilibrium conditions
Price and output
determination both in the
short run and long run,
Three degrees of price
discrimination , the
concept of dead weight
loss
24 Mexican Telecom Industry
28th (ME0018)
Aug
.
25 Monopolistic Features of Monopolistic  To identify the similarities and dissimilarities with
29th competition competition, demand perfect competition and monopoly.
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Aug curve, equilibrium  To understand the significance of selling costs
. conditions, price and which contribute to product differentiation
output determination both
in the short run and long
run
26 Gujarat Newspaper industry
4th
Sep.
27 Oligopoly- Features of oligopoly,  To observe and understand the reasons for price   Chapter :
5th types of Oligopoly rigidity in such markets 10
Sept Collusive and non-  To understand that the firms are mutually
collusive Oligopoly, interdependent
Kinked Demand curve,
28 Price Leadership & Low cost firm price  To understand the process of how price is fixed or   Chapter :
11th cartels leadership, dominant firm accepted in such markets. 10
Sept price leader ship and  To analyze how cost of production will
barometric price determine the profits or loss
leadership  How price and output is determined in
duopoly

29 OPEC: the Economics of cartel

11th
Sept
30 Game theory Basics of game theory,   Chapter :
12th Dominant Strategies, Nash 12
Sept Equilibrium, Threats,  To understand the relevance of game theory in
Commitments and economic theory
Credibility, Entry
deterrence  To describe the concepts related to game theory

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 and their application

31  AIRBUS 350 vs BOEING 787:

12th Battle for skies (COM0167B)
Sept
32   Externalities Positive and negative  ·To analyze how externalities, market power, Externalities: Justification for
18th Externalities - Market asymmetric Information, and principle agent Public Goods? (ME0004)
Sept Failure And Government problems leads to market failure
Intervention; Asymmetric
Information, Moral  To understand the relevance of regulatory bodies
Hazard, Market Signaling
for market correction.
Chapter :
13
33 Group Project presentations,
19th, discussions and evaluation &
25th, Class Participation Evaluation
26th
Sept

Expectations from Students

a. Students must report to the respective sessions well before the announced time. Latecomers will not be permitted to join the class after the scheduled time. If
late, the attendance for that session will be marked as absent.
b. Read the Case Study / material well prior to the class discussion. He/she is also expected to read the chapter indicated in the course plan as the faculty directs.
c. In the class discussion student is expected to participate actively and contribute to individual and group learning. Evaluation is based on active participation.
d. Evaluation is a continuous process at IBS. Every student needs to be aware of the timelines given in the section below. Absence from these evaluations will
mean non awarding of marks in that particular component
e. Wherever applicable, group assignments require each student to contribute to the group effort. This enhances group effectiveness and leads to greater
appreciation of working in groups.
f. Formal dressing is suggested for all students. Do not roam in the academic area/ attend classes in chappals / shorts / informal t-shirts.

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 g. Students are expected to show high regard and appreciation for in class discipline and desist from using mobile phones. This disturbs the class ambience and
unnecessarily diverts attention of other students as well as the faculty member.
h. Each faculty has been given a scheduled consultation hour. Utilize this time to meet the faculty and clarify doubts if any, seek explanations and get mentored if
needed.
i. Attendance is compulsory in all sessions. However refer to guidelines in your academic handbook for exceptions.

Evaluation Timelines
Keeping in line with continuous evaluation at IBS the following schedules have been drawn. Students are expected to go through the dates / sessions mentioned
and prepare accordingly.

Component Component Expected slot / due Weightage (%)

Number date
Class Participation 1 Session 17 5
Evaluation
Class Participation 2 Session 33 5
Evaluation
Test-1 Objective test (MCQs) 1 Session 11 20

Test-2 Written test 2 Session 22 20

Project Topics Allotment Session 10
/Distribution
Project Interim report 3 Session 15
Project/Seminar submission 3 By Session 30
Project presentation Session 32&33 10
Comprehensive examination At the end of the semester 40

Total 100

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Ms.Padmavathi.V, Associate Professor in the department of Economics, IBS – IFHE, Hyderabad. Earlier she was core faculty and Research Coordinator
at IIRM (jointly owned by Govt. of Andhra Pradesh and IRDA) and faculty member of IIIF (international Institute for Insurance and Finance - affiliated
to Osmania University), Hyderabad, India. she has done her Doctorate in Life Insurance (Ph.D.,) from Osmania University, Fellow from the Insurance
Institute of India (FIII - Life), M.Phil., in Motor Vehicle Taxation from Andhra University, Masters in Economics (M.A.,) from Nagarjuna University ,
P.G Diploma in Public relations from A.P.Open University and Certificate in Capital Markets, Regulation and Compliance from University of Reading,
U.K.

She has more than 30 years of experience in teaching subjects of Economics, Life Insurance and Risk Management. During her tenure with IIRM and IIIF
she has trained more than 1000 associates of various MNC’s and professional bodies, including IRDA, Satyam Computer Services Limited, Aviva Life
Insurance, ICICI Pru, ICICI Lombard, Planet Soft, i3 software solutions, LIC (Life Insurance Corporation of India), Institute for Technology and
Management and ICAI (Institute of Chartered Accountants of India). She was a subject matter expert for various MNC’s including TBG (The Boston
Group), Kalzoom Technologies Pvt. Ltd., to develop content in the Life insurance domain. She was a resource person for Osamania University Faculty
training programs. Eight of her books were published by ICAI and Professional Book Publishers . More than 30 articles were published in the
International and national journals including Think Piece, Fact File CII, UK , IEA etc., She has presented more than Twenty papers in international and
national conferences including APRIA (Asia Pacific Risk and Insurance Association) Conferences in Beijing, Singapore, Tokyo, Seoul and New York.

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