Consumers, Firms and Markets

Session 1
Basic Issues
• What ?
The nature and scope of the course

• How ?
Overall view of the syllabus, Key Ideas and Evaluation Parameters

• Why ?
Importance, relevance and key takeaways from the course
Nature and Scope
• Managerial Economics

• The use of economic analysis in the formulation of business policies

• Economic analysis ?

• Business Policies ?
Economic Analysis
• The study of the behavior of human being in producing, distributing
and consuming material goods and services in a world of scarce
resources.

• Scarcity ?

• Limited resources and unlimited wants !!!

Scarcity and Economic decision
• Water
• Drinking
• Bathing
• cleaning
• Washing
• Gardening

• How will the ‘stored’ water be utilized?

Contd.
• Limited resources to their ‘most efficient’ utilization

• Efficiency and Scarcity : Twin pillars of Economic Analysis

• Efficiency ?

• Most desirable outcome / Achievement of objective

Business Policy
• Management is the discipline of organizing and allocating a firm’s
scarce resources to achieve its desired objective !!
• Firm’s Resources ?
• Financial resources
• Physical resources
• Human resources
• Intellectual resources
• Objectives?
• Profit, Growth, Market leadership
Economic Analysis and Business Policy
• What to produce ? : The Product Decision (Strategy)
• Structure-Conduct-Performance ( Market analysis)
• How to produce? : The hiring(HR), staffing(HR), procurement &Supply
Chain (Operations) and capital budgeting (Finance and Accounting)
• Cost analysis , production function, producer’s equilibrium
• For whom to produce ? : Market segmentation , Target Customer and
Positioning (Marketing)
• Demand estimation &Forecasting, Elasticity of Demand, Pricing
Brief Overview of the Syllabus
• The Firm and Its objective

• Demand & Supply Analysis and Market Equilibrium

• Elasticity of Demand, Revenue and Managerial Implications

• Production and Cost Analysis

• Market Structure : Perfect Competition, Monopoly, Oligopoly and Monopolistic Competition

• Pricing Strategies
Evaluation

• Class participation

• Mid Term

• End Term

• Group Assignment
Managerial Economics and Its Relevance
• Integrative view of a business

• ‘Big Picture’

• Organization of complex problem in a simpler framework