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• The provided text pertains to study material on economics for managers, specifically covering key concepts such as managerial economics, market structure, and inflation, all tailored to the syllabus of Veer Narmad South Gujarat University.

Economics for Managers

• Focus is on managerial economics (including macro), primarily for Semester II BBA students.
• Prepared according to the new syllabus of Veer Narmad South Gujarat University, effective from the academic year 2019-2020.

Course Objectives

• Complete and rigorous introduction to managerial economics and macro economics basics.
• To demonstrate applications of economic theory for improved decision-making.

Teaching Pedagogy

• Lectures, practical examples from the corporate & business world, assignments & presentations are used.

Course content

Introduction to Managerial Economics (20%)

• What managerial economics is about along with various definitions.
• Nature & scope and chief characteristics of managerial economics are examined.
• Discusses the significance of managerial economics.
• Outlines fundamental concepts like opportunity cost, discounting, and equi-marginal principle.
• Defines the role & responsibilities of a managerial economist in business.

Market Structure Analysis-1 (20%)

• Focuses upon Perfect Competition & Price Determination under Perfect Competition.
• Features of a Perfectly Competitive market are addressed.
• Details the Demand curve facing the Firm & Industry under Perfect Competition.
• Equilibrium of the Firm & Industry under Perfect Competition in Short-run & Long-run is examined.
• Covers Price Discrimination and Meaning of Price Discrimination.
• Examines Price Determination under Monopoly. and defines Features & causes of Monopoly.
• Discusses the Nature of Demand Curve & Marginal Revenue Curve under Monopoly.
• Price & output determination under Monopoly under Short-run & Long-run is examined.

Definition, Nature, and Scope of Managerial Economics

• Managerial Economics is a special branch of Economics applying economic theory and analysis to business and institutional practices.
• Focus is on solving practical business problems and rational decision-making.
• It uses economic modes of thought to analyze business situations, integrating economic theory with business practice for decision-making and forward planning.
• It applies economic concepts and analysis to formulate rational managerial decisions, integrating economic knowledge for rational business decisions.
• Managerial economics helps business executives make rational choices to maximize returns from limited resources.
• It links traditional economics with decision sciences to find optimal solutions to managerial decision problems.
• It relies on the theory of the firm and includes the study of the firm, understanding the economic environment, and is both conceptual and metrical.
• Uses various quantitative techniques and advisors on business decision-making to obtain optimal results.
• It is more realistic and highlights the practical application of economic theories to real-world management problems.
• It's a science of decision making, and uses mathematics, statistics, engineering, etc.
• Topics of Managerial Economics are wide, they include demand, cost, pricing, and profit analysis, break-even, government regulations, economic forecasting, inventory, and capital budgeting.
• Strategic planning is a new addition to the scope of managerial economics with the emergence of multinational corporations.
• The focus of Managerial Economics differs from traditional economic theory its assumptions of profit maximization, recognizing legal, moral, public, and social obligations alongside profit motives.

Decision - Making and Forward - Planning :

• Decision making involves objectives establishment, problem definition, identifying solutions, evaluating courses of action, and implementation.
• It plays a very important part in managerial economics

Key Characteristics of Managerial Economics

• A branch and discipline of General Economics, mainly micro in scope, and based on the theory of the firm

Limitations of Economic Analysis in Business Decision Making

• Assumes rational decision-makers, sole goals of profit maximization, and the availability of perfect knowledge.

Forward Planning for Business

• Forward planning involves future plans or deciding the course of action for the firm and it must be fully conscious of its obligations.

Role & Responsibilities of a Managerial Economist

• They help to define the key factors that infulence to the business and to assist with specialisted skills that infulence the business.
• Main responsibility is to direct all energies into helping management achieve maximum profits, irrespective of his own views.

Fundamental Concepts in Managerial Economics

• Explains the incremental, opportunity cost, time perspective, discounting principle, and equi-marginal principles.
• The incremental concept involves the change in total cost and total revenue resulting from changes in prices, products, investments, and is often related to marginal reasoning but with certain differences.

Incremental Concepts

• Increase in revenue has to be balanced with the sum total of the changes in all the items in profit.
• Focus is on those concepts which are useful in deciding the business strategy of a unit of management.
• If incremental revenue is greater than the incremental cost, a business decision would be profitable .
• Study by James Early's reveals excellently managed large firms do make formal use of incremental analysis.

Opportunity Cost Concept

• It means the next best alternative which is sacrificed or foregone.
• This also comes with the concepts of explicit cost and implicit cost
• Helps to understand the various wages that will be paid and to know various interest rates.

The Discounting Principle

• Focuses on the fact that a rupee today is worth more than a rupee of tomorrow.
• The following formula can be used V=A/(1+r)
  • V means the present value of capital.
  • A means value of capital after one year, r rate of interest
• It is widely used in business economics while taking investment decisions

Scope of Managerial Economics

• Mainly covers Operational Issues or Internal and Environmental Issues or External
• Operational issues can include:
  • Resource Allocation
  • Demand Analysis and Demand Forecasting
  • Cost Analysis
  • Pricing Policies and Practices
  • Profit Planning and Break - Even Analysis
  • Capital Budgeting and Investment decisions
• Environmental:
  • Government economic policies and regulations.
  • Changes in the degree of competition.
  • Over-all economic picture of the country- local, regional, national and international trends.

Market Structure Analysis

• The study of the market structure is generally made on basis of the extent of competition prevailing there in

Modern market definition

• The existence of a commodity.
• A particular locality or place where buyers and sellers of a commodity gather to carry on exchange at retail or wholesale prices

Factors affecting the size of the market:

• Size of population.
• Level of income.
• Nature of the product.
• Nature of demand for the product.
• Availability of the means of transport and communications. -Peace and security and law and order situation. Currency and credit system. -Government's policies.
• Division of labour.
• Advertising expenditure.

Types of Market Structure :

• Perfect Competition
• very large number of firms producing Homogeneous product
• Monopoly
• a single producer of a Unique product without substitutes
• Monopolistic Competition -Fairly large producers with Differentiated products which are close substitutes of each other
• Oligopoly Firms -Firms producing Homogeneous or differentiated products

Price Determination Under Perfect Competition

• A “price taker” can be any buyer of some particular product who has no ability to affect its price.
• An “output adjuster” can be any seller of some particular product who needs to choose its output so as to optimize some measure, often but not always profits, given the product’s prevailing price.
• Perfect and pure competition depends upon non-existence of Transport Costs.

Equilibrium of a Firm Under Perfect Competition

• There are two important basic conditions of equilibrium of a firm.
  • Marginal cost must be equal to marginal revenue.
  • The marginal cost curve should cut the marginal revenue curve from below

Price Determination Under Monopoly

• • Causes of such a market is as follow:
• • Patents and copyrights for the products give legal rights to firms
• Exclusive knowledge about technology to the firm

Features of monopolistic

• There is product differentiation
• There is high amount of control over price

Factors under Monolistic

• Government policies:
• Exclusive knowledge about technology -Ownership and control of some strategic raw materials,

Pricing under Olligopoly:

The term "oligopoly" is derived when their is few units of power which influences desitions.

Types of Olligopoly:

• In oligopoly there is a unique product
• Products are advertised and promoted