M ANAGERIAL E CONOMICS - Prof. Sanjay K. Singh Indian Institute of Management Lucknow Course Outline and Session Plan Session(s) Topics to be covered Readings and Book Chapter(s) 1 Managerial economics: an introduction PR: chapter 1 PL: chapter 1 2-4 Demand, supply, price and elasticity PR: chapter 2 5-7 Theory of consumer behavior PR: chapters 3 & 4 8-9 Production and cost analysis PR: chapters 6 & 7 10-12 Market structures and price output determination – perfect competition and monopoly PR: chapters 8 to 11 PL: chapter 9 13-15 Market structures and price output determination – monopolistic competition and oligopoly PR: chapter 12 PL: chapter 10 16 Game theory and strategic behavior PR: chapter 13 PL: chapter 11 17 Externalities and public goods PR: chapter 18 18 Economics of information asymmetry PR: chapter 17 19 Decision making under uncertainty PR: chapter 5 PL: chapter 14 20 Competition policy and economic regulation From website – R EADINGS Textbooks: ° Microeconomics by Robert S. Pindyck and Daniel L. Rubinfeld, Pearson, Eighth Edition. ° Managerial Economics by H. C. Petersen, W.C. Lewis, and S.K. Jain, Pearson, Fourth Edition Reference Book: ° Microeconomics: Theory and Applications by D. Salvatore, Oxford University Press, Fourth edition. Polycopy containing few useful articles Evaluation (PGP) The course will be graded on the following components: Assignments and Quizzes: 30% Course Commitment: 10% Mid-term Examination: 25% End-term Examination: 35%
M ANAGERIAL E CONOMICS : A N I NTRODUCTION Economics is the study of the allocation of scarce resources. S CARCITY . . . . . . means that society has limited resources and therefore cannot produce all the goods and services people wish to have. E CONOMISTS STUDY . . . How people make decisions? How people interact with each other? The forces and trends that affect the economy as a whole. T EN P RINCIPLES OF E CONOMICS 1. People face tradeoffs. Having more of one good means having less of another Society faces tradeoffs in efficiency versus equity You face tradeoffs in how best to allocate your time; the choice to attend B-School rather than being in labor force 2. People face opportunity cost (cost of something is what you give up to get it). ° What is the opportunity cost of your IIM education? ° What is the opportunity cost of attending this lecture? Undertake an activity if the benefit its opportunity cost How People Make Decisions?
T EN P RINCIPLES OF E CONOMICS 3. Rational people think at the margin ( The Marginal Principle ) i.e., the relevant benefits and costs to consider are marginal . ° Marginal cost is the additional cost of one unit increase in an activity ( MC ) ° Marginal benefit is the extra benefit resulting from one unit increase in an activity ( MB ) ° If the marginal benefit of an activity exceeds its marginal cost, do it ° If the marginal benefit of an activity is less than its marginal cost, don’t do it ° Keep doing the activity until the marginal benefit just equals the marginal cost How People Make Decisions?