MBA - I Semester                                                          Paper Code: MBAC 1002 
                              
                    Managerial Economics    
         
        Objectives 
          Ֆ  To introduce the economic concepts 
          Ֆ  To  familiarize  with  the  students  the  importance  of  economic 
            approaches  in  managerial  decision  making  To  understand  the 
            applications of economic theories in business decisions  
        Unit – I 
           General Foundations of Managerial Economics - Economic Approach 
        - Circular Flow of Activity - Nature of the Firm - Objectives of Firms - 
        Demand Analysis and Estimation - Individual, Market and Firm demand - 
        Determinants of demand - Elasticity measures and Business Decision Making 
        - Demand Forecasting.  
        Unit-II  
           Law of Variable Proportions - Theory of the Firm - Production 
        Functions in the Short and Long Run - Cost Functions – Determinants of 
        Costs – Cost Forecasting - Short Run and Long Run Costs –Type of Costs - 
        Analysis of Risk and Uncertainty. 
        Unit-III  
           Product Markets -Determination Under Different Markets - Market 
        Structure – Perfect Competition – Monopoly – Monopolistic Competition – 
        Duopoly - Oligopoly - Pricing and Employment of Inputs Under Different 
        Market Structures – Price Discrimination - Degrees of Price Discrimination. 
        Unit-IV 
           Introduction to National Income – National Income Concepts - Models 
        of National Income Determination - Economic Indicators - Technology and 
        Employment - Issues and Challenges – Business Cycles – Phases – Management 
        of Cyclical Fluctuations - Fiscal and Monetary Policies.
        Unit – V
           Macro Economic Environment - Economic Transition in India - A 
        quick Review - Liberalization, Privatization and Globalization - Business 
        and Government - Public-Private Participation (PPP) - Industrial Finance - 
        Foreign Direct Investment(FDIs).  
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                References 
                   1.  Yogesh Maheswari,   Managerial Economics, Phi Learning, 
                     Newdelhi, 2005 Gupta G.S., 
                   2.  Managerial Economics, Tata Mcgraw-Hill, New Delhi Moyer 
                     &Harris, 
                   3.  Anagerial Economics, Cengage Learning, Newdelhi, 2005 Geetika, 
                     Ghosh & Choudhury, , 
                   4.  Managerial Economics, Tata Mcgrawhill, Newdelhi, 2011
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                        UNIT – I
           Lesson I  The Fundamentals Of Managerial Economics
        Reading Objective:
           At the end of the reading this chapter, the reader will be able to 
        understand that economics is the study of mankind’s attempt to satisfy 
        their unlimited wants with the help of limited resources.  Economics maybe 
        divided in to 1) Micro Economics and 2) Macro Economics 3) Monitory 
        Economics and 4) Fiscal Economics.  Micro economics deals with the basic 
        principles of economics like law of demand, law of supply, consumption, 
        production etc,.  Managerial economics deals with the principles of micro 
        economics as applied to managerial decision making.  The reader may also 
        be able understand the circle flow of economic activity. The circle flow is a 
        chain in which production creates income, income leads to spending and 
        spending in turn leads to production activity.
        Lesson Outline:
          Ֆ  Why study Economics?
          Ֆ  Managerial Economics
          Ֆ  Nature of Managerial Economics
          Ֆ  Circular flow of economic activity
          Ֆ  Objectives of the firm
          Ֆ  Review questions
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                Introduction
                    People have limited number of needs which must be satisfied if 
                they are to survive as human beings. Some are material needs, some are 
                psychological needs and some others are emotional needs. People’s needs 
                are limited; however, no one would choose to live at the level of basic 
                human needs if they want to enjoy a better standard of living. This is 
                because human wants (desire for the consumption of goods and services) 
                are unlimited. It doesn’t matter whether a person belongs to the middle 
                class in India or is the richest individual in the World, he or she wants 
                always something more.  For example bigger a house, more friends, more 
                salary etc., Therefore the basic economic problem is that the resources are 
                limited but wants are unlimited which forces us to make choices.  
                    Economics is the study of this allocation of resources, the choices 
                that are made by economic agents. An economy is a system which 
                attempts to solve this basic economic problem. There are different types 
                of economies; household economy, local economy, national economy and 
                international economy but all economies face the same problem. The 
                major economic problems are (i) what to produce? (ii) How to produce? 
                (iii) When to produce and (iv) For whom to produce?
                    Economics is the study of how individuals and societies choose 
                to use the scarce resources that nature and the previous generation have 
                provided. The world’s resources are limited and scarce. The resources 
                which are not scarce are called free goods. Resources which are scarce are 
                called economic goods.
                Why Study Economics?
                    A good grasp of economics is vital for managerial decision making, 
                for designing and understanding public policy, and to appreciate how an 
                economy functions. The students need to know how economics can help 
                us to understand what goes on in the world and how it can be used as a 
                practical tool for decision making. Managers and CEO’s of large corporate 
                bodies, managers of small companies, nonprofit organizations, service 
                centers etc., cannot succeed in business without a clear understanding of 
                how market forces create both opportunities and constraints for business 
                enterprises.
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