1.

Course Code: ECO 101

2. Course Title: Managerial Economics

3. Course Overview:
Managerial Economics deals with the application of microeconomics to the practical problems of businesses/firms in order to
facilitate rational managerial decisions and possible solutions of managerial problems. There are two broad branches of
economics science, such as microeconomics and macroeconomics. Microeconomics deals with the behaviour of individual
consumer and producer. Macroeconomics deals with the aggregate variables, such as national income, inflation etc. While
microeconomics would help managers in identifying how economic forces affect organization and more so what will be the
economic consequences of managerial behaviour, macroeconomics helps identify, explain and adjust to the entire gamut of
macroeconomic context in which business would operate. Managerial economics deals with the applications of
microeconomic theory. It integrates economic theory with business practice for the purpose of facilitating planning and
decision making. As a discipline it helps managers to recognize how economic forces affect organizations and describes the
economic consequences of managerial behavior.
The basic economic problem viz. resources are limited (in scarcity) and the uses to which they can be put to are unlimited,
forces firms to make decisions at every stage of operation, be it sourcing of inputs, conversion of inputs into output or
distribution of output. This decision-making involves choosing the optimal solution from the available alternatives. Different
alternatives entail different combinations of resources. Had resources been unlimited, one could have utilized all the
alternatives and the business could have continued well without any problem. But the scarcity of resources requires managers
to analyze and evaluate all the available choices and choose the alternative that produces the result most consistent with the
objective of the firm.
The problem before a firm can be manifold. While the sourcing of inputs could involve deciding whether to make, or buy,
how much to buy and from whom to buy, in the conversion process, the problems could relate to deciding on the production
techniques to be used, how much to produce, what combination of inputs to use and so on. When it comes to marketing the
product, questions concerning product pricing, advertisement expenditure and logistics become paramount.
Finding optimal solutions to all such managerial problems is rendered easy by the concepts and theories of economics and
methodologies of the decision sciences. The basic economic concepts of demand, cost, production and price, along with the
theories of consumer behavior, profit maximization and market structure helps in finding out optimal solutions. Without, a fair
comprehension of the concepts of opportunity costs, marginal reasoning and discounting, many managerial decisions would
have been grossly illogical. The decision-making framework of economics, when applied with the methodologies of decision
sciences like statistical estimation, forecasting, optimization, game theory, etc. provides a rational base to managers for
solving business problems.
In general, managerial economics can be used by the goal-oriented manager in two ways. First, given an existing economic
environment, the principles of managerial economics provide a framework for evaluating whether resources are being
allocated efficiently within in a firm. For example, economics can help the manager determine if profit could be increased by
reallocating labor from a marketing activity to the production line. Second, these principles help managers respond to various
economic signals. For example, given an increase in the price of output or development of a new lower-cost production
technology, the appropriate managerial response would be to increase output. Alternatively, an increase in the price of one
input, say labor, may be signal to substitute other inputs, such as capital, for labor in the production process.
This course also provides considerable attention to examining statistical techniques for quantitative estimation which helps in
economic optimization in relation to business objective of the firm. It examines production theory and cost in detail along
with their empirical estimation. In the last part of course, it examines different types of market structures and pricing decisions
relevant under different market conditions. The knowledge of the number of sellers and buyers, the nature, extent and degree
of competition etc. determines the nature of policies to be adopted by a firm in the market.
4. Programme level learning goals:
The predominant goal of this course is to make students better decision- makers in a business or institutional context as also to
facilitate the application of principles and techniques to personal financial and economic decisions. The secondary purpose of
the course is to sharpen the analytical skills so that students will be better able to recognize and solve decision problems in
different contexts. It is as relevant to the management of non-business, nonprofit organizations such as government agencies,
cooperatives, schools, hospitals, museums, and similar institutions, as it is to the management of profit-oriented businesses.

In a nutshell, managerial economics is the application of microeconomics theory and methodology to managerial decisionmaking. The course on managerial economics would facilitate the following broad aspects of learning for students:
Use of microeconomics tools for managerial decision making.

Behavior of consumers and producers and how they come in terms with each other in various market
conditions.
Analysis of possible array of factors likely to affect future decision making.

5. Learning Outcome
After completing the course student shall be able to:
1. Apply the economic approach to individual and business decisions. (LO-1)
2.

Analyze consumer behavior and estimate demand and supply. (LO-2)

3.

Work out production and cost of a firm. (LO-3)

4.

Identify nature and intensity of competition in different types of market. (LO-4)

6. List of topics/modules
Topic/Module
Module I: Introduction

Module II: Demand and Supply Analysis

Module III: Elasticity of Demand

Module IV: Production and Cost Analysis

Module V: Market Structures and Pricing decisions

7. Evaluation Criteria
Component
Type
Reflective
Individual
Notes

Quizzes

Individual

Contents/concepts
Economic Problems
Rationale and Objectives of Firms
Principal-Agent Problem
Economic Profit
Scarcity and Opportunity Cost
Utility as the basis of demand
Marginal Utility and Price
Demand and Supply Function
Exceptions to Law of Demand and Supply
Price Mechanism
Consumer Surplus
Producers surplus
Price, Income and Cross Elasticity
Elasticity and Revenue
Classification of Goods
Production Function
Returns to Factor and Returns to Scale
Economies of Scale and Scope
Cost Concepts; Short Run and Long Run Cost
Perfect Competition
Monopoly
Discriminating Monopoly
Monopolistic Competition
Oligopoly
Special Pricing Decisions & Practices.

Description
Reflective notes are a collection of notes, observations, thoughts, and
learning that the students have experienced after attending the class. The
purpose of reflective notes is to enhance the students learning through
the process of reflecting, thinking and writing about their learning
experiences of the class. The reflective notes will include only the key
learning and key take-away which the students got from the class.
There will be four quizzes conducted during the course. Quizzes may be
multiple-choice based, fill in the blanks, one liner, etc. There shall not be

Weight
10%

10%

Component

Type

Concept-based
assignment

Group

Project

Group

Mid Term
Exams
End Term
Exams

Individual
Individual

Description
any make-up quiz for any student.
The group will be allotted a concept of managerial economics with a
mandate to track, compile, synthesize, document and assimilate the news
items in print and other media, directly or indirectly related to the
assigned concept. The group will submit the document to the faculty and
will be evaluated on the basis of the quantity and quality of news
coverage and analysis. Other assignments may include collection of
concept-based videos, case studies, research and popular articles, etc.
It will be group task (group of 5-6 students). The students will be
assigned a topic to work upon. The student will collect (primary or
secondary as the case may be) and analyze data and prepare a project
report and submit the same to the faculty. In addition, the students will
have to briefly discuss the relevant concepts of managerial economics
related to the assigned topic.
This will be a blend of conceptual questions as well as application based
questions.
This will be a combination of cases; application based situational
questions and conceptual questions.

Weight
10%

10%

20%
40%

8. Recommended/ Reference Textbook and Resources

Text Book
References

Internet
Resources

Managerial Economics, Christopher R Thomas, S Charles Maurice, and Sumit Sarkar (2010) 9th
Edition, Tata McGraw-Hill Publishing Company Limited, New Delhi.
(Referred here after as Text).
1. Managerial Economics Economic Tools for Todays Decision Makers, Paul G. Keat, Philip
K. Y. Young, and Sreejata Banerjee (2011)Pearson Education
2. Managerial Economics, H. Craig Petersen, W. Cris Lewis, and Sudhir K. Jain(2006) Pearson
Education
3. Managerial Economics in a Global Economy, Dominick Salvatore (2008)Oxford University
Press
http://economics.about.com - While Economics at about.com is meant mainly as a general purpose
tool, it can also be very helpful for students who are enrolled in an introductory economics.
http://www.economist.com - The Economist online offers authoritative insight and opinion on
international news, politics, business, finance, science and technology. They publish all articles
from The Economist print edition (including those printed only in British copies) and maintain a
searchable online archive that dates back June 1997. It also offers a variety of web-only content,
including blogs, debates and audio/video programs.

9. Session Plan
Session
Topic

Requirements:
Readings/ Cases

Learning Outcomes

Course Overview; Assessment and

expectations; Relevance of Managerial
Economics for business decisionmaking
Forms, functions and objectives of
firms

Text: Chap 1 (pp: 4-5)

Development of preliminary
understanding and creation of interest
in managerial economics. (LO -1)

Text: Chap 1 (pp: 6-10)

Principal-agent problem; scarcity and

opportunity cost

Text: Chap 1 (pp: 1118)

Appreciation of importance of firm as

an agent of production, agency
problem and possible solutions,
scarcity and hence opportunity cost.
(LO -1)
Appreciation of importance of agency
problem and possible solutions,
scarcity and hence opportunity cost.
(LO- 1)

Module I: Fundamentals of Managerial Economics

1.

2.

3.

Module II: Demand and supply analysis

4.

Utility as a basis of demand; basic

assumptions of consumer theory; price

Text: Chap 5 (pp: 151160)

Appreciating the concept of utility and

significance of diminishing marginal

Session

Topic

Requirements:
Readings/ Cases

and marginal utility; law of

diminishing marginal utility

Learning Outcomes
utility. (LO -2)

5.

Demand Analysis: Law of Demand,

Determinants of Demand, Exceptions,
Classification of commodities: Good,
Bad, Neuter.

Text: Chap 2 (pp: 3042)

Case let 1: The 007 Car
is Here!

Understanding the nature and

influence of basic determinants of
demand for a commodity. (LO -2)

6.

Consumers preference and budget

constraint; Revealed preference,
Income and Substitution effect, Engels
Law.

Text: Chap 5 (pp: 160171)

Quiz-1: (syllabus:
session 1-5)

Realization of significance of
transforming consumers preference
domain from weak ordering into
strong ordering to increase the market
share. (LO -2)

7.

Supply Analysis

Text: Chap 2 (pp: 4250)

8.

Market equilibrium and disequilibrium,

Price mechanism.

Text: Chap 2 (pp: 5052)

9.

Measuring the value of market

exchange (consumer surplus, producer
surplus and social surplus);
Government intervention (floor price,
ceiling price)

Text: Chap 2 (pp: 5368)

Understanding the nature and

influence of basic determinants of
supply of a commodity. (LO -2)
Appreciation of market equilibrium
mechanism and price as a market
adjuster. (LO -2)
Assimilating the welfare effects of
market system, and need &
implications of governments price
intervention (LO -1, 2)

Module III: Elasticity of Demand

10.
Price elasticity; factors affecting price
elasticity of demand; business
applications of price elasticity
11.

Income, cross elasticity; business

applications of income and cross
elasticity; Elasticity and Revenue.

Guest Session 1:
Governments price
intervention
Text: Chap 6 (pp: 196209)

Ability to identify appropriate price

adjustment in order to increase firms
sales. (LO -2)

Case let 2: CNG

Vehicles have arrived.
Text: Chap 6 (pp: 209219)
Quiz-2: (syllabus:
session 6-10)

Ability to anticipate the impact on

firms business due to fluctuation in
consumer income and competing
firms price adjustment. (LO -2)

Text: Chap 8 (pp: 272283)

Anticipating output when one or more

factors of production are fixed. (LO-3)

Classification of goods: Inferior,

Normal and Luxury.
Module IV: Production and cost analysis
12.

Production function; production in the

short run - returns to a variable factor

Mid Term Examination (syllabus: sessions 1-12)

13.

Production in the long run and returns

to scale; Economies of scale and
Economies of scope,

Text: Chap 9 (pp: 303320)

Anticipating output and when a firm

can change (subject to budget
constraint) all the factors of
production. (LO-3)
Ability to identify the ways & means
to reap the economies of scale and
scope and avoid diseconomies of
scale.

14.

Externalities and Market Failure.

Text: Chap 9 (pp: 324329)

Ability to find out possible measures

to exploit positive externality and
reduce negative externality in

Session

Topic

Requirements:
Readings/ Cases
Case let 3: Cutting
Costs: The Solar Steam
Cooking Way

Learning Outcomes
production. (LO-3)

Guest session 2 :
Externalities in
production
15.

Cost Analysis in Short and Long Run

Text: Chap 8 (pp: 283295)

Text: Chap 9 (pp: 320330)

Anticipating cost behaviour when a

firm changes its production
technology in both short and long run.
(LO-3)

16.

Break-Even and Profit Contribution

Analysis

Handout: Break Even Assessment of feasible scale of

Analysis
production and prices. (LO-3)
Quiz-3: (syllabus:
session 13-15)

Module V: Market structure and pricing decisions

17.

18.

19.
20.

21.

22.

Managerial decisions in perfectly

competitive market: demand facing a
price-taking firm; profit maximization
in short-run and long-run;
Managerial decisions for firms with
market power: measurement of market
power; determinants of market power;
Output and pricing decisions under
monopoly;
Price discrimination
Price and output under monopolistic
competition;

Strategic decision making in Oligopoly

market structure.
Interdependence and price rigidity;
Fundamentals of game theory
Pricing Strategies: Cost-Plus pricing,
Peak-load pricing, Product Bundling,
Transfer pricing

Text: Chap 11 (pp: 375385)

Understanding the nature of demand

for undifferentiated product. (LO-4)

Text: Chap 12 (pp: 423443)

Understanding the determinants and

measurement of market power.

Text: Chap 14 (pp: 536554)

Text: Chap 12 (pp: 446456)
Case let 4: Booming
Business: Indian Hotel
Industry
Text: Chap 13 (pp: 474486)
Quiz-4: (syllabus:
session 16-20)

Finding out profit-maximizing output

and price of a unique product (without
close substitutes). (LO-4)
Ability to design differential pricing
pattern for sales and profit
maximization. (LO-4)
Finding out profit-maximizing output
and price under monopolistically
competitive market structure. (LO-4)

Taking strategic decisions in oligopoly

market structure. (LO-4)

Text: Chap 14 (pp: 559573)

Understanding the different pricing

techniques. (LO-4)
Appreciating the role of networking,
trust and solidarity. (LO-1)

23.

Economics of Trust, Networking and

Solidarity

Handout

24.

Review and Summary

---

End Term Examination (syllabus: sessions 1-24)

10. Contact Details
Name of
Mahima Sharma (sections A); R. K. Ojha (sections B & C); Mohd. Irfan (section D & E);
instructors
Office location
Mahima Sharma (old block); R. K. Ojha (old block); Mohd. Irfan (new block);
Telephone
Mahima Sharma (236); R. K. Ojha (230); Mohd. Irfan (269);

Email
Teaching venue
Office hours

Mahima Sharma (mahima.sharma@jaipuria.ac.in); R. K. Ojha (raj.ojha@jaipuria.ac.in); Mohd.

Irfan (mohd.irfan@jaipuria.ac.in);
Section A (room no. 113); section B (room no. 114); section C (room no. 115); section D (room no.
121); section E (room no. 120)
09:30 a.m. to 05:30 p.m.