The important take away from last week chapters are:

Chapter 8

This chapter rotates around market settings, describing how the process of

determining the price of product work in an industry where many buyers and sellers exist.

The seller’s behavior is being calculated through a “supply curve” and the behavior of buyers

is being evaluated by a “demand curve”. Before we analyze any market, it is important to get

the time defined and analyze the geography and product description for the market. Multiple

reasons could account for a shift in the demand curve. Market Equilibrium is called as the

situation where the quantity demanded equals quantity supplied. Another important point to

remember is that prices are the elementary method through which market participants

communicate to each other. Higher prices communicate the consumers to have lesser

consumption and for suppliers to aggravate the supplies.

Chapter9

In this chapter, we learned in depth about competitive firms. In the short run, until

entry or exit occurs, any competitive firm can earn a positive or negative profit.

In the case of competitive firms,

price = marginal revenue

         hence, if P>MC, produce more

         and if P<MC, produce less

We even define profit as the regression towards the mean and also called mean reversion

(Gilad, 2011).
The major difference between stock returns and the yields of bond comprises of a premium

risk compensation. In case the risk premier results into very small value, in this scenario

investors, decides to move out of the risky assets as according to them the market would be

ignoring the chances of risk in the expectations of higher returns.

Monopoly firms can gain profits which are positive for a longer duration of the period in

comparison to competitive firms but the profit gets eventually eroded by the entry and the

imitation.

Chapter 10

This chapter has a lot of interesting points and is fundamental pointers for

understanding managerial economics. The strategy is basically employed to get economic

profits. Fundamentally it is either about increasing the price or reducing the cost (O'Brien,

2011).

For a successful company, it is very important to have a unique advantage and then to sustain

this. This is called Sustainable Competitive Advantage. Big Investors like Warren Buffet

even follow these criteria in the selection of ventures. For Long- Run profitability, the

industrial organization economics (IO) perceives that industry structure is the fundamental

determinant (Tucker, 2012). Another important point in this chapter is about the five forces

framework, this model helps to understand the industry and market conditions in-depth. This

is a very useful tool for every business to evaluate before entering a new market or even in

the case where a new product is supposed to be launched. In the case of RVB which is a

review based view, the superiority of the resources gives the advantage to the individual

firms to exhibit sustained performances. The primary assumptions in RVB are resource

heterogeneity and resource immobility. The companies can follow three basic strategies
firstly reduce costs secondly reduce the intensity of the competition and lastly Differentiate

product.

Reference:

Gilad, B. (2011). Strategy without intelligence, intelligence without strategy. Business

Strategy Series, 12(1), 4-11. doi: 10.1108/17515631111106821

O'Brien, T. (2011). Managerial economics and operating beta. Managerial And Decision

Economics, 32(3), 175-191. doi: 10.1002/mde.1525

Tucker, C. (2012). The economics of advertising and privacy. International Journal Of

Industrial Organization, 30(3), 326-329. doi: 10.1016/j.ijindorg.2011.11.004