1: Introduction & Goals of the Firm

Session coverage, 8 July ‘22

1A: The Scope of Economic& Business Analysis

1B: The Firm, Value, and Wealth Creation

Before-the-class Reads& Smart notes: Chapter 1 from ME& BS text-book and

Topic 1 from Readings& Case Apps in CFM
A PRIMER FOR BEGINNERS

1A – Why Understanding the Economic Way of Thinking for Managers is

crucial? (Pages, 1-14 docket)
 a. Introducing the economic way of thinking: The problem of scarcity; Scarce resources& Factors
of Production
 b. Economics: The Study of Scarcity and Choice-making
 c. The Method of Managerial Economics: Problem Identification; Model Development; and
Testing Theory
 d. Beware of pitfalls while using economic reasoning: The “ceteris paribus”; and Association vs.
“Cause-and-effect”
 e. Why do business analysts or economists disagree / simply, why do forecasts differ?

1B - Using Firm value in Managerial Decision-Making

(pages, 1-6 text-book)
 Introduction: The Manager, Economics& Managerial Economics Defined
 The economics of effective management: Firm’s Objectives& Goals& constraints
 Separation of Ownership and Control: The Agency Problem and Costs
 Nature and Importance of profits
 Shareholder wealth maximization: FV, PV, NPV Concepts | APPENDIX: PV and PV tables

Case Study-1 / HEADLINE: Amcott Loses US$ 3.5 Million; Manager Fired, page 14(course docket); Case-
let 2: Indian-origin Tech Entrepreneur Arrested in the US over Alleged $45 Million Investment Fraud,
Shweta S, MSN.COM / 2 Jun ’22(course docket);
Inside Business-1 / The Goals of Firms in Our Global Economy, page 6(text-book).