MANAGERIAL ECONOMICS

Course Code: 24IMSI201DS03

L-T-P External Marks: 70

3-1-0 Internal Marks: 30

Time: 3 Hours

Course Objectives

1. Apply economic principles to management decisions.

2. Understand the Nature, Scope and Significance of Managerial Economics, and its Relationship with

other Disciplines.

3. Understand the Role of Managerial Economics in Decision Making.

4. Understand the cardinal and ordinal approaches of consumer behavior.

Course Outcomes

After completing the course students would be able to:

1. Define the basic elements of managerial economic aspects of firm.

2. Forecast demand for a product.

3. Know what to produce, where to, when to, how to, for whom to produce.

4. Frame policy for production to minimize the cost and maximum the profit.

5. Construct the cost function.

UNIT-I

Nature and scope of managerial economics; nature of marginal analysis; alternative objectives of business firms;

cardinal utility theory; indifference curve technique and the theory of consumer choice; consumer surplus; price,

income and substitution effects; demand elasticity; demand estimation and forecasting; relationship between

price elasticity and marginal revenue.

UNIT-II

Law of variable proportions; laws of return; optimal input combination; output-cost relations; engineering cost

curves; technological change and production decisions; revenue curves of a firm; price-output decisions under

alternative market structures; shut-down points; Baumol’s sales maximization model; advertising and price

output decisions.

UNIT-III

Product differentiation; price-output decision in multi-plant and multi-product firms; general pricing strategies;

special pricing techniques – limit pricing, peak load pricing and transfer pricing; dumping analysis; pricing of

public utilities.

UNIT-IV

Risk analysis; investment and capital replacement decisions; locational choice of a firm; measures of national

income; business cycles; operative aspects of macroeconomic policies; inflation analysis; tariff analysis.

Recommended Readings:

1. Hirschey, Mark, Managerial Economics, Thomson Learning, Bangalore

2. V. Agarwal, Managerial Economics, Pearson Education.

3. Monroe, Kent B., Pricing-Making Profitable Decisions, McGraw-Hill, New York

4. Keat, Paul B., and Philip K.Y. Young, Managerial Economics – Economic Tools for Today’s Decision

Makers, Pearson Education

5. Salvatore, Dominick, Managerial Economics in a Global Economy, Thomson Learning, Hyderabad

Instructions for External Examiner: The question paper shall be divided in two sections. Section A shall

comprise of seven short answer type questions from whole of the syllabus carrying two marks each, which shall

be compulsory. Answer to each question should not exceed 50 words normally. Section B shall comprise 8

questions (2 questions from each unit). The students will be required to attempt four questions selecting one

question from each unit. All questions will carry equal marks.