SUBJECT NAME

Economic Analysis for Business Decisions

SUBJECT CODE

MGT 3002

SUBJECT CREDITS

SUMMARY/OVERVIEW

The primary objective of this course is to develop the abilities

in students to apply fundamental principles of economics to a
wide range of managerial decisions. The focus of this course
will be on understanding the theory and principles of
microeconomics for applying the same in the real world issues
and to make managerial decisions. The students are expected
to leave the course with a strong hold on how the tools of
microeconomics can be applied to appropriate managerial
decision-making.
To help the students understand the behavior of various
economic agents and analyze and explain the application of
economic concepts like elasticity of demand, economies of scale
and economies of scope in managerial decision making.

AIMS

To facilitate recognition how economic forces affect

organizations and describe the economic consequences of
managerial behavior.
To help students understand different market structures
and analyze how price and quantity are determined in various
markets.

CORE LEARNING OUTCOMES

LEARNING OUTCOMES
On completion of this unit you
should be able to:

ASSESSMENT CRITERIA
To achieve the learning outcome you
must demonstrate the ability to:

Apply the economic way of thinking

to business decisions.

For each presentation topic, case study,

and in the examinations critically analyse
the role of economic factors in managerial
decisions.

Apply economic theory and methods to

understand the behavior of various
economic age nts.

For each presentation topic and in the

examination identify the importance of each
economic agent (consumers, producers,
etc.) to achieve optimum business solution.

Analyse and explain the application

of economic concepts like elasticity of
demand, economies of scale and
economies of scope in managerial
decision making.

In the presentation topics, in the case study

discussions, and in the examination the
managerial applications of these
fundamental economic concepts will be
assessed.

SL.
NO

In the classroom discussions and

examination critically analyse the
Illustrate the equilibrium conditions for
effectiveness of cost control strategy,
cost minimization and profit
including the factors that had an impact on
maximization to arrive at optimum
the outcomes, and identify ways to achieve
allocation of resources.
optimal allocation of resources through
problem solving skills.

Describe and analyse how price and

quantity are determined in various
market models like perfect
competition, monopoly, monopolistic
competition, and oligopoly.

In the presentations, case studies, and in the

examination critically analyse the structure,
conduct and performance analysis by using
some economic indices and also identify the
relevant market structure and price-output
determination in various markets.

The teaching methods will consist of formal lectures, case study

analysis, presentations and group discussions. Lectures will
include presentation of key theories and concepts. Students will
work at their own to identify the fundamental microeconomic
concepts and the related theories. Students are expected to read
beyond textbook assigned, and to identify on their own further
sources of information for complementing their studies.

APPROACH TO
LEARNING

ASSESSMENT
STRATEGY

Presentations will be student-driven offering the opportunity for

further discussion and clarification of topics that are of special
importance and difficulty. Students are encouraged to participate
in presentations and class room discussions. Another key
objective of the presentations is to develop students
communication and presentation skills. The structure of the inclass test will cover the issues discussed in the lecture and
presentations. Therefore, students need to show a high degree of
dedication and commitment in order to get the maximum benefit
from the discussions. Formative feedback will be offered after
every presentations, discussions, and case studies to prepare
students for the final examination.
DESCRIPTION OF
WEIGHT DURATION AND MARKS
ASSESSMENT METHOD
%
OF EXAMINATION)

NO

ASSESSMENT
METHOD

DSA

Written examination

20

2 hours and 50 Marks

AT

Throughout the course

CS / PR / OR /
CP

Class attendance
Case study/ Assignments,
Presentation on various
topics, Viva- voce/ Quiz,
Participation in class
activities

25

Throughout the course

Semester End

50

3 hours and 100 marks

Written

Examination

Examination
Outline Teaching Schedule

Unit
Number

II

III

IV

VI

Chapter Name

Contents

Definition Is Economics Art or Science? The

Themes of Microeconomics Why Study
Microeconomics? Scarcity and Trade-offs Preliminaries
Application of Economics to Various Aspects of
Life What is a Market? How Market Allocates
Resources
Module 1: Consumer Behavior and Demand (2)
Consumer Preferences Budget Constraints
Consumer Choice Marginal Utility and
Consumer Choice Law of Diminishing Marginal
Utility Equi-marginal Utility Water-Diamond
Consumer
Paradox Indifference Curves Maximization of
Choice
Utility subject to Budget Constraint Corner
Solutions Price Consumption and Income
Consumption Curves Income and Substitution
Effects
Demand Derivation of Demand Curve
Movement Along and Shift in Demand Curve
Market Demand Network Externalities
Demand
(Bandwagon and Snob Effects) Own-price,
Analysis
cross-price and income Elasticity of Demand
Short-Run vs. Long-Run Elasticity Demand
Forecasting
Module 2: Production, Cost and Supply (3)
Production Possibility Curve The Technology of
Production and Production Function Short run
and Long run Production with One Variable
Production
Input Diminishing returns to factor
Production with Two Variable Inputs Returns to
Scale Expansion Path
Cost Concepts Measuring Cost Cost in the
Short Run Cost in the Long Run Long-Run vs.
The Cost of
Short-Run Cost Curves Economies of Scale and
Production
Scope The Learning Curve Estimating and
Predicting Cost Break Even Analysis
Supply Derivation of Supply Curve Movement
Supply
Along and Shift in Supply Curve Market Supply
Analysis
Elasticity of Supply Short-Run vs. Long-Run

No. of
Sessions

2
1

Elasticity

VII

VIII

IX

XI

XII

Module 3: Equilibrium and Market Structure (5)

Market Equilibrium Changes in Market
Equilibrium Applications of Equilibrium
Understanding and Predicting the Effects of
Equilibrium
Changing Market Effects of Government
Intervention (Price Controls) Consumer and
Producer Surplus and welfare loss
Perfectly Competitive Markets Profit
Maximization MR, MC, and Profit
Maximization Choosing Output in the Short
Profit
Maximization Run The Competitive firms Short-Run Supply
Curve The Short-Run Market Supply Curve
and Perfect
Competition Choosing
Output in the Long Run The Industrys LongRun Supply Curve
Market
Monopoly Monopoly Power Sources of
Power:
Monopoly Power The Social Costs of Monopoly
Monopoly
Power Limiting Market Power
Pricing with Price Discrimination Peak-Load Pricing The
Two-Part
Market
Power
Tariff Advertising Transfer Pricing
Monopolistic Competition Oligopoly Price
Monopolistic
Competition Competition vs. Collusion: The
Competition
Prisoners Dilemma and its Implication Cartels and Oligopoly
Strategic choices using basic game theory
Market for Lemons Adverse Selection Credit
Asymmetric and Insurance Markets Market Signaling Job
Information markets Moral Hazard Principal Agent
Problems CEO compensations
Total Sessions

3
27

Recommended Resources

All chapters referred in the outline are from Microeconomics by Robert Pindyck,
Daniel Rubinfeld and Prem Mehta, 7th Edition, Pearson Education.
Recommended Resources
Recommended text book :

Robert Pindyck, Daniel Rubinfeld and Prem Mehta,: Microeconomics7th Edition,

Pearson Education.
Reference Books:

1. William Boyes and Michael Melvin: Textbook of Economics; 6th e, Biztantra

publications.
2. Dominick Salvatore: Principles of Microeconomics, Oxford University Press.
3. Samuelson & Nordhaus, Economics, latest edition, Tata McGraw-Hill, India.
4. John Sloman & Mark Sutcliffe: Economics for Business; Pearson Education, (Text Book).
5. Mankiw: Economics Principles and Applications; Cengage Learning
6. Dominick Salvatore & Ravikesh Srivastava: Managerial Economics, Oxford Higher
Education.
Other books you may want to consider are:
Freakonomics, by Steven D. Levitt and Stephen J. Dubner.
V. Banerjee and E. Duflo (2011) Poor Economics, Random House India.
Economics: Private & Public Choice, 11th Edition by James D. Gwartney, Richard L.
Stroup, Russell S. Sobel, and David Macpherson.
An Enquiry into the Nature and Causes of Wealth of Nations by Adam Smith.
The Strategy and Tactics of Pricing: A Guide to Profitable Decision Making, by
T homas Nagle, Reed Holden.
Power Pricing: How Managing Price Transforms the Bottom Line, by Robert J. Dolan
and Hermann Simon.
Recommended Journals:

Economist
Economic and Political Weekly
The IUP Journal of Monetary Economics
The IUP Journal of Public Finance

Useful research resources on internet:

http://www.rbi.org.in/home.aspx
http://www.worldbank.org/
http://finmin.nic.in/

 http://search.ebscohost.com/
http://www.emeraldinsight.com
Database websites:
http://www.capitaline.com/user/framepage.asp?id=1
http://www.indiastat.com/default.aspx
Other websites you may want to consider are:

http://miltonfriedman.blogspot.com/
http://www.economist.com
http://www.ft.com
http://www.icrier.org/