managerial economics assignment 2

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Managerial Economics Assignment 2 - 2nd version

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A rm often desires to charge di¤erent prices for its product to distinct consumer groups based on their di¤erent demands or marginal costs of service. When only costs di¤er, monopoly di¤erential pricing generally raises both consumer and total welfare, compared to uniform pricing. Total welfare rises due to the output reallocation and quantity change e¤ects: The pass-through from marginal cost to monopoly price dictates that at least one of these two e¤ects must be positive (and dominate if the other is not), provided that demand satis es a minor curvature condition. Consumers gain in aggregate, because to reallocate output the rm must vary prices, creating price dispersion that entails no upward bias in average price. We also contrast these ndings with results under classic third-degree price discrimination, and provide su¢ cient conditions for bene cial di¤erential pricing when both demand and cost di¤er.

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Federation of Indian Chambers of Commerce and Industry (FICCI)

Laveesh Bhandari

Subsidies, as a textbook on economics would indicate, provide a potent tool to drive a wedge between producer and consumer prices. Consequently they are usually targeted to alter the consumption/production level of a good, so as to counteract market imperfections and facilitate a socially desirable allocation of resources. In reality, however, subsidies have faired miserably in meeting the social objectives in India. More-often-than-not, subsidies have not reached the intended targets. The ascertainment of who deserves a subsidy and who does not has proved to be extremely costly administratively in India. Also, subsidies have led to perverse economic effects. This is most so in the case of India, where scarce resources have been diverted away from areas where the productivity would be higher. For example input subsidy to agriculture, which constitutes a considerable part of government expenditure, have resulted in considerable misuse of economic resources. Subsidies for electricity and water consumption and fertilizer usage have resulted in over-use of water and electricity and have serious implications for inter-class, inter-region, and inter-crop disparities as well as environmental degradation. It has also resulted in inadequate investment in energy-saving devices and undue rise in soil-salinity in many areas. These are just a few examples of adverse implications of a subsidy system in India that accords inordinately high levels of subsidies for short-term ends. Another aspect of subsidies that deserves mention is that it has promoted rent-seeking. This has largely nullified any social gains that can be attributed to equity considerations. For example, reduced agricultural input prices for targeted farmers on account of government subsidies have induced well-to-do farmers to expend resources to ensure that they are considered the target group as well. This has been done either through lobbying or through other means. Cross-subsidy in electricity tariff now benefits not only the agricultural sector, but also the domestic sector. Now as power sector reforms are being pursued, the removal of subsidy to the domestic sector, as the experience in Andhra Pradesh shows, has become politically inexpedient. The rest of the paper is organized into five sections. The second section sets the tone for this paper by briefly providing a backdrop on government subsidies in India. Section 3 discusses explicit subsidies of the Central Government in considerable detail. In a subsection, we also forecast the level of annual total explicit subsidy of the Central Government for the period 2000-01 to 2010-11. Section 4 discusses the two important types of government subsidies in India, i.e., electricity subsidies and agricultural subsidies, in length. We also provide a case study on the power sector in Uttar Pradesh. Sections one through four set the stage for the last section. The last section, din detail discusses the possible options that are required so that the subsidy regime can be overhauled given the political economic reality, and the imperative to remove wasteful and un-economic expenditure.

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1: Introduction to Managerial Economics

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• Page ID 44762

• 1.1: Why Managerial Economics is Relevent for Managers We rely on others in the society to produce and distribute nearly all the goods and services we need. The sources of those goods and services are usually not other individuals but organizations created for the explicit purpose of producing and distributing goods and services. Nearly every organization in our society can be viewed as providing a set of goods, services, or both. The responsibility for overseeing and making decisions for these organizations is the role of executives and managers.
• 1.2: Managerial Economics is Applicable to Different Types of Organizations
• 1.3: The Focus of This Book The intent of this book is to familiarize the reader with the key concepts, terminology, and principles from managerial economics. After reading the text, you should have a richer appreciation of your environment—your customers, your suppliers, your competitors, and your regulators. You will learn principles that should improve your intuition and your managerial decisions. You will also be able to communicate more effectively with your colleagues and with expert consultants.
• 1.4: How to Read This Book Like any academic subject, economics can seem like an abstract pursuit that is of greatest interest to economists who want to communicate with other economists. However, while there is certainly a substantial body of written research that may reinforce that impression, this book is written with the belief that economics provides a language and a perspective that is useful for general managers.

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ECON 41900: Managerial Economics

Instructor:  Dr. Amlan Mitra Online Meeting:  Blackboard (August 22, 2016 – December 17, 2016) Office:  Classroom Office Building, CLO 248 Office Hours:  Mon/Wed: Noon-1:50 P.M.; and by appointment Telephone:  (219)989-2313 E-mail:  [email protected]

University Catalog Description

A comprehensive treatment of economic theory and analysis applied to business decisions. Both qualitative techniques are applied to managerial decision making situations. Emphasis is placed on applications of economic concepts and processes to practical business situations.

Prerequisite:  ECON 251, MGMT 225.

Course Description and Overall Goal

This is a distance learning course in Managerial Economics.  It is designed to provide a solid foundation of economic understanding for use in managerial decision-making.  The overall goal of this course is to guide students on the use of managerial economics tools and techniques in specific business settings.  The course will offer a comprehensive treatment of economic theory and analysis, using both qualitative and quantitative tools and techniques (e.g. forecasting and estimation techniques) associated with the theory.  Examples and problems discussed in the class will illustrate the application of economic thinking to a wide variety of practical situations.  Students are recommended to actively participate in all assignments.   

Expected Background

You are expected to be familiar with the basic concepts of microeconomics, basic algebra, differential calculus, and business statistics.  While we will review almost all basic concepts in class, you may want to jump on any background topics that you may have found difficult to understand in the past.  From differential calculus, you must be able to do simple derivatives.  Look for review materials and exercises in the “Lecture Materials” of the Course Homepage.

Required Textbook

Loose-Leaf Managerial Economics and Business Strategy With CONNECT (The Mcgraw-Hill Series Economics) 8th Edition.  By   Michael Baye  (Author),  Jeff Prince  (Author)

Publisher:  McGraw-Hill Education; 8 th  Edition, 2014

ISBN:    9780077413859     

Connect and LearnSmart

Use the access code to register for CONNECT by visiting the following link:

http://connect.mheducation.com/class/a – mitra – smartstart – course_2

You should have full access to the following materials.

LearnSmart (SmartBook w/ Learning Resources: Mobile access to study tools like key terms, math review, self quizzes, and chapter summaries. Mobile access to chapter resources such as web buttons, student PowerPoint slides, and worked problems).

Recommended Readings

Wall Street Journal, Fortune, Business Week, Economist, Financial World, & similar publications.

Learning Objectives

ASSESSMENT OF LEARNING OBJECTIVES:

Completing assigned readings, quizzes, lab exercises, case studies, group presentations, term project, and a comprehensive final exam are the basic requirements to meet the five learning objectives.   Each of these five learning objectives will be assessed in the following way:

Learning Modules

Student Evaluation :

Completing assigned readings, scheduled quizzes, lab exercises, case studies, and a term paper are the basic requirements to meet our course objectives.   Grading procedure: Plus minus grading system will be used  for the course based on your overall points.

Course Participation Grade up to 50 points is possible for completing all online assignments (including homework and discussion board assignments) according to the following criteria:

All satisfactory (S) assignments: 50 points.  For each unsatisfactory (U) assignment 5 points will be deducted.  So, if you receive 2 U’s you will get 40 points.  If you receive 10 U’s you will receive a “zero” in course participation.      

EXCEL SPREADSHEET ASSIGNMENTS

There will be five Excel Spreadsheet Assignments from the five learning modules.  These assignments will be on solving managerial problems using the managerial economics concepts and quantitative business tools.  The purpose of these assignments is to prepare you for the quizzes.

There will be five quizzes from the five learning modules.  Each Excel Spreadsheet Assignment will be followed by a quiz.

Case Studies

There will be five case studies of involving managerial decision making in business firms and industries.  You will be asked to examine each case study to identify and analyze the major managerial decision problems.

A Note on Academic Honesty

Honesty and integrity in academic and personal pursuits are hallmarks of higher education. By acting honestly and with integrity, students maintain and uphold their own reputations, and the reputation of both the School of Management and the University. The Students Handbook states that “the commitment of the acts of cheating, lying, stealing and deceit in any of their diverse forms (such as the use of ghost-written papers, use of substitutes for taking examinations, the use of illegal cribs, plagiarism, and copying during exams) is dishonest.” Also, aiding and abetting in committing dishonest acts is in itself dishonest. The penalty for any student(s) involved in any of such acts will range from an outright zero in the specific assignment the act was committed to a grade of “F” in the course.

Students with Disabilities

In compliance with the Americans with Disabilities Act (ADA), all qualified students enrolled in this course are entitled to reasonable accommodations. It is the student’s responsibility to inform the instructor of any special needs before the end of the second week of class.

EMERGENCY PROCEDURE GUIDE :  Please read the university emergency procedure guide.

CLASS MEETING SCHEDULE (SUBJECT TO CHANGE):

• NOC:Managerial Economics (Video) 
• Co-ordinated by : IIT Bombay
• Available from : 2020-06-10
• Intro Video
• Lecture 1-Part1 : Introduction to Economics and Managerial Economics
• Lecture 1-Part2 : Introduction to the Managerial Economics- Economics and Managerial economics, Review of Economic Terms and Economic Rationality
• Lecture 2-Part1 : Introduction to the Managerial Economics- Opportunity Cost, Measuring and Maximizing Profit
• Lecture 2-Part2 : Introduction to the Managerial Economics- Understanding Incentive and Marginal Analysis
• Lecture 3-Part1 : Introduction to the Managerial Economics- Marginal and Incremental Analysis, Model of an Economy
• Lecture 3-Part2 : Basic Tools of Economic Analysis and Optimization Techniques- Functional relationship between economic variables, Important Economic functions
• Lecture 4-Part1 : Basic Tools of Economic Analysis and Optimization Techniques- Important Economic Function (Contd.)
• Lecture 4-Part2 : Basic Tools of Economic Analysis and Optimization Techniques- Slope and its use in Economic Analysis, Derivatives of various functions
• Lecture 5-Part1 : Basic Tools of Economic Analysis and Optimization Techniques- Derivative of various functions
• Lecture 5-Part2 : Basic Tools of Economic Analysis and Optimization Techniques- Optimization Technique
• Lecture 6-Part1 : Basic Tools of Economic Analysis and Optimization Techniques- Constrained optimization
• Lecture 6-Part2 : Basic Tools of Economic Analysis and Optimization Techniques- Regression Technique
• Lecture 7-Part1 : Basic Tools of Economic Analysis and Optimization Techniques- Regression Technique (Contd.)
• Lecture 7-Part2 : Basic Tools of Economic Analysis and Optimization Techniques- Ordinary Least Square (OLS) method
• Lecture 8-Part1 : Theory of Demand- Defining Demand, Law of Demand
• Lecture 8-Part2 : Theory of Demand- Demand Schedule/Demand Curve/ Demand Function, Factors affecting Demand, Market Demand
• Lecture 9-Part1 : Theory of Demand- Change in Demand Curve, Supply/ Law of Supply, Factors affecting Supply
• Lecture 9-Part2 : Theory of Demand- Change/Shift in the Supply, Market Equilibrium, Change in Equilibrium
• Lecture 10-Part1 : Theory of Demand- A Shift in both Supply and Demand, Elasticity of Demand, Types of Elasticity of Demand
• Lecture 10-Part2 : Theory of Demand- Price elasticity of demand, Degree of price elasticity of demand, Elasticity and revenue, Factors influencing price elasticity of demand
• Lecture 11-Part1 : Theory of Demand- Income Elasticity of Demand, Cross-Price Elasticity of Demand, Advertising Elasticity of Demand
• Lecture 11-Part2 : Theory of Demand- Numerical for each Elasticity of Demand
• Lecture 12-Part1 : Consumer Behaviour- Consumer Preferences, Utility Analysis (Total and Marginal Utility)
• Lecture 12-Part2 : Consumer Behaviour- Numerical for Utility analysis, Law of Diminishing Marginal Utility, Indifference Curve Analysis
• Lecture 13-Part1 : Consumer Behaviour-Budget line and Consumer equilibrium, Law of Equi-Marginal utility
• Lecture 13-Part2 : Consumer Behaviour- Price, Income and Substitution Effects, Consumer Surplus
• Lecture 14-Part1 : Elasticity of Supply- Numerical example to understand Consumer Surplus, Elasticity of Supply
• Lecture 14-Part2 : Elasticity of Supply-Impact of Tax on Price and Quantity, Price fixed by Law
• Lecture 15-Part1 : Demand Forecasting
• Lecture 15-Part2 : Methods of Demand Forecasting- Subjective methods of demand forecasting
• Lecture 16-Part1 : Demand Forecasting-Quantitative method of Demand forecasting
• Lecture 16-Part2 : Demand Forecasting- Quantitative method of Demand forecasting (Contd.)
• Lecture 17-Part1 : Theory of Production-Introduction
• Lecture 17-Part2 : Theory of Production- Law of Diminishing Return
• Lecture 18-Part1 : Theory of Production- long Run Production Analysis, Return to Scale, Isoquants
• Lecture 18-Part2 : Theory of Production- Isocost, Optimal Combination of Inputs, Expansion path, Economic Region of Production
• Lecture 19-Part1 : Theory of Production- Different kind of Production Functions: Cobb Douglas Production function, Optimal input combination
• Lecture 19-Part2 : Theory of Production- Effect of Changes in Input Prices, Law of Diminishing returns, Return to Scale
• Lecture 20-Part1 : Theory of Cost- Cost of Production, Types of Cost: Accounting/Economic Analysis
• Lecture 20-Part2 : Theory of Cost- Cost-Output Relationship, Short run cost Analysis
• Lecture 21-Part1 : Long Run Cost Analysis
• Lecture 21-Part2 : Long-Run Marginal Cost Curve
• Lecture 22-Part1 : Theory of Cost: Breakeven Analysis and Contribution Analysis
• Lecture 22-Part2 : Theory of Cost: Profit Volume Ratio, Margin of Safety and Learning Curve
• Lecture 23-Part1 : Theory of Cost: Application of Cost Analysis & Economies of Scale
• Lecture 23-Part2 : Theory of Cost: Production Economies
• Lecture 24-Part1 : Theory of Cost: Managerial and Transport Economies of Scale
• Lecture 24-Part2 : Theory of Market: Introduction
• Lecture 25-Part1 : Theory of Market: Perfect Competition
• Lecture 25-Part2 : Theory of Market: Short-run Profit Maximization under Perfect Competition
• Lecture 26-Part1 : Theory of Market: Short-run Market Supply and Firm Supply under Perfect Competition
• Lecture 26-Part2 : Theory of Market: Long-run Profit Maximization under Perfect Competition
• Lecture 27-Part1 : Theory of Market: Real World Application of Perfect Competition & Introduction to Monopoly
• Lecture 27-Part2 : Theory of Market: Types of Monopoly
• Lecture 28-Part1 : Theory of Market: Supply Curve of Monopoly Firm
• Lecture 28-Part2 : Theory of Market: Effect of shift of Cost in case of Monopoly
• Lecture 29-Part1 : Theory of Market: Social cost of Monopoly Power
• Lecture 29-Part2 : Theory of Market: Regulation of Monopoly Power and Monopsony
• Lecture 30-Part1 : Theory of Market: Bilateral Monopoly
• Lecture 30-Part2 : Theory of Market: Monopolistic Competition
• Lecture 31-Part1 : Theory of Market: Monopolistic Competition- Non-Price Competition and Introduction to Oligopoly
• Lecture 31-Part2 : Theory of Market: Characteristics of Oligopoly Market
• Lecture 32-Part1 : Theory of Market: Oligopoly Market continued.
• Lecture 32-Part2 : Theory of Market: Oligopoly Market- Stackelberg's Model
• Lecture 33-Part1 : Theory of Market: Collusive Oligopoly
• Lecture 33-Part2 : Theory of Market: Collusive Oligopoly continued.
• Lecture 34-Part1 : Theory of Market: Collusive Oligopoly continued.
• Lecture 34-Part2 : Theory of Market: Collusive Oligopoly-Price Leadership Model
• Lecture 35-Part1 : Oligopoly and Game Theory
• Lecture 35-Part2 : Oligopoly and Game Theory continued.
• Lecture 36-Part1 : Oligopoly and Game Theory- Nash Equilibrium
• Lecture 36-Part2 : Oligopoly and Game Theory - The Prisoner's Dilemma and Types of Games
• Lecture 37-Part1 : Applications of Game Theory in Economics
• Lecture 37-Part2 : Product pricing- Price Discrimination
• Lecture 38-Part1 : Product pricing- Price Discrimination continued.
• Lecture 38-Part2 : Types of Product pricing
• Lecture 39-Part1 : Types of Product pricing continued 1.
• Lecture 39-Part2 : Types of Product pricing continued 2.
• Lecture 40-Part1 : Types of Product pricing continued 3.
• Lecture 40-Part2 : Summary of Course
• Live Session 09-10-2020
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