SVKM’S NMIMS University Teaching Plan

Microeconomics School of Business Management, NMIMSPTMBA –1st Year: 2011-2012 Trimester: 1st ________________________________________________________________________Instructor – Prof. Souvik Dhar, email id: Souvik@nmims.edu – Div. BInstructor: Manish Gogari – Div. AEmail Id: manish_2g@rediffmail.com/ mmgogari@gmail.com Cell no: 9870216421________________________________________________________________________Goal: The goal is to apply decision tools & analytical techniques to evaluate decision problems faced by managers. Course objective:

1) Making the students understand the principles of economics which will help them develop a rational decision-making perspective and will sharpen the analytical framework that the executive must bring to bear on managerial decisions.

2) Making the students understand that application of the principles of economics will help managers ensure that resources are allocated efficiently within the firm, and that the firm makes appropriate reactions to changes in the economic environment.

Evaluation Criteria (in marks) Attendance: 05 Class participation & Group Presentations: 20 Economic Quiz: 10 Midterm Exam: 15 End Term Exam: 50 Total: 100

Session Outline

Session1 Introduction & overview of Economics The Theme of Microeconomics. Why study Microeconomics? Application of Economics to business decisions- Example of

Ford Motors, Launching of a new product and using of economic tools for effective decision- making.

References:* D.Salvatore, Chapter1* D N Dwivedi, Chapter1* Pindyck & Rubinfeld, Chapter1 pg 13-15

Demand & Supply Analysis- The demand for a commodity, Individual demand and Market

demand, Factors affecting demand. Law of demand, Exceptions to law of demand. Price elasticity of demand- types, Arc method, Price elasticity &

total revenue, Factors affecting price elasticity, Income elasticity & Cross elasticity of demand.

Law of supply, Determination of equilibrium price using demand & supply curves.

Using elasticities in managerial decision making-Examples/case study. Case: Automobiles Riding High.Case: Texas Calculates Elasticity.Case: Car Rides vs Bus Rides.References:* D.Salvatore, Chapter3* Pindyck & Rubinfeld, Chapter 4

Session 2 Consumer Choice – Consumer Preferences, Marginal utility and consumers choice,

Law of diminishing marginal utility, Assumptions & Limitations Indifference Curve Analysis-Indifference Curve, Indifference

Maps, Assumptions, Properties of IC, The Marginal rate of Substitution, Perfect substitutes & perfect complements, The Budget Line, Consumer’s Equilibrium

Effects of changes in Income & Prices. Consumer surplus and demand.

Case Study/Example- Designing New Automobiles.References:* D.Salvatore, Chapter3* Pindyck & Rubinfeld, Chapter 3

Session 3-4 Demand Forecasting Meaning & Importance, Methods of Forecasting:Qualitative

forecasts, Case Study/ExamplesProduction Analysis-

The Organization of Production & the Production Function, The Production Function with One Variable Input- Total, Average & Marginal Product

The Law of Diminishing Returns & Stages of Production, Optimal use of the variable input

The Production Function with Two Variable Inputs- Production Isoquants, Properties, Marginal Rate of technical Substitution, Optimal combination of inputs-Isocost Lines, Optimal input combination for minimizing costs or maximizing output

Returns to Scale,An Economic Game.Case Study/Examples: A production function for Wheat, Returns to Scale in the Carpet Industry, Returns to Scale in U.S Manufacturing Industries, Bajaj Auto Limited-Small is Better.The Effect of Effluent Fees on Input Choices.

References:* D.Salvatore, Chapter 5 & 6* Pindyck & Rubinfeld, Chapter 5 & 6

Session 5-6 Cost Theory and Estimation- The Nature of Costs, Short-Run Cost Functions and Curves Long-Run Costs Curves, Derivation of LAC Plant size & Economies of Scale Economies of Scope Learning Curves. Break Even Analysis.

Case study/Examples* Sunk, Fixed, & Variable costs: Computers, Software, & Pizzas.* The Short-Run Cost of Aluminum Smelting. * Economies of Scope in Trucking Industry.* The Learning Curve in Practice.References:* D.Salvatore, Chapter 7* Pindyck & Rubinfeld, Chapter 6

Session 7 Market Structure- Perfect Competition Meaning & importance, Price Determination Short-Run Analysis of a Perfectly Competitive firm Long-Run Analysis of a Perfectly Competitive Firm.

Case study/ Examples: Competition in Stock Market, The Short-Run Production of Petroleum Products.Monopoly-

Features, Average Revenue & Marginal Revenue

Short-Run & Long-Run Price & Output determination under Monopoly

The Social Costs of Monopoly power, Natural Monopoly.Case Study: Monopoly in the Mumbai City Taxi Industry.Monopolistic Competition-

Meaning & Importance, Price Discrimination- Types, International Price Discrimination

Case Study: The Monopolistically Competitive Restaurant Market.Price Discrimination by BSES in India.

References:* D.Salvatore, Chapter 8 & 9* Pindyck & Rubinfeld, Chapter 7,9 &11

Session 8 Oligopoly-Meaning & Features, Oligopoly Models- The Cournot Model, Cartel Arrangements, Price Signaling & Price Leadership, Competition versus Collusion-The Prisoners’ Dilemma, Implications of th4e Prisoners’ Dilemma for Oligopolistic Pricing- Price Rigidity & the Kinked Demand Curve ModelCase Study: OPEC CartelPricing in Practice, Cost-Plus Pricing, Incremental analysis in pricing Peak-Load Pricing, Penetration Pricing, Price Skimming.Case Study: Optimal Pricing & Output by Gillette.References:* D.Salvatore, Chapter 9,10,11* Pindyck & Rubinfeld, Chapter 11,12Economic Quiz

Session 9 Information, Market failure & The Role of the Government:Why markets Fail? Market Power, Incomplete Information, Externalities, Public Goods.Externalities & Public Goods- Negative externalities & inefficiency, Positive externalities & inefficiency.Ways of correcting Market Failure- An Emissions Standard, An Emission Fee, Recycling,Public Goods- Efficiency & Public Goods, Public Goods & Market Failure.Markets with Asymmetric Information- Quality Uncertainty & the market for Lemons, The Market for Used Cars, Implications of Asymmetric Information, Market signaling. References:* D.Salvatore, Chapter 12* Pindyck & Rubinfeld, Chapter 15,16,17* Das, Chapter 12Case Study/ExamplesTest

Session10 Presentations.TEXT BOOK: Micro Economics – Satya P Das (Sage Publications)

References*Managerial Economics (Adapted Version)- D. Salvatore 6th edition*Micro Economics – Robert S. Pindyck, Rubinfeld, Mehta.*Managerial Economics – Sumitra Pal, Caturvedi, S.LGupta.*Micro Economics – Diwvedi.