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Offered Annexed E Course Code: CIO Economics for Managers (FEM.) 1 . Course Objective This course is designed to impart knowledge of the concepts and principles of Economics, which govern the functioning of a firm/organization under different market conditions. It further aims at enhancing the understanding capabilities of students about macro-economic principles and decision making by business and government. . Course Duration The course will have 45 sessions of 60 minutes duration. 3. Course Content Assignment of sessions to the modules of course is as follows: Module No. I Session Marks (Nun. Exam) 09 20 Modules/Sub-Modules Ten principles of economics How people make decisions; How people interact; How the economy works as a whole.
Thinking like an economist The scientific method; Role of assumptions; Economic diagram; Production models; The circular-flow possibilities frontier; Micro and macro economics; Positive versus normative economics; Why economists disagree” The market forces of supply and demand Markets and competition; Individual demand; Demand schedule and emend curve; Market demand versus individual demand; Shifts in the demand curve; Supply schedule, Supply and demand- equilibrium, analyzing changes in equilibrium.
Elasticity and its application The elasticity of demand; The elasticity of supply, application of elasticity. Case: Pricing, admission to a museum. Consumers, producers and the efficiency of markets Consumer surplus; Producer surplus; Market efficiency- the benevolent social planner; evaluating the market equilibrium; Market efficiency and market failure The costs of production GIG/syllabus MBA/ 09-10 onwards page 30 of 235
Gujarat University, Mohammedan – MBA Programmer Costs – total revenue, total cost and profit, costs as opportunity costs, cost of capital as an opportunity cost, economic profit versus accounting profit; Production and costs – the production function, from production function to the total cost curve; various measures of cost – FCC, PVC, AC, MS, cost curves and their shapes and relationship; Costs in the short run and long run – relationship between SIR and LIRA TACT, economies and discomposes of scale. 9 Firms in competitive markets What is a competitive market; Profit minimization and the nominative firm’s supply curve; The supply curve in a competitive market? Case: Near empty restaurants and off-season miniature golf. Monopoly Why monopolies arise; How monopolies make production and pricing decisions; The welfare cost of monopoly – deadweight loss, social cost; Public policy towards monopolies; Price discrimination – the analytics of price discrimination, examples of price discrimination (movie tickets, airline prices, discount coupons, financial aid, quantity discounts).
Case: The De Beers Diamond Monopoly. Oligopoly Markets with only a few leers – duopoly, competition, monopolies and cartels, the equilibrium tort an oligopoly, how the size of an oligopoly affects the market outcome; Game theory and the economics of cooperation – prisoners’ dilemma, oligopolies as a prisoners’ dilemma, other examples of prisoners’ dilemma (arms race, advertising, common resources), the prisoners’ dilemma and the welfare of society, why people sometimes cooperate.
Case: OPEC and the World Oil Prices Oligopoly – cont’d. Public policy towards oligopolies – 09 restraint of trade and the antitrust laws, controversies over antitrust policy, resale price maintenance, predatory pricing, tying.
Case: An Illegal Phone Call Monopolistic competition Competition with differentiated products – firms in the short run, the long-run equilibrium, monopolistic versus perfect competition (excess capacity, mark up over marginal cost), monopolistic competition and the welfare of society; Advertising – the debate over advertising, 20 page 31 of 235 Gujarat University, Mohammedan – MBA Programmer advertising as a signal of quality, brand names. Case: Advertising and the price of eyeglasses.
The theory of consumer hooch The budget constraint; Preferences – representing preferences with indifference curves, four properties of indifference curves, two extreme examples of indifference curves; Optimization – the consumer’s optimal choices, change in income, change in prices, income and substitution effects, deriving the demand curve; Four applications – do all demand curves slope downward, how do wages affect labor supply, how do interest rates affect household saving, do the poor prefer to receive cash or in-kind transfers Measuring a nation’s income The economy’s income and expenditure; The measurement of GAP; The components of GAP; Real v/s nominal GAP; GAP and economic wellbeing. Case: International difficulties in GAP and Quality of life.
Measuring the cost of living The consumer price index; Correcting economic variables for the effects of inflation, Impact of Inflation on various sections of society- producers and consumers. 09 Production and growth Economic growth around the world; The role and determinants of productivity; Economic growth and public policy; The importance of long-run growth. Saving, investment and the uncial system Financial institutions in the US economy; Saving and investment in the National Income Accounts; The market for Alienable funds, Supply and Demand for Alienable Funds. The monetary system, Money growth and inflation The meaning of money; Functions and Kinds of Money, The classical theory of inflation; The Cost of notation.
Open-economy macroeconomics – Basic concept TTS The international tool to goods and capital – the flow of goods (exports, imports, net exports), the flow of capital (net foreign investment), the equality of net exports and net foreign investment; savings, investment and their relationship to the international flows; The prices for international transactions (real and nominal exchange rates); A first theory of exchange-rate determination (purchasing power parity) Aggregate demand and aggregate supply 09 Three key facts about economic fluctuations; Explaining short- run economic fluctuations; The aggregate demand page 32 of 235 Gujarat University, Mohammedan – MBA Programmer curve; The aggregate supply curve; Two causes of economic fluctuations (the effects of shifts in aggregate demand and supply).
The influence of monetary and fiscal policy on aggregate demand How monetary policy influences aggregate demand – the theory of liquidity preference, the downward slope of the aggregate demand curve, changes in the money supply, the role of interest-rate targets in Fed policy; How fiscal policy influences aggregate demand – changes in government purchases, the multiplier effect, a formula for the spending multiplier, other applications of the multiplier effect, the crowding-out effect, changes in taxes; Using policy to stabilize the economy – the cases for and against active stabilization policy. The short-run trade-off between inflation and unemployment The Phillips Curve – origins, aggregate demand, aggregate supply and the Phillips Curve; Shifts in the Phillips Curve – the role of expectations; Shifts in the Phillips Curve – the role of supply shocks; The cost of reducing inflation – the sacrifice ration, rational expectations and the possibility of costless disinflation, the Blocker disinflation, the Greenshank era.