SYLLABUS
Course Name: Managerial Economics
Course Code: MS 103
Course Objective- The objective is to give students grounding in the basic understanding of
economic environment and tools for better analysis of economic situations and thus helping in decision
making
.
Block I Introduction to Managerial Economics
Unit I Basics of Managerial Economics: Meaning, Scope and Nature of Managerial Economics
Unit II The Economy and its Basic Problems: Scarcity and Choices: Economy and its working, kinds
of economic system, Production Possibility of an Economy, How market mechanism works, Efficiency
and reasons for failure of market system, role of government in an economy.
Unit III Law of Demand and Supply: Law of Demand, Demand Function, Law of Supply, Supply
Function, Equilibrium of Demand and Supply, determination of equilibrium price and quantity.
Unit IV Elasticity of Demand and Supply: Price Elasticity of Demand and its determination, Price
Elasticity and Marginal Revenue, Price Elasticity and Consumption Expenditure, Income Elasticity of
demand, Cross- Elasticity of Demand, Elasticity of Price expectation, use of elasticity, Price Elasticity of
Supply.
Unit V Failure of the Market Economy and Role of the Government: Imperfect market information
and Market failure, growth of monopolies and market failure, market failure in case of Public goods,
public provision of Public Goods, Externalities and Government Intervention.
Unit VI Cardinal Utility Theory: Cardinal Utility Theory, Law of Diminishing Marginal Utility,
Consumer’s Equilibrium, derivation of demand curve, drawback of Cardinal Approach.
Unit VII Ordinal Utility Approach: Indifference curve analysis, diminishing marginal rate of
substitution, properties of indifference curves, Indifference curve map, budget line, consumer’s
equilibrium, effect of income and price change in consumer’s equilibrium, income effect and substitution
effect of inferior goods, complementarity and substitutability, the extreme choices, derivation of
individual demand curve, comparison of ordinal and cardinal utility approach, application of indifference
curve analysis.
Unit VIII Consumer’s Surplus: The Marshallian Consumer’s Surplus, Hicsian Method of Measuring
Consumer Surplus, application of consumer’s surplus concept.
Block II Supply Side Economics
Unit IX Theory of Production: Production with one variable input: Meaning of production,
production related concepts, production function, and law of production.
,Production with two variable input: Isoquants, Marginal rate of technical substitution, Properties of
Iso-quants, Isoquant map and economic region, other forms of isoquants, elasticity of substitution, law of
returns to scale.
Unit X Optimum Combination of Inputs
Isocost line, optimum combination of inputs, choice of optimum expansion path, change in input prices
and input combinations.
Unit XI Theory of Production Cost
Cost Concepts, Short-run Cost-output relation, Long-run Cost-Output relation, Economies of Scale, Dis-
economies of Scale, cost function and cost curves.
Block III Market System
Unit XII Business Firms and Market Structure
Objective of Business Firms, profit maximization, alternative objectives of Business firms, the market
structure.
Unit XIII Perfect Competition Market
Perfect competition market and its features, perfect v/s pure competition, equilibrium of the firm,
derivation of the supply curve of the firm, derivation of the supply curve of the industry, price and output
determination under perfect competition, price and output determination in long run, long run supply
curve of a competitive industry.
Unit XIV Monopoly Market
Monopoly market, its source and feature, demand and revenue curve under monopoly, cost and supply
curves under monopoly, profit maximization under monopoly, absence if supply curve under monopoly,
monopoly v/s perfect competition: comparison of Long run price and output, equilibrium of Multiplant
monopoly, price determination by monopoly, measure of monopoly power.
Unit XV Monopolistic Competition Market
Monopolistic completion market and its features, foundation of monopolistic competition model, price
and output determination under monopolistic competition, analysis of selling cost and firm’s equilibrium,
critical appraisal of Chamberlin’s theory of Monopolistic Competition.
Unit XVI Oligopoly Market
Oligopoly market its meaning and characteristics, duopoly model, oligopoly models, game theory
approach to oligopoly.
Block IV Basics of Macro Economics
Unit XVII The Circular Flow Model of the Economy
Circular flow in a simple economy model, circular flow of goods and money in a three sector economy,
circular flows in a four sector model: a model with foreign sector.
Unit XVIII National Income: Concept and Measurement
Measure of national income, methods of measuring national income, choice of methods, measurement of
national income in India, growth and composition of India’s national income,.
Unit XIX Theory of National Income Determination
Determination of National Income: Two Sector Model, the consumption function, derivation of saving
function, a formal model of national income determination, shift in aggregate demand function and
multiplier.
,Unit XX Income Determination with Government and Foreign Trade
Income Determination Model with Government: The three sector Model, Income determination with
foreign trade: A Four Sector Model.
Unit XXI Theories of Aggregate Consumption
The absolute income hypothesis, the relative income hypothesis, the permanent income hypothesis, the
life-cycle hypothesis.
Unit XXII Keynesian Theory of Interest
Money demand and supply: the Keynesian approach, the Keynesian theory of interest, drawbacks of the
Keynesian theory of interest.
Unit XXIII Investment Theory and Acceleration Principle
Basic concepts, investment decisions, change in interest rates, MEC and Capital Accumulation, the
acceleration principle,
Unit XXIV Money and Banking
Money: definition and function, types of Money, M1, M2, M3 and M4, high power money.
Banks: Banking in India, Reserve Bank of India and its functions, Repo, Reverse Repo, CRR, SLR, MSF,
credit creation by banks.
, CONTENTS
Unit 1: Basic of Managerial Economics 1 – 18
1.1 Introduction
1.2 Objectives
1.3 Introduction to Managerial Economics
1.4 Meaning of Managerial Economics
1.5 Scope of Managerial Economics
1.6 Nature of Managerial Economics
1.7 The Uses of managerial economics
1.8 Characteristics of managerial Economics
1.9 Managerial Economics: Normative or Positive
1.10 Importance of Managerial Economics
1.11 Summary
1.12 Glossary
1.13 Answer to check your progress/Possible Answers to SAQ
1.13.1 Short answer questions
1.13.2 Extended answer questions
1.13.3 True-false
1.13.4 Multiple-choice
1.13.5 Matching
1.13.6 Fill-in-the-blanks
1.14 Possible Answers to Self Assessment Questions
1.15 Bibliography
1.16 Suggested Readings
1.17 Terminal Questions
Unit 2: The Economy and its Basic Problems: Scarcity and Choices 19 – 44
2.1 Introduction
2.2 Objectives
2.3 The Problem of Scarcity
2.4 The Problem of Choice
2.5 Economy and its working
2.6 Economic System
2.7 Definition of Economic Systems
2.8 Kinds of Economic System
2.9 Production Possibility of an Economy
2.10 How market mechanism works?
Course Name: Managerial Economics
Course Code: MS 103
Course Objective- The objective is to give students grounding in the basic understanding of
economic environment and tools for better analysis of economic situations and thus helping in decision
making
.
Block I Introduction to Managerial Economics
Unit I Basics of Managerial Economics: Meaning, Scope and Nature of Managerial Economics
Unit II The Economy and its Basic Problems: Scarcity and Choices: Economy and its working, kinds
of economic system, Production Possibility of an Economy, How market mechanism works, Efficiency
and reasons for failure of market system, role of government in an economy.
Unit III Law of Demand and Supply: Law of Demand, Demand Function, Law of Supply, Supply
Function, Equilibrium of Demand and Supply, determination of equilibrium price and quantity.
Unit IV Elasticity of Demand and Supply: Price Elasticity of Demand and its determination, Price
Elasticity and Marginal Revenue, Price Elasticity and Consumption Expenditure, Income Elasticity of
demand, Cross- Elasticity of Demand, Elasticity of Price expectation, use of elasticity, Price Elasticity of
Supply.
Unit V Failure of the Market Economy and Role of the Government: Imperfect market information
and Market failure, growth of monopolies and market failure, market failure in case of Public goods,
public provision of Public Goods, Externalities and Government Intervention.
Unit VI Cardinal Utility Theory: Cardinal Utility Theory, Law of Diminishing Marginal Utility,
Consumer’s Equilibrium, derivation of demand curve, drawback of Cardinal Approach.
Unit VII Ordinal Utility Approach: Indifference curve analysis, diminishing marginal rate of
substitution, properties of indifference curves, Indifference curve map, budget line, consumer’s
equilibrium, effect of income and price change in consumer’s equilibrium, income effect and substitution
effect of inferior goods, complementarity and substitutability, the extreme choices, derivation of
individual demand curve, comparison of ordinal and cardinal utility approach, application of indifference
curve analysis.
Unit VIII Consumer’s Surplus: The Marshallian Consumer’s Surplus, Hicsian Method of Measuring
Consumer Surplus, application of consumer’s surplus concept.
Block II Supply Side Economics
Unit IX Theory of Production: Production with one variable input: Meaning of production,
production related concepts, production function, and law of production.
,Production with two variable input: Isoquants, Marginal rate of technical substitution, Properties of
Iso-quants, Isoquant map and economic region, other forms of isoquants, elasticity of substitution, law of
returns to scale.
Unit X Optimum Combination of Inputs
Isocost line, optimum combination of inputs, choice of optimum expansion path, change in input prices
and input combinations.
Unit XI Theory of Production Cost
Cost Concepts, Short-run Cost-output relation, Long-run Cost-Output relation, Economies of Scale, Dis-
economies of Scale, cost function and cost curves.
Block III Market System
Unit XII Business Firms and Market Structure
Objective of Business Firms, profit maximization, alternative objectives of Business firms, the market
structure.
Unit XIII Perfect Competition Market
Perfect competition market and its features, perfect v/s pure competition, equilibrium of the firm,
derivation of the supply curve of the firm, derivation of the supply curve of the industry, price and output
determination under perfect competition, price and output determination in long run, long run supply
curve of a competitive industry.
Unit XIV Monopoly Market
Monopoly market, its source and feature, demand and revenue curve under monopoly, cost and supply
curves under monopoly, profit maximization under monopoly, absence if supply curve under monopoly,
monopoly v/s perfect competition: comparison of Long run price and output, equilibrium of Multiplant
monopoly, price determination by monopoly, measure of monopoly power.
Unit XV Monopolistic Competition Market
Monopolistic completion market and its features, foundation of monopolistic competition model, price
and output determination under monopolistic competition, analysis of selling cost and firm’s equilibrium,
critical appraisal of Chamberlin’s theory of Monopolistic Competition.
Unit XVI Oligopoly Market
Oligopoly market its meaning and characteristics, duopoly model, oligopoly models, game theory
approach to oligopoly.
Block IV Basics of Macro Economics
Unit XVII The Circular Flow Model of the Economy
Circular flow in a simple economy model, circular flow of goods and money in a three sector economy,
circular flows in a four sector model: a model with foreign sector.
Unit XVIII National Income: Concept and Measurement
Measure of national income, methods of measuring national income, choice of methods, measurement of
national income in India, growth and composition of India’s national income,.
Unit XIX Theory of National Income Determination
Determination of National Income: Two Sector Model, the consumption function, derivation of saving
function, a formal model of national income determination, shift in aggregate demand function and
multiplier.
,Unit XX Income Determination with Government and Foreign Trade
Income Determination Model with Government: The three sector Model, Income determination with
foreign trade: A Four Sector Model.
Unit XXI Theories of Aggregate Consumption
The absolute income hypothesis, the relative income hypothesis, the permanent income hypothesis, the
life-cycle hypothesis.
Unit XXII Keynesian Theory of Interest
Money demand and supply: the Keynesian approach, the Keynesian theory of interest, drawbacks of the
Keynesian theory of interest.
Unit XXIII Investment Theory and Acceleration Principle
Basic concepts, investment decisions, change in interest rates, MEC and Capital Accumulation, the
acceleration principle,
Unit XXIV Money and Banking
Money: definition and function, types of Money, M1, M2, M3 and M4, high power money.
Banks: Banking in India, Reserve Bank of India and its functions, Repo, Reverse Repo, CRR, SLR, MSF,
credit creation by banks.
, CONTENTS
Unit 1: Basic of Managerial Economics 1 – 18
1.1 Introduction
1.2 Objectives
1.3 Introduction to Managerial Economics
1.4 Meaning of Managerial Economics
1.5 Scope of Managerial Economics
1.6 Nature of Managerial Economics
1.7 The Uses of managerial economics
1.8 Characteristics of managerial Economics
1.9 Managerial Economics: Normative or Positive
1.10 Importance of Managerial Economics
1.11 Summary
1.12 Glossary
1.13 Answer to check your progress/Possible Answers to SAQ
1.13.1 Short answer questions
1.13.2 Extended answer questions
1.13.3 True-false
1.13.4 Multiple-choice
1.13.5 Matching
1.13.6 Fill-in-the-blanks
1.14 Possible Answers to Self Assessment Questions
1.15 Bibliography
1.16 Suggested Readings
1.17 Terminal Questions
Unit 2: The Economy and its Basic Problems: Scarcity and Choices 19 – 44
2.1 Introduction
2.2 Objectives
2.3 The Problem of Scarcity
2.4 The Problem of Choice
2.5 Economy and its working
2.6 Economic System
2.7 Definition of Economic Systems
2.8 Kinds of Economic System
2.9 Production Possibility of an Economy
2.10 How market mechanism works?
