Managerial Economics: PGP - 1, Section A Term 1
Managerial Economics: PGP - 1, Section A Term 1
Managerial Economics: PGP - 1, Section A Term 1
PGP - 1, Section A
Term 1
Lecture 1
Instructor: Tirthatanmoy Das
Indian Institute of Management Bangalore
June 17, 2019
Why this course?
Are you interested in understanding stories such as the
following?….
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Why this course?
§ After pioneering plain paper copying technology,
Xerox leased their copiers to high-value users rather
than selling the copiers.
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What is economics?
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What is economics- an alternative
description?
“Economics is concerned with modelling the behavior of
individuals and organizations – for profit firms, non-
profit organizations, government entities, and so on – in
market and non-market settings. Its models almost
always assume that behaviors are purposeful – directed
at some clear goal – and it usually studies how diverse
behaviors that have conflicting objectives are brought
into equilibrium by market and non-market
institutions…”
….David M. Kreps
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What is economics?
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What is economics?
Scarcity: Why?
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What is economics?
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What is economics?
‘Scarcity’ and ‘Choice’? What is the connection?
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Consumers’ trade-off
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Firms’ trade-off
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Theory and model
Example:
Models for consumers: Consumers maximize utility
subject to their budget constraints.
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Theory and model
Example:
Models for firms: Firms maximize profit from a given set
of feasible production plan.
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Theory and model
Examples:
Models of market: Shows how price and quantity
determined by supply and demand.
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Microeconomics
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Managerial Economics
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What I will emphasize
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A Roadmap with an Example
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Demand considerations
§ How public would react to this new product?
- in Chapters 3, 4, 5.
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Production and cost considerations
§ How high would the production cost be?
§ How cost per car depends on total number of cars
produced each year?
§ How the costs of labor, raw materials affect costs?
§ How many car should Toyota produce every year to
maximize profit. And many more…
- in Chapters 6, 7, 8, 10.
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Pricing strategy considerations
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Uncertainty considerations
- in Chapters 2, 9, 5.
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Regulatory policy considerations
- in Chapters 18.
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Summary
§ What is Economics?
§ What does the word ‘trade-off’ mean?
§ What does the word ‘scarcity’ mean?
§ What do economic models do?
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