Managerial Economics An Introduction —Introduction —Is Economics is Science or Arts —The concept of Economic Laws and Different Branches of Economics —Different Methods of Economic Analysis —Micro Economics —Macro Economics —Scope of Managerial or Business Economics —The five Fundamental Concept of Economics —The Different Responsibilities of A Business Economist The Economic Nature of Decision Making —The Nature of the Firm —The Variety of Managerial Settings in a Modern Firm Strategic and Tactical Decision-Making —The Nature of the Decision Problem Dimensions of the Decision Problem Multiple Goals Multiple Strategies —Marginal Changes —Multiple Outcomes —Risk —Imperfect Knowledge —The Time Dimension —Entrepreneurial Decisions —What's Ahead —Summary of Important Points —Significant Terms The Goals of the Firm —The Role of Modelling in Economic Analysis —Eras of Managerial Behaviour Patterns —Alternative Premises —Choosing a Behavioural Premise —Profit in the Short and Long Runs --An Object of Pursuit or an Indicator of Success —Summary of Important Points —Significant Terms —Questions for Discussion —Appendix 3.1 —Economic Method and Modelling —Understanding Economic Behaviour —Model Method —Modern Modelling Procedures —Review —Appendix 3.2 —Managing for Quality Rather than Profitability 4. The Analysis of Value and Risk —The Remoteness of the Long Run —A Marginal Decision Criterion for the Long Run —Attitudes Towards Risk —Marginal Utility and Risk —Means of Dealing with Risk —Allowing for Anticipated Inflation —Decision Making Under Uncertainty —What's Ahead —Summary of Important Points —Significant Terms Questions for Discussion Maximization and Optimization —A Revolution in Thought —The Applicability of Marginal Analysis —The Marginal in Managerial Decision Making —Calculus and the Marginal —The Marginal as Decision Criterion —Multiple Independent Variables —Multiple Goals and Optimization —Optimization Using the Calculus —Optimization by Linear Programming —What's Ahead —Summary of Important Points Significant Terms Questions for Discussion —Problems —Appendix 5.1 —Linear Programming —The Simplex Method —Variables, Equations, and Inequalities —A Linear Programming Computer Programme Graphic Illustration Qualifications —The Dual Linear Programming Problem —An Example Appendix 5,2 —Differentiation Rules Modelling the. Decision Context --Estimating a Model by Regression Analysis —Simple Regression Models —Multiple Regression Models —Non-Linear Regression Models —Multiplicative Models —Inferences about the Regression Model —The Existence and Strength of the Relationship —The Significance of the Coefficients of the Independent Variables Problems with the Multiple Regression Context —Multicollinearity Autocorrelation —Heteroskedasticity —Significant Terms —Questions for Discussion Consumer Behaviour and Demand —Consumer Behaviour --The Theory of Demand --Demand Curves and Demand Surfaces VRML 3-D View Normal and Inferior Goods —Substitutes and Complements —Demand and Revenue —What's Ahead —Summary of Important Points —Significant Terms —Questions for Discussion Appendix 6.1 Preference and Indifference —The Horizontal Slice --The Indifference Curve Map The Marginal Rate of Substitution The Consumer's Budget —The Optimal Combination of Goods Substitution and Income Effects Demand Forecasting —Introduction —Meaning of Demand Forecasting —Objective of Demand Forecasting —Factors Affecting Demand Forecasting —4rocess of Demand Forecasting/Steps in Demand Forecasting —The Methods of Demand Forecasting for Established Products —The Methods of Demand Forecasting for New Products Elasticity and Demand Specification —Revenue and Elasticity —Elasticity Formulae —Elasticity and Other Demand Determinants —The Empirical Estimation of Demand —Specification Errors and the Identification Problem —The Identification Problem and Demand Elasticity —Conclusion —Summary of Important Points —Significant Terms Questions for Discussion The Economic Tasks of Marketing Production in the Short Run —Production is the Central Function of the Enterprise —Varieties of Production Activity Organizing Production —Managerial Problems in the Production Process —Production Principles —The Relevant Questions —The Production Function —The Production Surface The Long and Short-Run Time Frames The Vertical Slice Approach —The Vertical Slice —The Governing Principle Total, Average and Marginal Products The Productivities of Other Inputs —The Stages of Production The Equamarginal Principle —Cost Minimization vs. Profit Maximization —What's Ahead —Summary of Important Points —Significant Terms —Questions for Discussion Appendix 8.1 The Horizontal-Slice Approach —The Horizontal Slice —The Isoquant Map —The Marginal Rate of Technical Substitution —The Capital Outlay Budget --The Optimal Resource Allocation Criterion The Equamarginal Principle Stages of Production in lsoquant Analysis Production in the Long Run —The Long- and Short-Run Time Frames Variable Proportions and Returns to Scale A Constant Capital-Labour Ratio —Returns to Scale Scale and the Production Function —Changes in Technology, Entrepreneurship, Managerial Capacity —The Empirical Estimation of Production Functions —Managing Production —Summary of Important Points —Significant Terms —Questions for Discussion Costs in the Short Run --The Inevitability of Costs —Relevant Cost —Implicit Costs —Explicit Costs —Variable and Fixed Costs —The Short and the Long Run —Temporal Mismatching of Production and Costs —Spill-over Costs —Economic Profit —The Cost-Production Nexus —The Transition from the Production Function to the Cost Function —Dropping the Assumptions —The Law of Increasing Costs —Average Variable Cost Marginal Cost —Relationships among Total, Average and Marginal Cost —Relationships between Cost Functions and Product Functions —Overhead Costs in the Short-Run —What's Ahead —Summary of Important Points —Significant Terms —Questions for Discussion Costs in the Long Run —The Short and the Long Run —Overhead Costs —Costs in the Long Run The Long Run Average Cost Curve --Mathematical Specification and Empirical Estimation of Cost Functions Data Requirements —Relevant Costs —Identification of Output —Selection of an Appropriate Time Period The Management of Costs —Summary of Important Points —Significant Terms —Questions for Discussion The Competitive Environment The Maximum-Competition Extreme —Short-Run Adjustment in the Competitive Industry —The Operate vs. Shut-Down Criterion in the Short Run —Short-Run Industry Adjustment of the Competitive Industry —Long-Run Adjustments in the Competitive Industry —The Managerial Implications of Pure Competition —Summary of Important Points —Significant Terms —Questions for Discussion —Appendix 14.1 —Price Changes in Competitive Markets —Appendix 14.2 —Simulation Modelling of a Firm in a Competitive Market Monopoly —Short-Run Adjustments by the Monopolist —Long-Run Adjustment by the Monopolist —The Managerial Implications of Pure Monopoly —Competition vs. Monopoly —Summary of Important Points —Significant Terms —Questions for Discussion Monopolistic Competition —Decision Making under Monopolistic Competition Short-Run Adjustments in the Monopolistically-Competitive Market —Managerial Implications of Monopolistic Competition —What's Ahead —Summary of Important Points —Significant Terms —Questions for Discussion Oligopolistic Competition Decision Making in Oligopoly —Models of Oligopolistic Adjustment —Price Warfare —Extreme Price Rigidity Price-Leadership/Followership —The Managerial implications of Oligopolistic Competition The Societal Implications of Oligopolistic Behaviour and —Summary of Important Points —Significant Terms —Questions for Discussion —Appendix 17.1 Pricing Policy —Introduction —Price —Importance of Price Policy —Different Pricing Objectives in Competitive Economy —The Various Factor Affecting in Pricing Policy —The Various Methods of Pricing —The Pricing Policy of New Products —Methods or Strategies of Pricing of New Products Extending the Models —Simple Models and Complex Realities —On Realism, Accuracy, and Specificity in Models --Extensions of the Model of the Firm —Non-Price Determinants of Demand —Non-Quantity Determinants of Costs —Multiple Markets --Modelling for Price Discrimination Multiple Products —Jointly-Produced Products Increasing Size and Complexity —Transfer Pricing —What's Ahead Summary of Important Points Significant Terms —Questions for Discussion —Appendix 19.1 A Mathematical Model of Price Discrimination --Appendix 19.2 —Joint Products Produced in Variable Proportions Challenges to the Theory of the Firm —Multiple Goals —Non-Marginal Decision Criteria —An Assessment of Non-Marginal Pricing Practices Price-Leadership/Followership —The Managerial implications of Oligopolistic Competition The Societal Implications of Oligopolistic Behaviour and —Summary of Important Points —Significant Terms —Questions for Discussion —Appendix 17.1 Pricing Policy —Introduction —Price —Importance of Price Policy —Different Pricing Objectives in Competitive Economy —The Various Factor Affecting in Pricing Policy —The Various Methods of Pricing —The Pricing Policy of New Products —Methods or Strategies of Pricing of New Products Extending the Models —Simple Models and Complex Realities —On Realism, Accuracy, and Specificity in Models --Extensions of the Model of the Firm —Non-Price Determinants of Demand —Non-Quantity Determinants of Costs —Multiple Markets --Modelling for Price Discrimination Multiple Products —Jointly-Produced Products Increasing Size and Complexity —Transfer Pricing —What's Ahead Summary of Important Points Significant Terms —Questions for Discussion —Appendix 19.1 A Mathematical Model of Price Discrimination --Appendix 19.2 —Joint Products Produced in Variable Proportions Challenges to the Theory of the Firm —Multiple Goals —Non-Marginal