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IILM Institute for Higher Education
Module Manual: Basics of Economics
Academic Year: PGP/ 2012-2014
1. Introduction to the Module and Module Objective
Executives, consultants, investment bankers and many other practitioners make daily economic decisions that explicitly or implicitly follow economic laws. ‘Basics of Economics’ give an introduction to the economics of business decision-making. It is an introductory course in the application of microeconomics to business decision making.
Managers would be confronted with situations where they have to decide upon important business questions like - How much to produce? How to allocate the resources in an optimal manner? What price to charge in order to maximize profits? etc. This course provides the analytical skills and economic insights to analyze such managerial problems. It covers the broad principles of marginal analysis - from cost analysis to pricing. These principles shape managerial decisions in all other functional areas of business: accounting, finance, marketing, and strategy.
By the end of this course, students will have learned how to do at least four things:
1. Identify the categories of costs that are relevant for critical business decisions such as pricing, market entry or exit, and growth or downsizing of business lines or projects.
2. Construct fact-based, logically-grounded analyses of competition in highly fragmented markets that will allow them to make educated conjectures about prices and future profitability, and guide capacity expansion or disinvestments in these markets.
3. Use demand and cost fundamentals to determine profit-maximizing pricing decisions, evaluate the profitability of current pricing policies, and use pricing strategy to enhance value creation.
4. Identify problems arising due to external factors and market solutions for externalities.
2.
IILM Institute for Higher Education
Module Manual: Basics of Economics
Academic Year: PGP/ 2012-2014
1. Introduction to the Module and Module Objective
Executives, consultants, investment bankers and many other practitioners make daily economic decisions that explicitly or implicitly follow economic laws. ‘Basics of Economics’ give an introduction to the economics of business decision-making. It is an introductory course in the application of microeconomics to business decision making.
Managers would be confronted with situations where they have to decide upon important business questions like - How much to produce? How to allocate the resources in an optimal manner? What price to charge in order to maximize profits? etc. This course provides the analytical skills and economic insights to analyze such managerial problems. It covers the broad principles of marginal analysis - from cost analysis to pricing. These principles shape managerial decisions in all other functional areas of business: accounting, finance, marketing, and strategy.
By the end of this course, students will have learned how to do at least four things:
1. Identify the categories of costs that are relevant for critical business decisions such as pricing, market entry or exit, and growth or downsizing of business lines or projects.
2. Construct fact-based, logically-grounded analyses of competition in highly fragmented markets that will allow them to make educated conjectures about prices and future profitability, and guide capacity expansion or disinvestments in these markets.
3. Use demand and cost fundamentals to determine profit-maximizing pricing decisions, evaluate the profitability of current pricing policies, and use pricing strategy to enhance value creation.
4. Identify problems arising due to external factors and market solutions for externalities.
2.
References: Mankiw: Principles of Microeconomics, Fourth Edition, Cenage Learning Pindyck Robert S and Rubinfeld Daniel L, (2006), Microeconomics, Sixth Edition, PHI 1. Hirschey: Economics for Managers, Thomson, 1st Indian Ed., 2007 2 5. Boyes, William: New Managerial Economics, 1st Ed., 2005, Biztantra 6