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Managerial Economics

Book Description

Business schools, both at undergraduate and postgraduate levels, worldwide and in India now ensure that students undertake suitable courses in economics. The purpose of teaching Managerial Economics is to equip business students with the ability to deliberate logically and critically the challenging process of framing business strategies later on in their careers. Managerial Economics caters to these needs in the Indian context in a detailed manner.

Table of Contents

  1. Cover
  2. Title Page
  3. Contents
  4. About the Author
  5. Dedication
  6. Preface
  7. Chapter 1: An Introduction to Managerial Economics: Nature and Scope
    1. Introduction
    2. What Is Managerial Economics?
    3. Differences Between Microeconomics and Macroeconomics, and Their Relation to Managerial Economics
    4. Need to Study Managerial Economics
    5. Applications of Managerial Economics
    6. Managerial Economics and Business Economics: Ambiguity in the Use of the Two Terms
    7. Summary
    8. Review Questions
    9. Answers
  8. Chapter 2: Objectives of a Business Firm, Decision Rules and the Process of Optimization
    1. Introduction
    2. Objectives of a Business Firm
    3. Profit Objective
    4. Profit Theories
    5. Profit Maximization: An Algebraic Explanation
    6. Other Economic Objectives of a Firm
    7. Non-economic Objectives
    8. Profit: A Control Mechanism
    9. Decision Rules
    10. Process of Optimization
    11. Summary
    12. Review Questions
    13. Answers
  9. Chapter 3: Demand, Elasticity of Demand and Elasticity of Supply
    1. Introduction
    2. Demand
    3. Supply
    4. Equilibrium
    5. Elasticity of Demand
    6. Revenue Concepts
    7. Income Elasticity of Demand
    8. Cross Price Elasticity of Demand
    9. Advertising Elasticity
    10. Elasticity of Price Expectations
    11. Elasticity of Supply
    12. Summary
    13. Review Questions
    14. Answers
  10. Chapter 4: Demand Forecasting
    1. Introduction
    2. What Is Demand Forecasting?
    3. Methods of Forecasting Demand
    4. Conclusion
    5. Summary
    6. Review Questions
    7. Answers
  11. Chapter 5: Cardinal Utility Approach
    1. Introduction
    2. Marshall’s Utility Analysis
    3. What Is Utility?
    4. Concept of Cardinal and Ordinal Utilities
    5. Cardinal Utility Approach
    6. Law of Diminishing Marginal Utility
    7. Law of Equi-marginal Utility
    8. Limitations of the Cardinal Utility Approach
    9. Summary
    10. Review Questions
    11. Answers
  12. Chapter 6: Ordinal Utility Approach: Indifference Curve Theory and Its Applications
    1. Introduction
    2. Assumptions of the Indifference Curve Theory
    3. An Indifference Curve
    4. Characteristics of an Indifference Curve
    5. Exceptions: Complements and Substitutes
    6. Budget Line of the Consumer
    7. Shifts in the Budget Line
    8. Consumer’s Equilibrium
    9. Changes in the Income Level: Income Consumption Curve
    10. Changes in the Price Level: Price Consumption Curve
    11. Price Effect: Substitution Effect and Income Effect
    12. Derivation of the Demand Curve
    13. Consumer Surplus
    14. Limitations of the Indifference Curve Theory
    15. A Comparison of Cardinal and Ordinal Utility Approaches
    16. Applications of Indifference Curve Theory
    17. Summary
    18. Review Questions
    19. Answers
  13. Chapter 7: Revealed Preference Theory
    1. Introduction
    2. What Is Revealed Preference Theory?
    3. Assumptions of Revealed Preference Theory
    4. A Derivation of Demand Curve
    5. An Evaluation of Revealed Preference Theory
    6. Summary
    7. Review Questions
    8. Answers
  14. Chapter 8: Production Function
    1. Introduction
    2. Basic Concepts
    3. Production Function
    4. Production: Short Run
    5. Production: Long Run
    6. Isoquants
    7. Characteristics of Isoquants
    8. Exceptions: Complements and Substitutes
    9. Isocost Line
    10. Equilibrium of the Producer
    11. Expansion Path
    12. Elasticity of Substitution
    13. Economic Region of Production and Ridge Lines
    14. Law of Returns to Scale
    15. Summary
    16. Review Questions
    17. Answers
  15. Chapter 9: Cost Function
    1. Introduction
    2. Some Basic Cost Concepts
    3. Cost Function
    4. Traditional Theory of Costs
    5. Long-run Cost Analysis
    6. Economies and Diseconomies of Scale
    7. Break-even Analysis
    8. Summary
    9. Review Questions
    10. Answers
  16. Chapter 10: Perfect Competition
    1. Introduction
    2. Types of Market Structures and Pricing Decisions
    3. Characteristics of Perfect Competition
    4. Firm’s Revenue Curves Under Perfect Competition
    5. Short-run Equilibrium of a Firm
    6. Long-run Equilibrium of a Firm
    7. Applications of Perfect Competition
    8. Summary
    9. Review Questions
    10. Answers
  17. Chapter 11: Monopoly and Monopolistic Competition
    1. Introduction
    2. Monopoly
    3. Types of Monopoly
    4. Firm’s Revenue Curves Under Monopoly
    5. Short Equilibrium of a Firm
    6. Long-run Equilibrium of a Firm
    7. Price Discrimination
    8. Control of Monopoly
    9. Monopolistic Competition
    10. Equilibrium of a Firm
    11. Short-run Equilibrium of a Firm
    12. Long-run Equilibrium of a Firm
    13. Excess Capacity
    14. Selling Costs
    15. Summary
    16. Review Questions
    17. Answers
  18. Chapter 12: Oligopoly and Strategies of Pricing
    1. Introduction
    2. Causes of Oligopoly
    3. Characteristics of Oligopoly
    4. Models of Non-Collusive Oligopoly
    5. Sweezy’s Kinked Demand Curve Model
    6. Models of Collusive Oligopoly
    7. Price Leadership
    8. Games Theory and Prisoner’s Dilemma
    9. Summary
    10. Review Questions
    11. Answers
  19. Chapter 13: Capital Budgeting and the Decision to Invest
    1. Introduction
    2. What Is Capital Budgeting?
    3. Significance of Capital Budgeting
    4. Steps in Capital Budgeting
    5. Determination of the Optimum Level of Capital
    6. Decision to Invest Under Certainty
    7. Sources and the Cost of Capital
    8. Decision to Invest Under Risk and Uncertainty
    9. Summary
    10. Review Questions
    11. Answers
  20. Chapter 14: Theories of Distribution
    1. Introduction
    2. Wages
    3. Wage Determination Under Perfect Competition
    4. Supply of Labour
    5. Rent
    6. Ricardian Theory of Rent
    7. Modern Theory of Rent
    8. Profit
    9. Risk Theory
    10. Uncertainty Theory
    11. Innovation Theory
    12. Interest
    13. Classical Theory
    14. Neo-classical Theory
    15. Keynesian Theory
    16. Summary
    17. Review Questions
    18. Answers
  21. Chapter 15: General Equilibrium and Welfare Economics
    1. Introduction
    2. General Equilibrium of Production and Exchange
    3. Welfare Economics
    4. Utility Possibility Frontier
    5. Social Welfare Function
    6. Summary
    7. Review Questions
    8. Answers
  22. Chapter 16: National Income
    1. Introduction
    2. National Income Aggregates
    3. Measurement of National Income
    4. Problems in the Measurement of National Income, Especially in Underdeveloped Countries
    5. Summary
    6. Review Questions
    7. Answers
  23. Chapter 17: Classical Model of Income Determination
    1. Introduction
    2. Background of Macroeconomics
    3. Need to Study Macroeconomics
    4. Concepts in Macroeconomics
    5. Say’s Law
    6. Output and Employment in Classical Model
    7. A Criticism of Classical Model
    8. Summary
    9. Review Questions
    10. Answers
  24. Chapter 18: Keynesian Model of Income Determination in a Two-sector Economy, Shifts in Aggregate Demand and Multiplier
    1. Introduction
    2. Aggregate Demand in a Two-sector Economy
    3. Consumption
    4. Saving as a Counterpart of the Consumption Function
    5. Determination of Equilibrium Income or Output in a Two-sector Economy
    6. Shifts in Aggregate Demand and Multiplier
    7. Uses and Limitations of Multiplier
    8. Applicability of Multiplier to LDCs
    9. Multiplier and Paradox of Thrift
    10. Summary
    11. Review Questions
    12. Answers
  25. Chapter 19: Keynesian Model of Income Determination in Three-sector and Four-sector Economies
    1. Introduction
    2. Determination of Equilibrium Income or Output in a Three-sector Economy
    3. First Model of Income Determination (Introducing Government Expenditure and Tax)
    4. Second Model of Income Determination (Introducing Government Transfer Payments)
    5. Third Model of Income Determination (Including Government Expenditures, Transfer Payments and Introducing Tax as a Function of the Income Level)
    6. Multipliers in a Three-sector Economy-Fiscal Multipliers
    7. Determination of Equilibrium Income or Output in a Four-sector Economy
    8. Equilibrium Income and Output
    9. Introduction of Government Transfer Payments in a Four-sector Model
    10. Multiplier in a Four-sector Economy-Foreign Trade Multiplier
    11. Summary
    12. Review Questions
    13. Answers
  26. Chapter 20: IS–LM Model for a Two-sector Economy
    1. Introduction
    2. IS–LM Model in a Two-sector Economy
    3. Goods Market Equilibrium in a Two-sector Economy: IS Curve
    4. Money Market Equilibrium in a Two-sector Economy: LM Curve
    5. Equilibrium in Two Markets: Goods Market and Money Market
    6. Equilibrium in the Two Markets (Goods Market and Money Market): An Algebraic Explanation
    7. Disequilibrium to Equilibrium: The Process of Adjustment
    8. A Shift in IS–LM Curves
    9. Summary
    10. Review Questions
    11. Answers
  27. Chapter 21: Theories of Investment Spending
    1. Introduction
    2. Basic Concepts
    3. Decision to Invest
    4. Marginal Efficiency of Capital
    5. Marginal Efficiency of Investment
    6. Changes in the Rate of Interest, MEC and Capital Accumulation
    7. Theories of Investment
    8. Summary
    9. Review Questions
    10. Answers
  28. Chapter 22: Economic Growth, Business Cycles and Stabilization Policy
    1. Introduction
    2. Economic Growth
    3. Factors Determining Economic Growth
    4. Theories of Economic Growth
    5. Business Cycles and Stabilization
    6. Summary
    7. Review Questions
    8. Answers
  29. Chapter 23: Theory of International Trade, Trade Policy and Foreign Exchange
    1. Introduction
    2. Classical Approach
    3. Heckscher–Ohlin Theory of Trade
    4. Terms of Trade
    5. Trade Policy
    6. Foreign Exchange Market
    7. Exchange Rate Systems
    8. Exchange Rate Determination
    9. Fixed Versus Flexible Exchange Rate
    10. Summary
    11. Review Questions
    12. Answers
  30. Chapter 24: Balance of Payments and the International Monetary System
    1. Introduction
    2. Meaning and Structure of Balance of Payments
    3. Double Entry Bookkeeping
    4. Disequilibrium in the Balance of Payments
    5. Kinds of Disequilibria in the Balance of Payments
    6. Process of Adjustment in the Balance of Payments
    7. Performance of Indian Economy in the External Sector
    8. International Monetary System
    9. Summary
    10. Review Questions
    11. Answers
  31. Chapter 25: Monetary Policy and Fiscal Policy
    1. Introduction
    2. Monetary Policy
    3. Instruments of Monetary Policy
    4. Limitations of Monetary Policy
    5. Fiscal Policy
    6. Instruments of Fiscal Policy
    7. Full Employment Budget Surplus
    8. Limitations of Fiscal Policy
    9. Crowding Out and Its Importance
    10. Banking Sector
    11. Summary
    12. Review Questions
    13. Answers
  32. Glossary
  33. Acknowledgements
  34. Copyright
  35. Back Cover