We have numerous choice: 67 varieties of
toothpaste, 487 styles of shoes, 186
brands of cell phones with 137 telephone
companies.
There are 87 varieties of lawyers, and 75
specialties inside medicine.
Yehi Hai Right Choice ?
?????
Questions
• How do markets work?
• How do customers value products?
• What are the relevant production and cost
measures for decision making?
• How does competition affect business decisions
in different market structures?
• What prices should be set?
• What would be the impact of changes in interest
rates on costs, accounting, or capital budgeting?
• How important to managerial and marketing
decisions are changes in: foreign exchange rates,
GDP, inflation, government regulations, sources
of energy, and the balance of payments?
Introduction:
Economic Issues
By- Rahul Jain
(MBA, FCS)
Aim of the Course
To introduce economic concepts to the
fashion marketing students to enable
them to use various forms of economic
analysis to extract useful information
from economic data
Our strategy for achieving objectives360 Degree Learning
• Concepts, Practice and Class Discussion
• Punctuality, Participation and Preparation
(Its compulsory to bring your own calculators, Pen,
Stationary, Registers, Prescribed Book, Course
Handouts - Otherwise disciplinary action will be taken)
• Judgment challenge
• Learning to communicate ideas
• Learning from each other
• Learning through discovery
What is “Good” Participation?
• Quality, not quantity.
• Analyzing and discussing course material.
• Questioning the analysis of others.
• Seeking clarification.
• Contrasting issues within other settings, courses, and / or
other
• countries.
• Changing the direction of discussion.
• Summarizing / synthesizing.
• Adherence to guidelines for professional conduct.
Some Important rules
• Switch off your Mobiles
• Attendance rules will be strictly applied
• Non completion of Assignment will lead
to strict disciplinary measures
• Students can gather additional bonus
points by being a “Performer” 4 times in
the whole course.
• Students falling in the “Improvement
category” would be penalized.
Economics as the context of business
• Management, marketing & accounting focus on
specifics
– How to manage a company…
– How to market a product…
– How to quantify & compare corporate
performance…
Focus is your personal input to business
• Economics is the context of business
– “Men make their own history, but they do not make it as they
please; they do not make it under self-selected circumstances,
but under circumstances existing already, given and
transmitted from the past”
• Focus on constraints on and circumstances of your input.
Both opportunities & dilemmas
– Quick quiz: who made the above statement?
Economics as the context of
business
•Often the best wisdom in economics isn’t
found in standard textbooks!
•considers theories & data are more relevant
to business
The Managerial economics
• What is managerial economics?
– decision making in business
• external influences on the firm
– the business environment
• internal decisions of the firm
• the external effects of business decision making
Managerial Economics can be defined as the study
of economic theories, logic and tools of economic
analysis that are used in the process of business
decision- making.
“The firm”: real world vs economic
theory
• The real world: an incredible diversity
– Size: from corner store to Microsoft
– Operations: from one outlet to almost all countries
– Diversity:
• from single product (wheat farm) to many (Sony)
• From one industry to many
– Ownership: from sole proprietor to multinational
listed company
– Structure:
• from one person operations to multi-department
• From sole operations (production to sale) to
specialization in manufacturing, wholesale, retail,
marketing, consulting…
Microeconomics is a branch of economics that
studies how individuals, households and firms make
decisions to allocate limited resources, typically in
markets where goods or services are being bought
and sold.
Micro-Economics Applied to Operational Issues
The issues that arise within the business are operational
issues, and the following are the theories applied:





Theory of Demand
Theory of Production and Production Decisions
Analysis of Market-Structure and Pricing Theory
Profit Analysis and Profit Management
Theory of Capital and Investment Decisions
Macroeconomics, on the other hand, involves the "sum
total of economic activity, dealing with the issues of
growth, inflation and unemployment and with national
economic policies relating to these issues" and the
effects of government actions (such as changing taxation
levels) on them.
Macro-Economics applied to Business Environment
The issues that pertain to the business environment in
planning
and formulation of the future strategy under these three
categories:
 Issues related to Macroeconomic trends in the Economy
 Issues related to Foreign Trade
 Issues related to Government Policies
The Economic Problem
• Economic problems
– production and consumption
– scarcity: the central economic problem
• Macroeconomic issues
– growth
– unemployment
– inflation
– deficits
– cyclical fluctuations
The Economic Problem
• Microeconomic issues
– choices:
• what
• how
• for whom
– the concept of opportunity cost
– rational decision making
• weighing up marginal costs and marginal
benefits
– the social implications of choice
The Firm and Its
Economic Problem
• Firm
– An institution that hires productive resources
and that organises those resources to
produce and sell goods and services
• A firm’s goal is to maximize wealth of the
shareholders
The Types of
Business Organisation
• Sole Proprietorship
– a firm with a single owner
• Partnership
– a firm with two or more owners who have
unlimited liability
• Company
– a firm owned by one or more limited liability
stockholders
Discussion
What kind of Economic factors will be
considered by SRK while launching King
Khan merchandize?
•
•
•
•
•
•
•
Managerial Decisions Areas
Assessment of investible funds
Selecting business area
Choice of Product
Determining Optimum Output
Determining Price of the Product
Determining Input-Combination and technology
Sales Promotion
Use of Quantitative Methods
Application of
Economic Concepts
and Theories in
Decision-Making
• Mathematical tools
• Statistical tools
• Econometrics
Managerial Economics
Application of Economic Concepts, Theories and Analytical
Tools to find Optimum Business Problems
Opportunity Cost
• Firms incur opportunity costs when they
produce goods.
– Opportunity cost of producing — the best
alternative investment opportunity that the
firm foregoes to produce a good or service
– Look at it as the opportunity costs of the
factors of production the firm employs
(labor, capital, entrepreneurs)
Opportunity Cost
• Components of a firm’s opportunity cost
– Explicit costs (money costs)
• The amount paid for factors of production
– Implicit costs (non-money costs)
• The value of foregone opportunities.
• The firm incur implicit costs when it:
– uses its own capital
– uses its owner’s time or financial resources
Opportunity Cost
• Cost of Owner’s Resources
– The income that the owner could have
earned in the best alternative job.
– Normal profit is the expected return for
supplying entrepreneurial ability.
Economic Profit
• Economic Profit
– A firm’s total revenue minus its opportunity
costs.
– Not the same as accounting profit.
The Firm and Its
Economic Problem
• Technology Constraints
– A firm’s resources and the available technology limit
its production.
• Information Constraints
– The cost of coping with limited information itself
limits profit.
• Market Constraints
– Willingness to pay of its customers and by the prices
and marketing efforts of rival firms.
– Willingness of people to work for and invest in the
firm.
The Economic Problem
• The circular flow of income
– firms and households
The circular flow of goods and incomes
The Economic Problem
• The circular flow of income
– firms and households
– goods markets
• real flows: goods and services
The circular flow of goods and incomes
The circular flow of goods and incomes
Goods and services
The Economic Problem
• The circular flow of income
– firms and households
– goods markets
• real flows: goods and services
• money flows: consumer expenditure
The circular flow of goods and incomes
Goods and services
The circular flow of goods and incomes
Goods and services
£
Consumer
expenditure
The Economic Problem
• The circular flow of income
– firms and households
– goods markets
• real flows: goods and services
• money flows: consumer expenditure
– factor markets
The Economic Problem
• The circular flow of income
– firms and households
– goods markets
• real flows: goods and services
• money flows: consumer expenditure
– factor markets
• real flows: services of labour and other factors
The circular flow of goods and incomes
Goods and services
£
Consumer
expenditure
The circular flow of goods and incomes
Goods and services
£
Consumer
expenditure
Services of factors of production (labour, etc)
The Economic Problem
• The circular flow of income
– firms and households
– goods markets
• real flows: goods and services
• money flows: consumer expenditure
– factor markets
• real flows: services of labour and other factors
• money flows: wages and other incomes
The circular flow of goods and incomes
Goods and services
£
Consumer
expenditure
Services of factors of production (labour, etc)
The circular flow of goods and incomes
Goods and services
£
Consumer
expenditure
Wages, rent
dividends, etc.
£
Services of factors of production (labour, etc)
The Economic Problem
• The circular flow of income (cont.)
– macroeconomic issues
• the size of total flows
– microeconomic issues
• individual markets
• choices within goods and factor markets
Website activity
• Each one of you write your bio in your
course page.
• Bio will be written as per following
guidelines:
– Include your name, prior education background and
institute’s name
– Include your hobbies, 2 strengths and 2 unique talents
– Include your achievements
– Include what you want to learn from this course
• www.finishingschool.pbworks.com
Class Assignment – I
A) Individual Assignment- 3 minute presentation on
Business News Analysis (Refer Economic times and
other business news papers/ magazine) –Compulsory
for first 3 roll numbers. Also submit a report on A4
size paper (Give intext citations) : Second Week
onwards.
Following should be the headings in the News analysis
• Description of the news
• Analysis, Interpretation and Implication
• Conclusion
B) Individual Assignment – 2 minute presentation on Key
learnings of the previous class. (Compulsory for all)
Class Assignment – I
C) Individual Assignment: Read Google PPT and Make a
one page analysis of factors affecting the demand of
Google products and services, from the Google PPT.
You can also do additional secondary research on the
company. (Provide references)
Submit on A4 Page.
Assignment – I Contd.
Main Readings
Note: Chapters of the Text Book, PPT , Internet, Hand Outs and Library
Text Book: Managerial Economics, DN Dwivedi. Vikas Publications
• Academic Honesty
– Do Not Copy Work
– Reference Any Source
– When Confused Ask Instructor
Contact me: Rahul Jain (9811228852,
rahulkjain16@yahoo.co.in,
Yahooid:rahulkjain16)