Managerial Economics

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Please Read Notes: Brand New, International Softcover Edition, Printed in black and white pages, minor self wear on the cover or pages, Sale restriction may be printed on the book, but Book name, contents, and author are exactly same as Hardcover Edition. Fast delivery through DHL/FedEx express. Cover Contents Preface About the Author Chapter 1: An Introduction to Managerial Economics: Nature and Scope Introduction What is Managerial Economics? Differences between Microeconomics and Macroeconomics, and their Relation to Managerial Economics Need to Study Managerial Economics Applications of Managerial Economics Managerial Economics and Business Economics: Ambiguity in the Use of the Two Terms Summary Review Questions Answers Chapter 2: Objectives of a Business Firm, Decision Rules and the Process of Optimization Introduction Objectives of a Business Firm Profit Objective Nature and Measurement of Profit Profit Theories Profit Maximization: An Algebraic Explanation Profit Maximization: A Graphical Explanation Other Economic Objectives of a Firm Non-Economic Objectives Profit: A Control Mechanism Decision Rules Marginal Principle Opportunity Cost Principle Incremental Principle Process of Optimization Summary Review Questions Answers Chapter 3: Demand, Elasticity of Demand and Elasticity of Supply Introduction Demand What Is Demand? Demand Function Demand and Price of Good x: Law of Demand Why Does the Demand Curve Slope Downwards? Demand for Good x and Price of Other Goods Demand for Good x and the Consumer’s Income Demand, and Tastes and Preferences of the Consumer Change in Demand Versus Shifts in Demand Supply What Is Supply? Law of the Supply Supply Function Why Does the Supply Curve Slope Upwards? Change in Supply Versus Shifts in Supply Equilibrium Elasticity of Demand Price Elasticity of Demand Factors Influencing the Price Elasticity of Demand Measurement of Price Elasticity of Demand Price Elasticity of Demand on a Linear Demand Curve Revenue Concepts Average Revenue, Marginal Revenue and Their Relationship with Price Elasticity Total Revenue and Its Relationship with Price Elasticity Significance of Price Elasticity of Demand Income Elasticity of Demand Different Types of Income Elasticity of Demand Significance of Income Elasticity of Demand Cross Price Elasticity of Demand Different Types of Cross Price Elasticity of Demand Significance of Cross Price Elasticity of Demand Advertising Elasticity What Is Advertising Elasticity? Factors Influencing Advertising Elasticity Types of Advertising Elasticity Elasticity of Price Expectations Types of Elasticity of Price Expectations Elasticity of Supply What Is Elasticity of Supply? Factors Influencing Elasticity of Supply Different Types of Elasticity of Supply Summary Review Questions Answers Chapter 4: Demand Forecasting Introduction What is Demand Forecasting? Methods of Forecasting Demand Consumer Survey Methods Expert Opinion Method Market Experiments Method Time Series Analysis Conclusion Summary Review Questions Answers Chapter 5: Cardinal Utility Approach Introduction Marshall’s Utility Analysis What is Utility? Concept of Cardinal and Ordinal Utilities Cardinal Utility Approach Total Utility Marginal Utility Law of Diminishing Marginal Utility A Derivation of the Law of Demand Law of Equi-Marginal Utility Limitations of the Cardinal Utility Approach Summary Review Questions Answers Chapter 6: Ordinal Utility Approach: Indifference Curve Theory and Its Applications Introduction Assumptions of the Indifference Curve Theory An Indifference Curve Characteristics of an Indifference Curve An Indifference Curve Is Negatively Sloped Indifference Curve Is Convex to the Origin Indifference Curves Cannot Intersect Exceptions: Complements and Substitutes Budget Line of the Consumer Shifts in the Budget Line Consumer’s Equilibrium Changes in the Income Level: Income Consumption Curve Normal Good Inferior Good Changes in the Price Level: Price Consumption Curve Price Effect: Substitution Effect and Income Effect Substitution Effect Income Effect Derivation of the Demand Curve Normal Good Inferior Good and Giffen Good Consumer Surplus Marshall’s Consumer Surplus Hicks’ Consumer Surplus Limitations of the Indifference Curve Theory A Comparison of Cardinal and Ordinal Utility Approaches Applications of Indifference Curve Theory Summary Review Questions Answers Chapter 7: Revealed Preference Theory Introduction What is Revealed Preference Theory? Assumptions of Revealed Preference Theory A Derivation of Demand Curve Quasi-substitution Effect Quasi-income Effect An Evaluation of Revealed Preference Theory Contributions of Revealed Preference Theory Limitations of Revealed Preference Theory Summary Review Questions Answers Chapter 8: Production Function Introduction Basic Concepts Production Function Cobb Douglas Production Function Production: Short Run Law of Variable Proportions Stages of Production Production: Long Run Isoquants Characteristics of Isoquants Exceptions: Complements and Substitutes Isocost Line Equilibrium of the Producer Situation I: Maximization of Output Given the Cost Situation II: Minimization of Cost Given the Output Expansion Path Elasticity of Substitution Economic Region of Production and Ridge Lines Law of Returns to Scale Increasing Returns to Scale Constant Returns to Scale Decreasing Returns to Scale Summary Review Questions Answers Chapter 9: Cost Function Introduction Some Basic Cost Concepts Cost Function Traditional Theory of Costs Short-run Cost Analysis Some Relationships Between the Short-run Cost Curves Long-Run Cost Analysis Long-run Average Cost Long-run Marginal Cost Relationship Between Long-run Average Cost and Long-run Marginal Cost Long-run Total Cost Economies and Diseconomies of Scale Economies of Scale Diseconomies of Scale Break-Even Analysis Break-even Analysis: Revenue and Cost Functions Are Linear Algebraic Analysis Break-even Analysis: Revenue and Cost functions Are Non-linear Summary Review Questions Answers Chapter 10: Perfect Competition Introduction Types of Market Structures and Pricing Decisions Characteristics of Perfect Competition Firm’s Revenue Curves under Perfect Competition Total Revenue Curve Average Revenue Curve Marginal Revenue Curve Short-Run Equilibrium of a Firm Firm’s Equilibrium Long-Run Equilibrium of a Firm Applications of Perfect Competition Price Controls Impact of Taxes and Subsidies Summary Review Questions Answers Chapter 11: Monopoly and Monopolistic Competition Introduction Monopoly Characteristics of Monopoly Types of Monopoly Firm’s Revenue Curves Under Monopoly Demand Curve Total Revenue Curve Average Revenue Curve Marginal Revenue Curve Relationship Between Average Revenue, Marginal Revenue and Elasticity of Demand Short Equilibrium of a Firm Firm’s Equilibrium Long-Run Equilibrium of a Firm Firm’s Equilibrium Price Discrimination Meaning of Price Discrimination Conditions Necessary for Price Discrimination Degrees of Price Discrimination Control of Monopoly Imposition of a Lump Sum Tax Marginal Cost Pricing and Average Cost Pricing Monopolistic Competition Characteristics of Monopolistic Competition Equilibrium of a Firm Short-Run Equilibrium of a Firm Long-Run Equilibrium of a Firm Excess Capacity Selling Costs Summary Review Questions Answers Chapter 12: Oligopoly and Strategies of Pricing Introduction Causes of Oligopoly Characteristics of Oligopoly Models of Non-Collusive Oligopoly Cournot Duopoly Model Sweezy’s Kinked Demand Curve Model Models of Collusive Oligopoly Cartels Price Leadership Games Theory and Prisoner’s Dilemma Summary Review Questions Answers Chapter 13: Capital Budgeting and the Decision to Invest Introduction What is Capital Budgeting? Significance of Capital Budgeting Steps in Capital Budgeting Determination of the Optimum Level of Capital Decision to Invest under Certainty Sources and the Cost of Capital Decision to Invest Under Risk and Uncertainty Some Concepts Decision to Invest Under Risk Decision to Invest Under Uncertainty Summary Review Questions Answers Chapter 14: Theories of Distribution Introduction Wages Wage Determination under Perfect Competition Demand for Labour Profit Maximizing Effect Supply of Labour Individual Supply of Labour Market Supply of Labour Determination of the Wage Rate Rent Ricardian Theory of Rent Modern Theory of Rent Profit Dynamic Theory Risk Theory Uncertainty Theory Innovation Theory Interest Classical Theory Neo-Classical Theory Keynesian Theory Interest Rate Determination Summary Review Questions Answers Chapter 15: General Equilibrium and Welfare Economics Introduction General Equilibrium of Production and Exchange Assumptions General Equilibrium of Production Production Possibility Frontier General Equilibrium of Exchange (Consumption) General Equilibrium in Production and Exchange Welfare Economics Utility Possibility Frontier Grand Utility Possibility Curve Social Welfare Function Point of Maximum Social Welfare Summary Review Questions Answers Chapter 16: National Income Introduction National Income Aggregates Gross National Product (GNP) Gross Domestic Product (GDP) National Income (NI) Personal Income Disposable Personal Income Measurement of National Income Output Approach Income Approach Expenditure Approach Net Income from Abroad Problems in the Measurement of National Income, Especially in Underdeveloped Countries Summary Review Questions Answers Chapter 17: Classical Model of Income Determination Introduction Background of Macroeconomics Classical School of Thought Keynesian Economics Post-Keynesian Economics Need to Study Macroeconomics From the Viewpoint of an Individual From the Viewpoint of the Consumers, Firms and Governments From the Viewpoint of an Economy’s Performance From the Viewpoint of an Economy’s Stability and Growth Concepts in Macroeconomics Stocks and Flows Equilibrium and Disequilibrium Statics, Dynamics and Comparative Statics Partial Equilibrium and General Equilibrium Say’s Law Output and Employment in Classical Model Production Function Labour Market in Classical Theory Demand for Labour Supply of Labour Determination of Employment, Real Wage Rate and Output A Criticism of Classical Model Summary Review Questions Answers Chapter 18: Keynesian Model of Income Determination in a Two-sector Economy, Shifts in Aggregate Demand and Multiplier Introduction Aggregate Demand in a Two-Sector Economy Consumption Consumption Spending Consumption Function Non-linear Consumption Function Linear Consumption Function Average Propensity to Consume (APC) Marginal Propensity to Consume (MPC) Saving as a Counterpart of the Consumption Function Saving Function Average Propensity to Save (APS) Marginal Propensity to Save (MPS) Relationship Between APC and APS Aggregate Demand Function Determination of Equilibrium Income or Output in a Two-Sector Economy Equilibrium Income and Output: A Theoretical Explanation Equilibrium Income and Output: An Algebraic Explanation Equilibrium Income and Output: A Graphical Explanation Shifts in Aggregate Demand and Multiplier Working of Multiplier Uses and Limitations of Multiplier Applicability of Multiplier to LDCs Multiplier and Paradox of Thrift Summary Review Questions Answers Chapter 19: Keynesian Model of Income Determination in Three-sector and Four-sector Economies Introduction Determination of Equilibrium Income or Output in a Three-Sector Economy First Model of Income Determination (Introducing Government expenditure and Tax) Equilibrium Income and Output Equilibrium Income and Output: A Graphical Explanation Second Model of Income Determination (Introducing Government Transfer Payments) Third Model of Income Determination (Including Government Expenditures, Transfer Payments and Introducing Tax as a Function of the Income Level) Multipliers in a Three-Sector Economy–Fiscal Multipliers Government Sector Multipliers with Lump Sum Tax Government Sector Multipliers with Income Tax Determination of Equilibrium Income or Output in a Four-Sector Economy Equilibrium Income and Output Introduction of Government Transfer Payments in a Four-Sector Model Determination of Equilibrium Income and Output: A Graphical Explanation Multiplier in a Four-Sector Economy–Foreign Trade Multiplier Summary Review Questions Answers Chapter 20: IS–LM Model for a Two-sector Economy Introduction IS–LM Model in a Two-Sector Economy Goods Market Equilibrium in a Two-Sector Economy: IS Curve Money Market Equilibrium in a Two-Sector Economy: LM Curve Equilibrium in Two Markets: Goods Market and Money Market IS Curve: An Algebraic Explanation LM Curve: An Algebraic Explanation Equilibrium in the Two Markets (Goods Market and Money Market): An Algebraic Explanation Disequilibrium to Equilibrium: The Process of Adjustment A Shift in IS–LM Curves A Shift in IS Curve A Shift in LM Curve A Simultaneous Shift in Both IS and LM Curves Summary Review Questions Answers Chapter 21: Theories of Investment Spending Introduction Basic Concepts Investment Gross and Net Investments Public and Private Investments Induced and Autonomous Investments Decision to Invest Present Value of a Capital Asset and Discounting Marginal Efficiency of Capital Marginal Efficiency of Capital Schedule and the Rate of Investment Marginal Efficiency of Investment Changes in the Rate of Interest, Mec and Capital Accumulation Fall in the Rate of Interest and Capital Accumulation Shift in the MEC Schedule and Capital Accumulation Theories of Investment Accelerator Theory of Investment Flexible Accelerator Model q Theory of Investment Summary Review Questions Answers Chapter 22: Economic Growth, Business Cycles and Stabilization Policy Introduction Economic Growth Concept of Economic Growth Factors Determining Economic Growth Development of Technology Formation of Capital and Development of the Infrastructure Human Capital Formation Natural Resources Other Factors Theories of Economic Growth Harrod–Domar Theory of Growth Neo-Classical Growth Theory Business Cycles and Stabilization What Are Business Cycles? Theories of Business Cycle Stabilization Policies Quantitative Measures of Monetary Policy Qualitative or Selective Measures of Monetary Policy Fiscal Policy Taxation Stabilization in the Economy Summary Review Questions Answers Chapter 23: Theory of International Trade, Trade Policy and Foreign Exchange Introduction Classical Approach Adam Smith’s Theory of Absolute Advantage Ricardian Theory of Comparative Advantage Heckscher–Ohlin Theory of Trade Terms of Trade Net Barter Terms of Trade Gross Barter Terms of trade Income Terms of Trade Trade Policy Policy of Free Trade Policy of Trade Protection Foreign Exchange Market Types of Foreign Exchange Transactions Functions of the Foreign Exchange Market Some Related Concepts Exchange Rate Systems Exchange Rate Determination Determination of Exchange Rate in a Flexible or Floating Exchange Rate Demand for Foreign Exchange Supply of Foreign Exchange Exchange Rate: Equilibrium Exchange Rate: Disequilibrium Fluctuations in the Exchange Rate Determination of Exchange Rate in a Fixed Exchange Rate System Fixed Versus Flexible Exchange Rate Advantages and Disadvantages of the Fixed Exchange Rate System Advantages and Disadvantages of the Flexible Exchange Rate System Summary Review Questions Answers Chapter 24: Balance of Payments and the International Monetary System Introduction Meaning and Structure of Balance of Payments Current Account Capital Account Official International Reserve Account Double Entry Bookkeeping Disequilibrium in the Balance of Payments Autonomous and Accommodating Transactions Kinds of Disequilibria in the Balance of Payments Structural Disequilibrium Cyclical Disequilibrium Exchange Rate Disequilibrium Monetary Disequilibrium Process of Adjustment in the Balance of Payments Expenditure-reducing or Expenditure-changing Policies Expenditure-switching Policies: Devaluation (Elasticity Approach) Expenditure-switching Policies: Devaluation (Absorption Approach) Performance of Indian Economy in the External Sector International Monetary System An Evolution of the International Monetary System Summary Review Questions Answers Chapter 25: Monetary Policy and Fiscal Policy Introduction Monetary Policy Meaning of Monetary Policy Instruments of Monetary Policy Quantitative or General Measures of Monetary Policy Qualitative or Selective Measures of Monetary Policy Deficit Financing: Government’s Instrument of Monetary Control Limitations of Monetary Policy Fiscal Policy Meaning of Fiscal Policy Instruments of Fiscal Policy Full Employment Budget Surplus Limitations of Fiscal Policy Crowding Out and Its Importance Banking Sector Central Bank Commercial Banks Development Banks Summary Review Questions Answers Glossary Index