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MANAGERIAL ECONOMICS
SYLLABUS
Course Objectives
The objective of this course is to enlighten the students with the practical utility of application of economic
principles, concepts, method and tools for solving business problems, and relevant decision-making
process.
UNIT-I
Meaning and scope of managerial economics relation with other branches. Fundamental concepts
Opportunity cost principles incremental principle principle of time perspective discounting principle
Firm and its objective optimization and maximization concepts demand analysis and demand forecasting:
Demand function Demand cures demand for producer goods and consumer goods Types of demand and
distinctions elasticities types measurement of elasticities Business uses of elasticity.
UNIT II
Theory of production: production function for a single product Law of production laws of variable
proportions optimal combination of factors of production single, output isoquants output
maximization and cost minimization cob- Douglas production function managerial uses of production
function cost concepts Accounting and economic costs relevant costs of decision making cost
output relationship in the short run and long run economics and diseconomies of scale. Cost-volume profit
analysis break-even charts assumptions uses limitations.

UNIT III
Market structure perfect and imperfect competition monopolistic competition oligopoly monopoly
predatory and discriminatory competition destructive competition potential competition price and
output determination perfect competition and monopoly measuring monopoly power-methods
monopolistic competition (chamberians group equilibrium model only) Oligopoly kinked demand
curve model of Paul Sweezy.
UNITY IV
Pricing policy: objectives methods cost plus pricing incremental pricing transfer pricing
administered prices dual pricing odd number and critical pricing multiple products opportunity for
multiple products policy on adding new products and dropping old products multiple product pricing.
UNIT V
Profits: Nature of profits theories of profits risk innovation and imperfection theories profit
measurement conceptual conflict between accountants and economists profits for control. Business
cycles causes different phases innovations theory and political theory firms measures to solve
problems regarding pricing and investment decisions during business cycles.

QUESTION BANK
UNIT I
1.

Managerial Economics is Economics applied in decision-making- Discuss (OU.Mar.2005)

2.

Define Managerial Economics and show how differs from economic theory. (OU.Mar.2004)

3.

Explain the meaning and scope of Managerial Economics in Market Economy (OU.Mar.2000, Mar, 1999)

4.

Managerial Economics is prescriptive rather than descriptive in character-Discuss (OU.Mar.1996)

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5.

Managerial Economics is the integration of economic theory with business practice for the purpose of
facilitating decision-making and forward planning- Discuss

6.

Managerial Economics bridges the gap between economic theory and economic practice. Discuss

7.

What role does the managerial economist play in business?

8.

Discuss the nature and scope of managerial economics.

9.

Explain the incremental concept and state its importance (OU.Mar.2000)

10. What is opportunity cost? How is it calculated? Describe the significance of opportunity cost in allocation
of resources by firms.
11. What is the difference between incremental concept and marginal concept? When can the decision by an
entrepreneur be considered valid according to the incremental principle?
12. How far is profit maximization the basic objective of the firm? What are the reasons for limiting profits?
13. How is the behavior of the profit-maximizing firm different from the revenue-maximizing firm?
14. Why is demand analysis essential for successful production planning and capital expansion?
15. Explain price elasticity of demand. How can it be measured? (OU.Mar.2004)
16. What is income elasticity? How do you measure it? What is its significance? (OU.Mar.2005)
17. What are the types of elasticity of demand? Explain cross elasticity of demand (OU.Mar.2000)
18. Elasticity of demand plays an important role in demand forecasting- Discuss (OU.Nov.1999)
19. What is the purpose of forecasting? Discuss the factors involved in demand forecasting
20. What is the significance of demand forecasting? What are the steps involved in forecasting demand?
21. Discuss critically the different methods of demand forecasting
22. Economics is a science of choice making. Discuss (PE-I.Nov.1994)
23. Explain and illustrate the role of deductive and inductive methods in Economic analysis (PE-I. Nov.1996)
24. Macroeconomics and Microeconomics are interdependent. Do you agree (PE-I.May.1997)
25. Explain the characteristics of economic laws (PE-I.Nov.2003)
26. What is the purpose of an economic model? Explain different types of economic models. (PE-I. May.2001)
27. State the uses of the concept of elasticity of demand (PE I-May.1995)
28. Define Price elasticity of demand. Explain the methods for its measurement (PE-I.May.1998)
29. What is price elasticity of demand? Distinguish between point elasticity and arc elasticity of demand (PEI.May.2002)
30. Explain and critically examine the concept of consumers surplus (PE-I.Nov.1995)

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31. Explain consumers equilibrium with the help of Indifference curve analysis (PE-I.May.1996)
32. Explain the law of equi-marginal utility.(b) What are the main properties of indifference curve (PEI.May.2004)
33. Briefly describe the various methods of demand forecasting (PE-I.Nov.1996)

UNIT II
1.

Define production function. Explain the nature and managerial uses of production function (OU.Mar.2005)

2.

Explain the law of variable proportions. (OU.Mar.2004,Mar.2000)

3.

Define production function and explain the effect of economies of scale in the optimization of production.
(OU.Nov.1999)

4.

Briefly explain production function through isoquants.( OU.Mar.1999)

5.

Explain the concept of production function and discuss the production function of Cobb- Douglas type.

6.

How are the returns to scale different from returns to proportion?

7.

Derive the optimum decision rule for attaining the least-cost combination of inputs in a given productive
process

8.

Economies of scale may be either internal or external, they may be technical, managerial, financial, or risk
bearing- Elucidate.

9.

Discuss briefly the different cost concepts relevant to managerial decision of planning and control
(OU.Mar.2005.Mar.2004)

10. Explain the cost-output relationship in the short and long run.
11. What are economies of scale? How do they influence the size of the firm?
12. Distinguish between fixed and variable costs.
13. Analyse the importance of U-shaped average cost of a firm(a) in fixing the volume of goods to be produced
in short period,(b)in deciding the size of the plant in the long run.
14. What is Marginal rate of substitution? Why does it diminish? What is its relationship with marginal utility
(PE-I.May.2000)
15. Explain producers equilibrium with the help of isoquants (PE-I.Nov.2001)
16. Explain labour supply curve (PE-I.May.2003)
17. Discuss factors affecting the elasticity of supply (PE-I.May.2002)
18. Explain the characteristics of labour as a factor of production (PE-I.May.2004)
19. Explain and illustrate different stages of the law of variable proportions (PE-I.May.2002)
20. Explain capital formation and describe the various stages of capital formation (PE-I.Nov.1996)
21. Explain and illustrate the average cost curves of a firm in the short-run (PE-I.May.2001)
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22. What is cost function? Explain the determinants of cost. (PE-I.Nov.2000)

23. Explain the major components of total cost of production (PE-I.May.2004)

UNIT III
1.

Explain how price and output are determined in perfect competition. (OU.Mar.2005)

2.

Describe the features of perfect competition and show how the price is determined in perfect competition.
(OU.Mar.2004)

3.

What are the main features of perfect competition? When does a firm earn super normal profits? What
happens to such profits in the long run? (OU.Mar.2000)

4.

Explain the price-output equilibrium under monopoly (OU.Mar.2004)

5.

What is price discrimination under monopoly? How is the price determined under monopoly? Explain.
(OU.Mar.2000)

6.

A monopolist can control either price or output, but not both. Explain

7.

Explain the efficiency of monopoly and competition in terms of price, output and cost. Should monopolies
be controlled?

8.

How are the price and output determined under monopolistic competition? (OU.Mar.2005)

9.

Define oligopoly and state the importance of selling costs (OU.Nov.1999)

10. What is meant by monopolistic competition? Is product differentiation an outcome of monopolistic

competition or vice versa? Discuss the behavior of the firm under monopolistic competition.
11. What is Oligopoly? Explain the price and output decisions taken under conditions of oligopoly.
12. Explain price rigidity under oligopoly in terms of kinked demand curve. What will happen if firms under
oligopoly (i) collide, (ii) collude
13. Monopolistic competition necessarily implies presence of excess capacity Comment.
14. What are the conditions necessary for price leadership? Is it restrictive trade practice? Substantiate the
argument.
15. Explain Kinked demand curve hypothesis. (PE-I.May.2004)
16. What factors determine the extent of market for a commodity? (PE-I.May.1999)
17. What are the main characteristics of a free market economy? How does it solve its basic problems? (PEI.Nov.2001)
18. Describe the characteristics of Oligopoly. (PE-I.May.2003)
19. Examine the role of time element in price determination (PE-I.Nov.2001)
20. Explain and illustrate the determination of price under monopolistic competition in the short run and long
run (PE-I.May.2001)

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21. Explain and illustrate the equilibrium position for a firm under perfect competition (PE-I. Nov.2003)
22. Perfect competition is a myth. Comment (PE-I.Nov.1999)
23. Explain price discrimination giving suitable examples. Describe the conditions necessary for price
discrimination (PE-I.Nov.2000)
24. What are the three types of price discrimination followed by monopoly firms? Discuss (CS
Foundation.June.2004)
25. A competitive firm is not a price determinator, but an output adjustor. Elucidate (CS
Foundation.June.2000)

UNIT IV
1.

Pricing in practice is completely divorced from the theory of the firm. Explain with special reference to
dual pricing.

2.

Discuss the various techniques of price formulation in actual business situation.

3.

Explain the method of cost-plus pricing. Also state the strengths and weaknesses of traditional pricing
theory.

4.

Discuss the uses and limitations of marginal cost pricing

5.

Distinguish between the pricing policies followed by big and the small businesses.

6.

What are the unique problems faced by multi-product firms in setting a price for each product? Explain
them with suitable illustrations wherever possible.

7.

Explain incremental reasoning in pricing. What are its advantages and limitations (OU.Mar.2005.Mar.2004)

8.

What are the specific problems of product-line pricing?

9.

Explain the pricing policies at various stages of product life cycle.

10. What do you understand by transfer pricing? How transfer price is determined?
11. What factors influence the choice of prices for a product-line by a firm? Discuss
12. How does the price determination of a multi-product firm differ from that of a single product firm?
(OU.Mar.2005)
13. State the objectives of
(OU.Nov.1999.Mar.1999)

pricing

policy

and

explain

the

different

14. What is the role of cost in pricing?

UNIT V
1.

Profit is the reward for successful innovation. Explain (OU.Mar.2004)

methods

of

pricing.

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2.

Explain the risk and uncertainty theories of profit (OU.Mar.2005)

3.

Define profits and explain the nature and the sources of profit (OU.Mar.2000)

4.

Distinguish between accountants concepts of profit and economists concept of profit.

5.

Explain briefly the various theories of profit and discuss the statement profit as the objective of a firm is at
best a very limited concept.

6.

Explain the concept of break-even in profit planning

7.

Explain Break-even analysis and its limitations

8.

What is break-even point? State the significance of break-even analysis (OU.Mar.2000)

9.

What do you understand by business cycles? Explain the process of the boom, the depression and the
recovery. (OU.Mar.2004)

10. Explain the phases and causes of business cycles (OU.Mar.2005)

11. What do you understand by a business cycle? Why does it occur mostly in free enterprise economy?
12. Why do business cycles occur? Explain the monetary and non-monetary factors causing business cycles
(OU.Mar.1998)
13. What is cyclical pricing? What are the factors that influence this policy?
14. What are the various difficulties involved in measurement of national income in India? (PE-I. Nov.1998)
15. Explain different methods of measuring National Income . What are their limitations? (PE-I.Nov. 2001)
16. Explain the value added method of measuring national income (PE I.May.2004)
17. What is national income? Is it a reliable index of economic welfare (PE-I.May.2002)

ASSIGNMENTS
UNIT I
1.

Critically evaluate, how far the statement given below is a correct description of the subject- matter of
managerial economics: The objective of managerial economics is to provide framework for analyzing
business decisions. Instead of presenting detailed list of rules for specific decision making managerial
economics addresses the larger economic forces that shape day- to day decision-making

2.

What is meant by model building? How can it be helpful in the analysis of managerial economic problems?
Also discuss the various types of models used in managerial economics?

3.

The enrollment in 10 top business schools in India went up from 2,200 in 1980 to 3,800 in 2000, while the
average tuition fee per year went up from Rs 6,000 to Rs 72,000 during the same period. Does this imply
that demand curve for quality education is upward sloping? Comment

4.

Explain the significance of price elasticity in practical application and state the various kinds of elasticity
playing an important role in different fields

5.

Write a note about the various steps which would be necessary if you were asked to forecast demand for a
typical mass consumption item
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UNIT II
1.

Use the concept of elasticity of substitution to explain the various forms of production function that you
may encounter in reality

2.

Do firms operate at optimal scale? Analyze a local firm in your locality and make a brief note of your
findings.

3.

Bring out the relevance of the laws of production in business decisions. Take any firm of your choice and
present your case. What are the measures taken by the firm to mitigate the effects of these laws?

4.

What are the different types of costs one would come across in practical business decisions? Explain how
they affect decision-making with specific examples.

5.

Analyse any industrial estate nearer to your locality and state the different types of external economies
enjoyed by the firms located there.
UNIT III
1.

Under what conditions are the oil prices determined by Organisation of Petroleum Exporting Countries
(OPEC)? Is oil price hike justified

2.

Explain which of the following markets could be considered monopolistically competitive:

(i) Network Television
(ii) Low priced pens
(iii) Restaurants
(iv) Automobiles
Write a note on the reasons for your viewpoint.

3.

What are cartels? Write about the different cartels existing at present in various parts of the World.

4.

Give an example for monopolistic competition. Write a note about the selling costs incurred on that
particular product.

5.

Take specific example of two substitute products in a monopolistic competition. Make notes on how a
strategy of product differentiation has an effect on the demand for these products.

UNIT IV
1

How are prices determined for services of public utilities? Take any two examples and present your case

Explain the pricing policies at various stages of product life cycle taking any product your choice.

How do pricing policies in reality differ from theory? Illustrate your answer giving specific examples

UNIT V
1

Write a detailed note on the differences existing between accountants profit calculation and economists
profit calculation giving specific examples.

Write about the Great Depression of 1929 and how it led to the growth of Keynesian economics and macro
economic approach.