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Dibrugarh University - Business Economics Study Guide

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B.com 2nd Semester - Business Economics Study Guide for May 2015 Exam

B.com 2nd Semester - Business Economics Study Guide for May 2015 Exam

Course No. 202 BUSINESS ECONOMICS (BECO VI) - New Course(For B.Com.General And Six Speciality Courses)Marks: 80Hours: 40Objective: This course is meant to acquaint the students with the principles of Business Economics as are applicable in business.

Course Contents: Unit I: Introduction: Meaning, nature, scope, characteristics of Business Economics; Relationship between Business Economics and Traditional Economics; Basic Problems of an economic system, Working of price mechanism. 20: 10 hrs Unit II: Elasticity of Demand: Concepts, measurements, practical importance of elasticity of demand for business management; Supply theory. 20: 10 hrs Unit III: Production Function: Law of variable proportions; Isoquants; Economic regions and optimum factor combination; Expansion path; Returns to scale; Internal and external economies and diseconomies. 20: 10 hrs Unit IV: Market Structure: Objectives of Business Firms; Perfect competition: Profit maximization and equilibrium of firm and industry; Short-run and long-run supply curves; Price and output determination. 20: 10 hrs

Business Economics Syllabus (Old Course)UNIT-I: Introduction to Business Economics:Meaning,nature,Scope, characteristics of Business Economics; Relationship between Business Economics and Traditional Economics; Basic Problems of an economic system, working of price mechanism.UNIT-II: Elasticity of Demand:Concepts; Measurements; Determining factors and importance; Supply theory.UNIT-III: Production function:Law of Variable proportion; lsoquant; Economic region and optimum factor combination; Expansion path; Returns to scale; Internal and external economics and diseconomies.UNIT-IV: Market Structure:Objectives of Business firms; Perfect competition: profit minimization and equilibrium of firm and industry, Short run and long run supply Curves, Price and output determination.UNIT-V: Monopoly:Determination of price under monopoly; Perfect competition and monopoly; price discrimination. Oligopoly: characteristics; determining pricing and output; price leadership collasive oligopoloy; kinkeddemandcurve.

Text and Reference Books: 1. Jhingan & Upadhya: Business Economics, Vrinda Publications (P) Ltd, Delhi. 2. John P. Gould, Jr. and Edward P. Lazear: Micro-economics Theory; All India Traveller, Delhi. 3. Browing Edger K. and Browing Jacquelence M: Micro economic Theory and Applications; Kalyani, New Delhi. 4. Waston Donald S. and Getz Molcolm; Price Theory and its Uses; Khosla Publishing House, New Delhi. 5. Hingan: Business Economics, Vikash Publishers, New Delhi. 6. Soloman: Economics for Business, Pearson, New Delhi. 7. Mukherjee: Business Economics, Micro and Macro, New Central Book Agency, Hyderabad. 8. Mukherjee: Business Economics, New Central Book Agency, Hyderabad. 1.Basic Problems of Indian EconomySince 1991, the Indian economy has pursued free market liberalisation, greater openess in trade and increase investment in infrastructure. This helped the Indian economy to achieve a rapid rate of economic growth and economic development. However, the economy still faces various problems and challenges.1. Inflation: Fuelled by rising wages, property prices and food prices inflation in India is an increasing problem. Inflation is currently between 8-10%. This inflation has been a problem despite periods of economic slowdown. For example in late 2013, Indian inflation reached 11%, despite growth falling to 4.8%. This suggests that inflation is not just due to excess demand, but is also related to cost push inflationary factors.2. Poor educational standards: Although India has benefited from a high % of English speakers, there is still high levels of illiteracy amongst the population. It is worse in rural areas and amongst women. Over 50% of Indian women are illiterate. This limits economic development and a more skilled workforce.3. Poor Infrastructure: Many Indians lack basic amenities lack access to running water. Indian public services are creaking under the strain of bureaucracy and inefficiency. Over 40% of Indian fruit rots before it reaches the market.4. Balance of Payments deterioration: Although India has built up large amounts of foreign currency reserves the high rates of economic growth have been at the cost of a persistent current account deficit. In late 2012, the current account reached a peak of 6% of GDP. Since then there has been an improvement in the current account. But, the Indian economy has seen imports growth faster than exports. This means India needs to attract capital flows to finance the deficit. Also, the large deficit caused the depreciation in the Rupee between 2012 and 2014. 5. Inequality has risen rather than decreased: It is hoped that economic growth would help drag the Indian poor above the poverty line. However so far economic growth has been highly uneven benefiting the skilled and wealthy disproportionately. Many of Indias rural poor are yet to receive any tangible benefit from the Indias economic growth. 6. Large Budget Deficit: India has one of the largest budget deficits in the developing world. Excluding subsidies it amounts to nearly 8% of GDP. Although it is fallen a little in the past year. It still allows little scope for increasing investment in public services like health and education.7. Rigid labour Laws: As an example Firms employing more than 100 people cannot fire workers without government permission. The effect of this is to discourage firms from expanding to over 100 people. It also discourages foreign investment. 8. Inefficient agriculture: Agriculture produces 17.4% of economic output but, over 51% of the work force are employed in agriculture. This is the most inefficient sector of the economy and reform has proved slow.9. Slowdown in growth: 2013/14 has seen a slowdown in the rate of economic growth to 4-5%. Real GDP per capita growth is even lower. This is a cause for concern as India needs a high growth rate to see rising living standards, lower unemployment and encouraging investment. India has fallen behind China, which is a comparable developing economy.

2. Business or Managerial Economics:Managerial Economics generally refers to the integration of economic theory with business practice. While economics provides the tools which explain various concepts such as Demand, Supply, Price, Competition etc. Managerial Economics applies these tools to the management of business. In this sense, Managerial Economics is also understood to refer to business economics or applied economics.Definitions of Managerial EconomicsAccording to Prof. Spencer Sigelman, Managerial Economics deals with integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management.According to Prof. Hauge, Managerial Economics is concerned with using logic of economics, mathematics & statistics to provide effective ways of thinking about business decision problems.According to Prof. Joel Dean, The purpose of Managerial Economics is to show how economic analysis can be used in formulating business policies.Nature and characteristics of Managerial Economics:1. Microeconomics: It studies the problems and principles of an individual business firm or an individual industry. It aids the management in forecasting and evaluating the trends of the market.2. Normative economics: It is concerned with varied corrective measures that a management undertakes under various circumstances. It deals with goal determination, goal development and achievement of these goals. Future planning, policy-making, decision-making and optimal utilisation of available resources, come under the banner of managerial economics.3. Pragmatic: Managerial economics is pragmatic. In pure micro-economic theory, analysis is performed, based on certain exceptions, which are far from reality. 4. Uses theory of firm: Managerial economics employs economic concepts and principles, which are known as the theory of Firm or 'Economics of the Firm'. Thus, its scope is narrower than that of pure economic theory.5. Takes the help of macroeconomics: Managerial economics incorporates certain aspects of macroeconomic theory. Knowledge of macroeconomic issues such as business cycles, taxation policies, industrial policy of the government, price and distribution policies, wage policies and antimonopoly policies and so on, is integral to the successful functioning of a business enterprise.6. Aims at helping the management: Managerial economics aims at supporting the management in taking corrective decisions and charting plans and policies for future.7. A scientific art: Science is a system of rules and principles engendered for attaining given ends. Scientific methods have been credited as the optimal path to achieving one's goals. Managerial economics has been is also called a scientific art because it helps the management in the best and efficient utilisation of scarce economic resources.8. Prescriptive rather than descriptive: Managerial economics is a normative and applied discipline. It suggests the application of economic principles with regard to policy formulation, decision-making and future planning. It not only describes the goals of an organisation but also prescribes the means of achieving these goals.

Scope of Managerial EconomicsThe scope of Managerial Economics is so wide that it embraces almost all the problems and areas of the manager and the firm.It deals with demand analysis and forecasting, resource allocation, production function, cost analysis,inventory management , advertising, price system, capital budgeting etc. However, the scope of managerial economics may be discussed under following points:a)Demand analysis and forecasting :Demand forecasting is the process of finding the value

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