Key Takeaways from the Managerial Economics

Course
Lecturer- Dr. Chitrakalpa Sen
Let me first take this opportunity to thank you for your laborious efforts in making us
understand each and every concept about the managerial economics. From your
first lecture on Demand & Supply Curves to the last lecture on Game Theory I
enjoyed every second of your teaching and looked forward to your next class. It was
a mind opening course in the first module of our MBA and we started with a perfect
teacher as a guide.

Now about the key learnings, there were plenty. Be it the rivalry concept in the
market among the consumers, or among producers or between consumer and
producer. Or be it the Market Demand & Supply concepts, we learned a lot about the
preferences at an individual level as a producer, or a consumer and at the level of a
company.

The concepts of the managerial economics helped us realize our various day to day
preferences in the terms of economics. For example the concept of cross price
elasticity and own price elasticity can be easily related to our shopping criteria in the
shopping mall.

The concept of Indifference curves and budget line can also be linked easily to our
way of behaviour as a consumer in the daily life. Also how the concept of Isoquant
and Isocosts is related to our manufacturing field was also made clear in the class.

Some of the learnings along with their practical applications that I could understand
are as follows:

The concept of Opportunity Cost (implicit costs) and Explicit costs was a
good learning which emphasizes on evaluating the options of allocating the
resource to. We learnt that the opportunity cost of deploying the resources to
one project must be evaluated; it might happen that the opportunity cost lost
from non-deployment to option 1 might be greater than the profits earned on
deployment of resources to option 2. These opportunity costs are sometimes
overlooked by the managers while their decision making. But we must realize
that we could have made more profits if we would have used the resources in
another way. This careful evaluation and effective use of concept of
opportunity cost evaluation will help us in a sound decision making process.

One interesting concept learned was of Production Cost, Brake-Even point

and shut down point related with the Costs of Production. Here we learned
how we can determine the cost implications on the future of the company, i.e.
depending on the Marginal Revenue and the Costs of production, we can
 decide if we can afford to remain in the market or should we shut the
business. The concept of Average Cost, Fixed cost and marginal cost were
also important learnings. The decisions such as outsourcing of a product to a
vendor or to manufacture that product within the plant is based very much
based on the careful evaluation of production costs and profits earned. The
company evaluated, which will be more profitable : whether to manufacture
the product inside the plant or outsource it to the vendor and minimize the
capital and labour costs; the option which gives more profit (without
compromising the quality) will be chosen.

One interesting concept was of the Revenue Management employed by

Airlines using 3rd degree Price discrimination. This concept helped us
understand that how the consumer surplus can be made Zero and the
revenue of the company be increased. Here we learnt about the price setting
as per the segments of the consumers and then high pricing for the last
minute bookings made by them. The same concept of price discrimination is
also utilized by the Pizza vendors/ Food Plaza when they ask us about our
Phone numbers. They actually get access to our history of purchasing
patterns and then recommend their products as per our purchasing power and
tastes.

The other interesting concept learned was of Point of Equilibrium, Price

Floor and Price Ceiling. We always came across the MSP (minimum support
price) of certain farmer products, but were never able to understand its true
function. But when we learnt the concept of Price floor, we understood how
the government uses the technique of price floor to support the farmers in the
market against the sharp fall in prices of their crops owing to the bumper
production.

Concepts of Shorn Run and Long run, Economies of Scale and

Diseconomies of Scale were also good ones. These will help us to
understand how the future plans are built around minimising the costs and
how to vary the capital and labour inputs in the short run and long run.

Regression analysis is one concept which I knew earlier but the course
added hugely to my earlier understanding of regression analysis. I knew how
we could deduce the equation of the output in terms of the input given, and
the explanatory power of the model, but I learnt during the course how to find
out the significance of each of the inputs using the p-values and how to
conclude on the overall validity of the model. I can make use of this concept
not only in economics but to every practical situation that seems fit.

These are only a few among the many learnings imparted during the classroom, and
we look forward to some other courses by you.