Introduction

Learning Objectives: What is Managerial Economics? Why should we care about learning economics? How do economic concepts help run a business?

Economics is everywhere! We just need to pay attention to see economics behind every human decision, action, and reaction. Think like an economist. Example: Dynamic Ticket Pricing at Indian Railways What is the economics behind dynamic ticket pricing?

Resources are scarce Scarce resources need to be optimally allocated. Optimization means maximizing or minimizing some objective subject to some constraints. Example: The Airbus Beluga What determines whether Airbus produces the Beluga or not? Every economic decision comes with a trade off. Example: Former Tobacco Fields Now Grow Chickpeas To Serve America's Growing Hummus Addiction

Opportunity Cost Opportunity cost of a resource is the sum of accounting cost and the cost of giving up the next best alternative use of the resource. Example: Dynamic Ticket Pricing at Indian Railways What is the opportunity cost of one unoccupied seat on a train?

Economic Agents An economy is made of economic agents. Who are economic agents? Producers Consumers Government Each and every economic agent affects and gets affected by actions of other economic agents. Example: Who is/are the economic agent(s) in the movie Cast Away?

Incentives Human decisions are governed by incentives. Example: The Wu-Tang Clan and The World's Most Exclusive Album What is the incentive for the band to make only one copy of the album?

Decision-making at the margin Economic agents take decisions in order to equate the marginal benefit (MB) to marginal cost (MC) Example: How does a tea stall owner decide whether to produce one more cup of tea or not?

Externalities When an economic activity creates benefits or costs for economic agents who are not part of that activity Example: Judge Orders California Sriracha Factory to Halt Odor- Making Operations Is this a positive or negative externality?

How to Develop an Economics Project Define the objective of the study What is the problem you are trying to address Select the methods How will you solve/analyze the problem? Find information/data sources Where will you get the data/information to be used to solve/analyze the problem? What is the outcome of your study? What are the results of the exercise? Have you found a solution? What are the limitations of your study?