1. Instructor: Sana Ullah Khan
Course Outline
Business economics
Instructor: Sana Ullah Khan
Course code: BA 5408

2. Introduction Course instructor: Sana Ullah Khan
Course title: Business economics
Credit hours: 3 (3,0)
Course code: BA 5408
Course Objective
Understanding of micro and macroeconomics concepts
Business applications of economics

4. Week 01, 02 Introduction to Economics
What do economists study?
Scarcity and Choice
Trade offs
Efficiency
The opportunity cost
The Production Possibilities Frontier
Micro versus Macro Economics
Positive Versus Normative Analysis
Conclusion

5. Week 03 Micro Perspective of Economics
The market forces of Supply and Demand
Demand
Demand Schedule
Law of Demand
Demand Curve
Individual Demand and market demand
Shifts in the demand curve

6. Cont.. Supply Supply Schedule Law of Supply
The Supply schedule and the Supply curve
Individual Supply versus Market supply
Shifts in Supply
Market Equilibrium
Conclusion

7. Week 04 Supply and Demand: Government Regulations
Price Ceiling
government-imposed price control or limit on how high a price is charged for a product.
to protect consumers from conditions that could make necessary commodities unattainable
Price Floor
A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product
Effect on market Outcome
Conclusion

8. Week 05 Elasticity of demand and Supply
Price elasticity of demand
Factors Affecting Price Elasticity of Demand
Price Elasticity and Total Revenue ?
Price Elasticity of Supply
Factors Affecting Price Elasticity of Supply
Conclusion

9. Week 06 The Production Function and the Costs of Production
Efficient Method of Production
Production Function and Types of Costs
Short run cost analysis
Long run Costs
The Law of Diminishing Returns
Economies and Diseconomies of Scale
Conclusion

10. Week 07 Market Structures and Competitive Markets
The meaning of Competition
Demand for an Individual's Firms Product
Profit maximization and competitive firm's supply curve
Short-run Equilibrium of the Firm (Economic Profit, Loss, and Breakeven)
The supply curve in the competitive market.
Long-run equilibrium of the firm
Conclusion

11. Project/Report & Mid Term
Week 08
Mid Term
Week 09
Final Project/Report Progress & Presentations

12. Week 10 Monopoly and Monopolistic Competition
Demand Curve for the Monopolist
Profit Maximization/Equilibrium in Monopoly
Monopolistic Competition
Feature of the Market
The short-run equilibrium (profit or Loss)
The long-run equilibrium
Monopolistic versus perfect competition
Price Discrimination

13. Cont.. Oligopoly Characteristics of Oligopoly
Behavior of a Firm in an Oligopolistic
Market
Mutual Interdependence
Leadership pricing
Conclusion

14. Week 11, 12 Macro Perspective of Economics
A Frame Work Of Macro Economics
Evolution of Macro Economics
Scope of Macro Economics
Integration of Micro and Macro Economics
Separate identity of Micro and Macro Economics
Macro Economics Variables and their Functional Relationship
Economic Model, its Derivation and its Construction
Macro-Economic problems
Conclusion

15. Week 13 Assessing the Economy’s Performance
Concepts of National Income
Circular flow of National Income
Measurement of National Income
Production Approach
Income Approach
Expenditure Approach
Conclusion

16. Week 14 Issues Of Macro Economics
Unemployment
Types of unemployment
Full employment level
Economic and non-economic cost of unemployment
Inflation
Meaning and measurement of inflation
Types of inflation
Effects of inflation
Conclusion

17. Week 15
Presentation/Project/Revision

18. Readings & Assesments Core texts Additional reading Assessment Method
Principles of economics, N. Gregory Mankiw
Additional reading
Managerial economics and business strategy, Michael.R.Baye
Assessment Method
5 Quizzes %
5 Assignment %
Class participation %
Mid Term %
Project/Report + Presentation 15%
Final Exam %

19. Introduction to Business economics - I
Lecture 1
Introduction to Business economics - I
Instructor: Sana Ullah Khan
Course code: BA 5408

20. Introduction Introduction to Business economics
Major Topics to be covered
Introduction to Business economics
Market forces of supply and demand
Elasticity
The theory of consumer choice
The Costs of Production
Firms in Competitive Markets
Monopoly
Monopolistic Competition

21. Introduction Measuring a Nation’s Income Production and Growth
Saving investment and financial system
Unemployment
Unemployment and Inflation
Money and Inflation
Open economy
Aggregate demand and aggregate supply
Poverty
Economy of Pakistan

22. Lecture Outline Introduction to Economics/ definitions
Ten principles of economics
Why Manager needs to Study economics

23. Introduction Evolution of Economics
In old days people used the word “ oikonomos” for the management of house affairs.
Development of civilization extended oikonomos to frontiers of the country and resulted it in becoming “political economy”, which dealt with various economic affairs of the country.
1770 industrial revolution gave rise to problems like housing, transport, unemployment which extended political economy to “economics”.

24. Cont.. The definition of economics evolved through three stages.
Definitions of economics
The definition of economics evolved through three stages.
Definition of the Classical school of thought led by Adam Smith
Definition of the Neo Classical school of thought led by Alfred Marshall
Definition of the Modern school of thought led by Lionel Robbins

25. Introduction
Definition of the Classical school of thought led by Adam Smith
In 1776 Adam Smith defined economics as a Science of Wealth.
He discussed wealth from four different aspects
Production of wealth: Goods and services produced with a combination of land, labor, capital and organization.
Exchange of wealth: Enables society to satisfy multiple wants.
Distribution of wealth: Everybody gets everything produced in the country
Consumption of wealth: Utility of goods and service for satisfaction.
Criticism
It could make society materialistic

26. Introduction
2. Definition of the Neo Classical school of thought led by Alfred Marshall
Dr. Alfred Marshall’s in 1798 defined economics as
“Economics is a science which studies human behavior in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of material requisites of well being.”

27. Cont..
Criticism
It limits the scope of economics as it leaves out non material requisites of well being.
Material requisites which do not promote welfare are excluded e.g. drugs, cigarettes etc.
Welfare is not a measurable concept.
Problems in policy making as it creates a problem of liking and disliking.

28. Introduction
3. Definition of the Modern school of thought led by Lionel Robbins
Robbins's Defined economics as
“Economics is a science which studies human behavior as a relationship between multiple ends and scarce means which have alternative uses.”

29. Cont.. Comprehensive Extension of economics scope to services
Merits
Comprehensive
Extension of economics scope to services
Analytical in nature which helps in problem resolving.
Demerits
He tried to make economics as pure science whereas its is a social science.
There is no touch of morality.
He says resources are limited and does not explain the increase in limited resources.

30. Introduction A household and an economy face many decisions:
Who will work?
What goods and how many of them should be produced?
What resources should be used in production?
At what price should the goods be sold?
Society and Scarce Resources:
The management of society’s resources is important because resources are scarce.
Scarcity. . . means that society has limited resources and therefore cannot produce all the goods and services people wish to have.

31. Cont..
Economics is the study of how society manages its scarce resources.
Types of economics
Microeconomics focuses on the individual parts of the economy.
How households and firms make decisions and how they interact in specific markets
Macroeconomics looks at the economy as a whole.
Economy-wide phenomena, including inflation, unemployment, and economic growth

32. Ten principles of economics
How people make decisions.
People face tradeoffs.
The cost of something is what you give up to get it.
Rational people think at the margin.
People respond to incentives.
How people interact with each other.
Trade can make everyone better off.
Markets are usually a good way to organize economic activity.
Governments can sometimes improve economic outcomes.

33. Cont…
The forces and trends that affect how the economy as a whole works.
The standard of living depends on a country’s production.
Prices rise when the government prints too much money.
Society faces a short-run tradeoff between inflation and unemployment.

34. Ten principles of economics
Principle #1: People Face Tradeoffs.
To get one thing, we usually have to give up another thing.
Food v. clothing
Leisure time v. work
Efficiency v. equity
Making decisions requires trading off one goal against another.
Efficiency v. Equity
Efficiency means society gets the most that it can from its scarce resources.
Equity means the benefits of those resources are distributed fairly among the members of society

35. Ten principles of economics
Principle #2: The Cost of Something Is What You Give Up to Get It.
Decisions require comparing costs and benefits of alternatives.
Whether to go to college or to work?
Whether to study or go out for shopping?
Whether to go to class or sleep in?
The opportunity cost of an item is what you give up to obtain that item.

36. Ten principles of economics
Principle #3: Rational People Think at the Margin.
Marginal changes are small, incremental adjustments to an existing plan of action.
People make decisions by comparing costs and benefits at the margin.

37. Ten principles of economics
Principle #4: People Respond to Incentives.
Marginal changes in costs or benefits motivate people to respond.
The decision to choose one alternative over another occurs when that alternative’s marginal benefits exceed its marginal costs!

38. Ten principles of economics
Principle #5: Trade Can Make Everyone Better Off.
People gain from their ability to trade with one another.
Competition results in gains from trading.
Trade allows people to specialize in what they do best.

39. Ten principles of economics
Principle #6: Markets Are Usually a Good Way to Organize Economic Activity.
A market economy is an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services.
Households decide what to buy and who to work for.
Firms decide who to hire and what to produce

40. Ten principles of economics
Principle #7: Governments Can Sometimes Improve Market Outcomes.
Market failure occurs when the market fails to allocate resources efficiently.
When the market fails (breaks down) government can intervene to promote efficiency and equity.
Market failure may be caused by
an externality, which is the impact of one person or firm’s actions on the well-being of a bystander.
market power, which is the ability of a single person or firm to unduly influence market prices.

41. Ten principles of economics
Principle #8: The Standard of Living Depends on a Country’s Production.
Standard of living may be measured in different ways:
By comparing personal incomes.
By comparing the total market value of a nation’s production.
Almost all variations in living standards are explained by differences in countries’ productivities.

42. Ten principles of economics
Productivity is the amount of goods and services produced from each hour of a worker’s time.
Principle #9: Prices Rise When the Government Prints Too Much Money.
Inflation is an increase in the overall level of prices in the economy.
One cause of inflation is the growth in the quantity of money.
When the government creates large quantities of money, the value of the money falls.

43. Ten principles of economics
Principle #10: Society Faces a Short-run Tradeoff Between Inflation and Unemployment.
The Phillips Curve illustrates the tradeoff between inflation and unemployment:
It’s a short-run tradeoff!

44. Why managers need to study economics?
Informed and rational decision making
Better policy making
Enhancement of analytical skills
Not limited to profit-making firms and organizations
Optimum utilization of scarce resources

45. Business economics
Deals with the decision making and forward planning in uncertainty and integrates economic theory with business practice for the purpose of facilitating decision-making and forward planning by management.

46. Aspects of application
Use of optimization techniques to improve organizational decisions
Consideration of individual consumer choice to understand individual and market demand decisions and to forecast demand
Analyze cost and supply structure to understand supply decisions
Understanding markets
Understanding external factors like unemployment, inflation

47. Assignment Brief Introduction
Reasons behind choosing your Area of Specialization
Your Background in Economics (Courses studied)
Summarize what you know about Micro and Macro Economics
Your Perception about Business Economics
Your Expectation about the Course
“Business Economics”

48. The End

49. References
N. Gregory Mankiw (2006). Principles of Economics (4th ed.). South-Western College Pub. ISBN