Managerial Economics Essay

1) The grab of peer slight variable with respect to other among two presumption decimal points. It is used when thither is no world-wide exploit to define the relationship of the two variables. Arc snapshot is as well as defined as the e lowesticity between two points on a curve. The P arc elasticity of Q is reckon asThe per centage is calculated variedly from the normal manner of percent change. This percent change uses the amount (or midpoint) of the points, in lieu of the original point as the base.2) Definition of constabulary of Diminishing Marginal Re handlesA fairness of economics stating that, as the bend of new employees sum ups, the marginal crop of an supererogatory employee bequeath at approximately(prenominal) point be less than the marginal product of the precedent employee.The right of diminishing marginal returns direction that the productivity of avariable stimulation declines as more is used in short-run employment, holding oneness or mo re infixs fixed. This law has a direct bearing on market supply, the supply outlay, and the law of supply. If the productivity of a variable input declines, then more is needed to produce a given measurement of output, which means the constitute of production increases, and a higher supply wrong is needed. The direct relation between scathe and quantity produced is the essence of the law of supply.An economic theory that states as additional inputs argon put into production, the additional return will be in successively sm onlyer increments. This to a lower placesurface be due to crowding, adding less appropriate resources or increasing inputs of dismantle quality.In More Laymen TermsAs the saying goes, Too umpteen Cooks Spoil the Broth, in any production there is a point of diminishing returns where just adding more inputs will not give the corresponding income as it once did. Although many industrial firms strive to reach scale, where their size gives them a cost adva ntage at higher production levels, no matter what exertion a firm finds itself there will everlastingly be a point where the additional gain from added input is reduced.3) The prisoners plight is a canonical example of a bet analyzed in risque theory that shows why two individuals mogul not cooperate, even if it appears that it is in their best hobby to do so. It was before framed by Merrill Flood and Melvin Dresher working at RAND in 1950. Albert W. use up formalized the game with prison sentence payoffs and gave it the prisoners quandary name (Poundstone, 1992). A classic example of the prisoners dilemma (PD) is move overed as fol diminisheds devil men argon arrested, but the police do not possess enough info for a conviction. Following the breakup of the two men, the police offer both a similar bargainif one testifies against his partner (defects/ buy ats), and the other remains silent (cooperates/assists), the betrayer goes dispatch and the cooperator receives the f ull one-year sentence. If both remain silent, both are sentenced to only one month in jail for a mild charge. Ifeach rats out the other, each receives a three-month sentence. Each prisoner mustiness choose either to betray or remain silent the finding of each is kept quiet. What should they do?If it is supposed here that each impostor is only concerned with lessening his time in jail, the game becomes a non-zero sum game where the two players whitethorn either assist or betray the other. In the game, the sole worry of the prisoners seems to be increasing his consume reward. The interesting symmetry of this problem is that the logical conclusion leads both to betray the other, even though their individual prize would be greater if they cooperated.In the regular version of this game, collaboration is dominated by betraying, and as a head, the only possible outcome of the game is for both prisoners to betray the other. unheeding of what the other prisoner chooses, one will alwa ys gain a greater payoff by betraying the other. Because betraying is always more beneficial than cooperating, all objective prisoners would seemingly betray the other.In the extended form game, the game is played everywhere and over, and consequently, both prisoners continuously apply an opportunity to punish the other for the previous finding. If the number of times the game will be played is known, the finite aspect of the game means that by regressive induction, the two prisoners will betray each other repeatedly.4) Third distributor point inequality involves charging different prices to different pieces of customers. This method of price discrimination is authentically an imperfect variation of the perfect type represented by first-year degree price discrimination. In this method different segments of customers are set and each segment is charged price base on what price is most profitable for the caller-up in each segment. The most jet way of segmentation for this type of price discrimination is by geographical location. A very prominent example of this type price discrimination is charges for operations by surgeons. For the resembling type of operations surgeons and hospitals charge different fees depending on the type of hospital room and other facilities that the patient chooses during hospital care foroperation. Other common forms of much(prenominal) price discrimination include discounts much(prenominal) as those for students or senior citizens.SECTION BCASE let 11) Demand theory indicates that the determinants of consumption are income (I), the price of the correct in question ( pi ), the prices of other goods ( po ) and other variables such as tastes i i q q ( i o I, p , p , other variables).Consider the case of an illicit commodity such as marijuana. The consumption of marijuana involves risks of fines, in some cases imprisonment and, possibly, other be associated with the shame of being caught. Consequently, the price of marij uana in its demand function ( p ) m should be interpreted as being do up of the conventional money cost ( p ) m summing up the pass judgment other costs per unit2) Legalization of marijuana would go across the criminal sanctions and penalties associated with its consumption. As this would decrease the full price, consumption would be expected to rise. Marijuana consumption is significantly higher amongst males than females 60 percent of all males have consumed it, compared to 46 percent of all females. intake of marijuana is estimated to increase by about 4 percent if it were legalised and by about 11 percent following both legalisation and a 50-percentfall in its price. harm is a significant determinant of marijuana consumption. Whilst marijuana consumption is estimated to be price inelastic, estimates of most of the price elasticities are significantly different from zero.Two types of price elasticities of demand for marijuana were estimated, gross and mesh topology. The g ross price elasticity includes the effects of both legalisation and a price change, while the net version excludes the legalisation effect. The price elasticity of demand for marijuana differs significantly with the type of consumer. For more frequent users (daily, weekly and monthly), gross and net price elasticities are estimated to be-.6 and -.4, respectively. Occasional smokers having a gross price elasticity of about -.3 and net elasticity of about -.1. Regarding those who are no weeklong users, they have gross and net price elasticities close to zero. For a given type of consumer, males and females share the same elasticity value.CASE LET 21) In my opinion Yes, the Indian companies are running a major(ip) risk by not paying attention to cost cutting. To embellish Comparing major Indian companies in key industries with their globose competitors shows that Indian companies are running a major risk. They suffer from a primal bias for growth. The problem is most look more equ al Essar than Reliance. fleck they love the sweet of growth, they are unwilling to face the sour of productivity improvement. Nowhere is this more amply borne out than in the consumer goods application where the Indian giant Hindustan Lever has consolidated to grow at over 50 per cent while its press productivity declined by approximately 6 per cent per annum in the same period. Its strongest competitor, Nirma, too grew at over 25 per cent per annum in revenues but maintained its labour productivity comparatively stable. Unfortunately, however, its return on enceinte employed (ROCE) suffered by over 17 per cent.In contrast, Coca Cola, worldwide, grew at around 7 per cent, improved its labour productivity by 20 per cent and its return on capital employed by 6.7 per cent. The story is very similar in the information technology orbit where Infosys, NIIT and HCL achieve rates of growth of over 50 per cent which compares favorably with the worlds best companies that grew at around 30 per cent between 1994-95. NIIT, for example, strongly believes that growth is an impetus in itself. Its focus on growth has helped it double revenues every two years. Sustaining positiveness in the face of such expansion is an extremely challenging travail What makes this even worse is the Indian companies barely manage to cover their cost of capital, while their competitors worldwide such as Glaxo and Pfizer earn an average ROCE of 65 per cent. In the Indian textile industry, Arvind Mills was once the shining star. kindred Reliance, it had learnt to cook sweet and sour.Between 1994 and 1996, it grew at an average of 30 per cent per annum to become the worldslargest denim producer. At the same time, it also operated a tight ship, improving labour productivity by 20 per cent. Despite the excellent performance in the past, there are ideal signals for Arvinds future. The excess over the WACC is only 1.5 per cent, implying it barely manages to satisfy its investors expectations of return and does not really have a surplus to re-invest in the duty.Apparently, investors also think so, for Arvinds stock price has been falling since Q4 1994 contempt such excellent results and, at the end of the first quarter of 1998, is less than Rs 70 compared to Rs 170 at the end of 1994. Unfortunately, Arvinds deteriorating financial returns over the last few years is also typical of the Indian textile industry. The top three Indian companies actually showed a decline in their return ratios in contrast to the international majors.2 ) Fast travel consumer goods will become a Rs 400,000-crore industry by 2020. A Booz & conjunction study finds out the trends that will shape its futureConsider this. The anti-ageing skin care category grew five times between 2007 and 2008. Its today the fastest- festering segment in the skincare market. Olay, Procter & Gambles premium anti-ageing skincare brand, captured 20 per cent of the market within a year of its launch in 2007 and toda y dominates it with 37 per cent share. Who could have idea of ready toleration for anti-ageing creams and lotions some ten years ago? For that matter, who could have thought Indian consumers would take oral hygiene so seriously?Mouth-rinsing seems to be select up as a habit mouthwash penetration is growing at 35 per cent a year. More so, who could have thought rural consumers would fall for shampoos? Rural penetration of shampoos increased to 46 per cent last year, way up from 16 per cent in 2001. Consumption patterns have evolved rapidly in the last five to ten years. The consumer is merchandise up to experience the new or what he hasnt. Hes looking for products with better functionality, quality, value, and so on. What he inevitably is fast acquire replaced with what he wantsCategories are evolving at a brisk pace in the market for the middle and lower-income segments. With their rising economic status, these consumers are shifting from need- to want-based products. For ins tance, consumers havemoved from toothpowders to toothpastes and are now also demanding mouthwash within the same category. The trend towards mass-customization of products will intensify with FMCG players profiling the buyer by age, region, person-to-person attributes, ethnic background and professional choices. Micro-segmentation will amplify the need for exceedingly customized market research so as to capture the specific needs of the consumer segment targeted, before the actual product design phase gets underway.3) Industies stupefying growth in value added as observed in the previous sub section is not accompanied by a proportionate rise in the level of relative productivity in price of the crosscountry analysis. The fragmented nature of Indian pharmaceutical sector characterized by the operation of a very large number of players, estimated to be about 10,000 units of which just 300 units are medium and large sized7, may be a reason for low level of productivity. The other authorized factor for low productivity can be due to the nature of technological activities in the sector, which tends to rely more on process than product development. Further, it may be that Indian companies are focusing at the low end of valuechains in the pharmaceuticals like producing generics than opting for branded products or supply bulk drugs to orbicular players than market formulations of their own.4) The Indian textile industry has been one of the foremost contributors to the countrys employment, exportings, and GDP. The industry has been rated as one of the key drivers of the Indian economy and a bold target of exports of $50 billion (currently its $22 billion) had been targeted by the year 2012 by the governance after the dismantling of the quota regime in 2005. However we are soundless far away from that target.Though now it can be blame on the worldwide recession, I think we need to do some soul searching as to was it anyways possible. Globally, the Indian ind ustry is recognized for its hawkish advantages, especially in the cotton segment. The government has set huge targets for the industry and expects to attract investments of about Rs 1.5 lakh crore during the eleventh Plan period. This would meet the export and national targets, while taking various initiatives like setting up textile parks, training centers, and made in India label promotion to global markets.The Indian textile industry is facing tough competition in the US, as exporters from smaller countries like Bangladesh are cornering the lucrative market at a winged pace, a FICCI study said. In addition to China, countries like Indonesia, Vietnam and Bangladesh have managed to perform better than India in the US market in 2009, the study said. Bangladesh, Indonesia and Vietnam managed to increase their share in the US textiles and apparel second in 2009 year on year at a faster rate than India.The Indian textile industry will no disbelieve survive and move along by the st rengths of its traditional position and domestic market. However, the growth envisaged and it being re-classified as sunshine industry over the last three years from a sunset industry may turn out to be a mythSection C1) A vision of the impact of fire trade can also be gleaned from Nobel Prize winning economist Paul Samuelson (1970) who confidently asserted that step down trade promotes a mutually profitable division of labour, greatly enhances the likely real national product of all nations, and makes possible higher standards of life-time all over the globe.It promotes a regional division of labor this means that some regions of the world (or countries) will specialize in certain things. They will specialize in areas where they have a comparative advantage.It enhances national production this means that countries will be able to produce more things if there is trade. That is because they focus on producing things they are good at and do not waste resources on things that the y are not good at.It allows higher standards of life because there is more production. If there is more production, there are more things available to be consumed.Another belief in the importance of free trade can be ascribed to itsperceived indirect effect on peace, security and the prevention of war. One of the first articulations of this is by Baron de Montesquieu, who musical composition in 1748, stated Peace is the natural effect of trade. Two nations who trading with each other become reciprocally dependent for if one has an interest in buying, the other has an interest in selling, and thus their union is founded on their mutual necessities. This theory of mutual interdependence has been explored in some flesh out by authors such as Keohane and Nye67 and is echoed in attempts to build and protect the mandates of global institutions seeking such co-operation. However few attempts are made to hint the results of policy activities on whole population of States, and as a resu lt the overtly negative impact on some groups, usually minorities and innate2) The Decision Trees, used to help with decision making in business ( and many other areas), are a form of diagrammatic analysis. They are used as a tool for helping managers to choose between several escapes of action. They provide an effective and clear structure for presenting options and within decision tree diagrams the probabilities and financial outcomes of these options can be measured. They also help to form a balanced picture of the risks and potential financial rewards associated with each possible course of action.In many business decision making situations chance (or probability) plays an all-important(prenominal) role, and the use of decision trees helps build probability into the decision making process. in writing(p) representation of a decision situation, normally found in discussions of decision-making under uncertainty or risk. It shows decision alternatives, states of nature, probab ilities attached to the state of nature, and conditional benefits and losses. The tree approach is most useful in a sequential decision situation. For example, assume XYZ Corporation wishes to introduce one of two products to the market this year. The probabilities and present values (PV) of projected cash inflows followA decision tree analyzing the two products followsBased on the expected net present value, the company should choose product A over product B.