Managerial Economics:- Indifference Curve, Giffen paradox, Budget line, Marginal rate of substitution

Indifference Curve (IC)
It is a curve showing the various combinations of two commodities that give equal level of satisfaction to the consumer.

Properties

• Indifference curves are always downward sloping
• They move from left to right
• Always two commodities are considered
• In order to have more of x commodity less of y is consumed
• IC are always convex to the origin
• The slope of the budget line determine the maximum satisfaction point
• Two IC never intersect each other

Budget line:-

It is the line showing the income of the consumer to be spend on the consumption of the two commodities. The income will be spend totally without having any surplus left.

Assumptions

• Rationality
• Utitilty is ordinal
• Diminishing marginal rate of substitution
• The total utility of the consumer depends on the quantities of the commodities consumed           u = f (q1+q2......qn)
• Consistency and transitivity of choice i.e. if A>B then B will never be preferred over A. Also  if A>Band B>C then A>C

Terminology

1. :-The Marginal rate of substitution:

2. Giffen Paradox:- When due to increase in the income of the consumer he moves on to more high valued product and leaves the consumption of the lower value product due to increase in his productivity capacity  eg:- coarse grains, Jowar etc

Special Types of indifference curves

Managerial Economics:- Demand, Utility, Consumer Equilibrium...

Demand :-It is the utility satisfying power of a commodity. Demand should always be equal to supply to determine the Equilibrium point.

• Law of demand:- The market demand is negatively related to the price. Demand curve has a negative slope.This economic principle describes something you already intuitively know -- if the price goes up, people buy less. The reverse is, of course, true -- if the price drops, people buy more. However, price is not the only determining factor. 
• Therefore, the law of demand is only true if all other determinants don't change. In economics, this is known as ceteris paribus. Therefore, the law of demand formally states that, ceteribus paribus, the quantity demanded for a good or service is inversely related to the price.
• The demand schedule is a table or formula that tells you how many units of a good or service will be demanded at the various prices.
• Demand Curve:- The graphical representation of the demand schedule through curve is demand curve.
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• Consumer behavior (CB):- The consumer is assumed to be rational. it can be measured by 2 methods(utility theory)
• Cardinal utility theory:-Consumers are rational.This type of utility is measurable(utils). Consent marginal utility of money. Diminishing marginal utility. The total utility of a basket of goods depends on qualities of individual commodities. u= f (x1,x2,.....xn).{u=utility=function of each as well as th successive units of the commodity consumed.}
• Criticism faced by utility concept:- How to measure utility? This is an unrealistic concept. It can not be used as measuring rod. Diminishing marginal utility is a psychological law.

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Consumer equlibrium :-

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CBSE NET Management topics from DEC 2015 paper 3 cont...Part 2

 Marginal analysis:- Marginal analysis is an important decision-making tool in the business world. Marginal analysis allows business owners to measure the additional benefits of one production activity versus its costs. This analysis can help an owner understand whether an activity is profitable and thus make a decision based on that information.
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Payoff Table :-A tool used for decision analysis which lists down all the pros and cons of any decision. It makes use of payoffs, and provides various combinations or alternatives, giving a better idea of the situation. Known as a payoff matrix .

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Patterns of product life cycle

A product can follow a pattern known as growth-slump-maturity pattern. This kind of pattern usually encounters a rapid growth in the beginning and after later sales decline with a stabilization at a certain level. One of the examples of such product group is kitchen appliances where the late adopters purchase a new product while the early adopters end up replacing their old appliances.

The cycle-recycle pattern usually starts with a period of growth which is followed by decline. Another phase of growth is triggered by promotion of the product which see a lesser growth as compared to the primary cycle. A typical example of this pattern can be seen in pharmaceutical industry where sales start declining the company gives the drug another push, which produces a second cycle.

Another common pattern is called scalloped pattern. Sales observe a succession of growth periods based on the discovery of new product characteristics, uses, or users. Nylon sales, for example, display a scalloped pattern because, over time, new and a new uses have been discovered -parachutes, hosiery, shirts, carpeting, etc.

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Servqual Model 

Definition: the SERVQUAL Model is an empiric model by Zeithaml, Parasuraman and Berry to compare service quality performance with customer service quality needs.
It is used to do a gap analysis of an organization's service quality performance against the service quality needs of its customers.
That's why it's also called the GAP model.
It takes into account the perceptions of customers of the relative importance of service attributes. This allows an organization to prioritize.
The main aspects of service quality are RATER: Reliability, Assurance, Tangibles, Empathy, and Responsiveness.

The 4 Gaps are :-

Management perception Gap

Specification Gap

Service Delivery Gap

Market Communication Gap

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ID,EGO, SUPER EGO

ID

The id is the primitive and instinctive component of personality. It consists of all the inherited (i.e. biological) components of personality present at birth, including the sex (life) instinct – Eros (which contains the libido), and the aggressive (death) instinct - Thanatos.

The id is the impulsive (and unconscious) part of our psyche which responds directly and immediately to the instincts.

EGO

The ego develops in order to mediate between the unrealistic id and the external real world. It is the decision making component of personality. Ideally the ego works by reason, whereas the id is chaotic and totally unreasonable.

The ego operates according to the reality principle, working out realistic ways of satisfying the id’s demands, often compromising or postponing satisfaction to avoid negative consequences of society. The ego considers social realities and norms, etiquette and rules in deciding how to behave.

SUPEREGO

The superego incorporates the values and morals of society which are learned from one's parents and others. It develops around the age of 3 – 5 during the phallic stage of psycho-sexual development.

The superego's function is to control the id's impulses, especially those which society forbids, such as sex and aggression. It also has the function of persuading the ego to turn to moralistic goals rather than simply realistic ones and to strive for perfection.

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CBSE NET Management topics from DEC 2015 paper 3 cont...

ECGC:-

         Export Credit Guarantee corporation ( established in 1957)

It provides export credit insurance support to Indian exporters and is controlled by ministry of commerce. 

What do they do ?

-It provides a range of credit risk insurance covers to exporters against loss in export of goods and services. It also offers guarantees to bank and financial institutions to enable exporters to obtain better facilities from them.

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NAFTA:-

           North American Free Trade Agreement ( established in 1994)

Members:- Canada, USA and Mexico

It enables free trade among the north American countries

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EPCG:-

Export Promotion Capital Goods

- It helps the importers and exporters to promote export related to machinery and machinery parts

-Other schemes MEIS:- Merchandise Export from India Scheme

                      SEIS;- Service Exports from India Scheme

-In order to promote domestic capital goods manufacturing industry, Specific Export Obligation under EPCG scheme, in case capital goods are procured from indigenous manufacturers, has been reduced from 90% to 75%

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Sunset Clause

-The Uruguay round provided 'Sunset' clause to control dumping

-In US, anti-dumping duties have traditionally stayed in force for years. The agreement introduces a sunset clause under which such duties are to be generally terminated after five years.

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ANOVA ( Analysis Of Variance) It is statistical method used to test differences between two or more means.

-The shape of 'F' distribution depends on the number of degrees of freedom in both the numerator and the denominator of the 'F' ratio

-In analysis of variance, sample sizes should be equal

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'P' value

-Use the P-value to determine whether the results are statistically significant.

- P-value are often used in hypothesis tests, where you either reject or fail to reject null hypothesis. when you do a hypothesis testes, the key piece of output to concentrate on is the P-value.

- A P-value ranges from 0 to 1. The P-value is a probability that measures the evidence against the null hypothesis. 

-Lower probabilities provide stronger evidence against the null hypothesis.

- If the P-value is less than or equal to you 'a' you reject null hypothesis.If the P-value is greater than 'a' you fail to reject null hypothesis. 

-Value of 0.05 is often used for 'a'.i.e. if the P-value is less than or equal to 0.05, reject null hypothesis.

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OC Curve:-

The operating characteric (OC) curve depicts the discriminatory power of an acceptance sampling plan. The OC curve plots the probabilities of accepting a lot versus the fraction defective. When the OC curve is plotted, the sampling risks are obvious.

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C chart :-

It is an attributes control chart used with data collected in sub-groups that are same size. C Charts shows how the process is measured by the number of non-conformities per item or group of items, changes over the time. Non-conformities are defects occurrences  found in a sampled subgroup. They can be described as any characteristics that is present but should not be present. e.g. scratch, dent, bubble, missing button.

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CBSE NET Management topics from DEC 2015 paper 3

UGC NET  Management topics  from DEC 2015 paper 3

Related party transaction:-(Q no. 71)

-There is a provision in he companies Act 2013, regarding related party transactions to ensure ethical standards in managerial decisions.

-Related party transaction is a business deal or arrangement between two  parties who are joined by special relationship prior to the deal. For eg. a business transaction between a major shareholder and the corporation.

- A related party is one on  whose advice, directions or instructions (except given in professional capacity) a director or manager is accustomed to act

-A related party can be a firm in which a director, manager or his relative is a partner

-A related party is a holding/subsidiary or associate company, subsidiary's subsidiary and such person as would be prescribed

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Corporate governance:(Q 70)

-Corporate governance:- broadly refers to the mechanisms, relations, and processes by which a corporation is controlled and is directed; involves balancing the many interests of the stakeholders of a corporation.

Basically we will talk about corporate governance under two different heads:-

(A) Corporate governance under companies Act

it talks about 

• Shareholder rights
• Disclosure and transparency requirements
• Responsibilities of board.(Directors responsibility statement,appointment of independent directors, audit committee and internal check)

(B) Corporate  Governance By SEBI. it looks after:-

• Clause 49- this clause was introduced in 2000 and further revised. It depicts the list of standards corporate governance which every listed company has to follow.
• Board of directors and independent directors
• Audit committees
• Subsidiary companies
• Disclosures
• Report of corporate governance
• Compliance 
• Appointment of women director

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Current MSME schemes

MSME(Micro small and medium enterprises)

1. PMEGP (Prime Minister Employment Generation Programme )
2. NMCP (National Manufacturer Competitiveness Programme )
3. ASPIRE :- to promote innovation and rural entrepreneurs through rural livelihood incubator, technology business incubators and funds 
4.  SFURTI (Scheme of Fund for Regeneration of Traditional Industries)
5. PCR (Performance Credit Rating Scheme
6. ATI ( Assistance to training institutions
7. MA (Marketing Assistance)
8. CLCSS (Credit Linked Capital Subsidiary Schemes)
9. CUY (Coir Udyami Yojna)
10. CVY(Coir Vikas Yojana)
11. MCY(Mahila Coir  Yojana)
12. CGTMSE ( Credit Guarantee fund Scheme Assistance MSEs) 
13. MSE-CDP:- Cluster Development programmes
14. Tool Rooms
15. IC (International Corporation)

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