Module 1

Discuss the various Micro Environmental facts that influence an individual firm/ Nature
of Microeconomics

Competitors:

The competitive environment consists of certain basic things which every firm has to take note
of. No company, howsoever large it may be, enjoys monopoly. In the original business world a
company encounters various forms of competition. The most common competition which a
company’s product now faces is from differentiated products of other companies

Customers:

According to Peter. F. Drucker, “There is only one valid definition of business purpose, that is to
create a customer.” The business enterprises aim to earn profit through serving the customer
demand. It now thinks more in terms of profitable sale rather than more sales volume for its sake.
Today marketing of a firm begins and also ends with the customers.

Suppliers:

Regarding the suppliers, the organisation can think of availing the required material or labour
according to its manufacturing programme. It can adopt such a purchase policy which gives
bargaining power to the organisation.

Public:

Literally word ‘public’ refers to people in general. According to Philip Kotler, “A public is any
group that has an actual or potential interest in or impact on a company’s ability to achieve its
objectives.” The environmentalists, consumer protection groups, media persons and local people
are some of the well-known examples of publics.

Marketing Intermediaries:

Market intermediaries are either individuals or business houses who come to the aid of the
company in promoting, selling and distributing the goods to the ultimate consumers. They are
Middlemen (wholesalers, retailers and agents), distributing agencies, market service agencies
and financial institutions. Most of the companies find, it is too difficult to reach the consumers.
In such a cases the agents and distribution firms help to reach the product to the consumer.

Workers and Their Union:

As per the production function theory, the labour gets more importance. He is also one of the
pillars of the company. The organised labours is highly secured their position compare to
unorganised workers So, the workers now prefer to join labour unions which invariably resort to
collective bargaining and thereby makes them less vulnerable to employer’s exploitation.
 How Business and Society is interdependent on each other? Discuss

Business
 
today is arguably the most dominant institution in the world. The
term “business”
refers here to any organization that is involved in the trade of goods, services, or both to
consumers for a profit. The most common forms of business ownership are:

 
Sole proprietorship, where the business is owned by one person and operates for profit.

 
Partnership, where the business is owned by two or more people.

 
Corporation, where the business has a separate legal personality from its owners. Corporations
can be either state-owned or owned by individuals and may operate either for profit or for non-
profit. A corporation is owned by its investors and shareholders, who elect a board of directors
for policy orientation and hire managerial team and workers for execution of its vision and
mission. A corporation can be either privately held by a small group of individuals, or publicly
held, with publicly traded shares listed on a stock exchange. Business, therefore, is an ongoing
activity. For example, businesses recruit workers, buy supplies, and borrow money; they also sell
products, and pay taxes. Business and society are highly interdependent
Society defined
Society, on the other hand, is a network of individuals, groups and organizations.
 
Society, in its broadest sense, refers to human beings and to the social structures they collectively
create. In a more specific sense, the term is used to refer to segments of humankind, such as
members of a particular community, nation, or interest group. As a set of organizations created
by humans, business is clearly a part of society. Business, therefore, is inextricable linked to
society.
The dynamic environment of business
One core argument is that the external environment of business is dynamic and ever changing.
Businesses and their stakeholders do not interact in a vacuum. On
 
the contrary, most companies operate in a swirl of social
ethical, global, political, ecological,
 
and technological change that produces both opportunities and threats.
Changing societal expectations
Everywhere around the world, society’s expectations of business are
changing. People increasingly expect business to be more responsible, believing companies
should pay close attention to social issues and act as good citizens in society. New public issues
constantly arise that require action. Increasingly, business is faced with the daunting task of
balancing its social, legal, and economic obligations, seeking to meet its commitments to
multiple stakeholders

1. What is macroeconomic policy? Explain objectives of macroeconomic Policy.

Macroeconomic Policy Objectives:

The macroeconomic policy objectives are the following:

(i) Full employment,

(ii) Performance of any government is judged in terms of goals of achieving full
employment and price stability. These two may be called the key indicators of health
of an economy. In other words, modern governments aim at reducing both
unemployment and inflation rates.
(iii) Price stability,
(iv) No longer the attainment of full employment is considered as a macroeconomic goal.
The emphasis has shifted to price stability. By price stability we must not mean an
unchanging price level over time. Not necessarily, price increase is unwelcome,
particularly if it is restricted within a reasonable limit. In other words, price fluc-
tuations of a larger degree are always unwelcome.

2. (iii) Economic growth,

3. Economic growth in a market economy is never steady. These economies experience ups
and downs in their performance. This objective became uppermost in the period
following the World War II (1939-45). Economists call such ups and downs in the
economic performance as trade cycle/business cycle. In the short run such fluctuations
may exhibit depressions or prosperity (boom).
4. (iv) Balance of payments equilibrium and exchange rate stability, and
5. From a macro- economic point of view, one can show that an international transaction
differs from domestic transaction in terms of (foreign) currency exchange. Over a period
of time, all countries aim at balanced flow of goods, services and assets into and out of
the country. Whenever this happens, total international monetary reserves are viewed as
stable.
6. (v) Social objectives.
7. Macroeconomic policy is also used to attain some social ends or social welfare. This
means that income distribution needs to be more fair and equitable. In a capitalist market-
based society some people get more than others. In order to ensure social justice,
policymakers use macroeconomic policy instruments.

Module 2

Explain the difference between cardinal and ordinal utility

Comparison Chart
 Basis for
Cardinal Utility Ordinal Utility
Comparison

Cardinal utility is the utility wherein the Ordinal utility states that the satisfaction
satisfaction derived by the consumers which a consumer derives from the
Meaning
from the consumption of good or service consumption of good or service cannot
can be expressed numerically. be expressed numerical units.

Approach Quantitative Qualitative

Realistic Less More

Measurement Utils Ranks

Analysis Marginal Utility Analysis Indifference Curve Analysis

Promoted by Classical and Neo-classical Economists Modern Economists

1. Explain the objectives of utility analysis?

The objectives are to find the following answers

What guides these individual consumer decisions? Why do consumers purchasesome

commodities and not others? How do they decide how much to purchase of eachcommodity?
What is the aim of a rational consumer in spending income? These are someof the important
questions to which we seek answers in this chapter. The theory of con-sumer behavior and
choice is thefirst step in the derivation of the market demand curve,the importance of which was
clearly demonstrated in Chapter 2.We begin the study of the economic behavior of the consumer
by examining tastes.Consumers’tastes can be related to utility concepts or indifference curves.

Because the consumer’s wants are unlimited or, in any event, exceed his or herability to satisfy
them all, it is important that the consumer spend income so as to max-imize satisfaction. Thus, a
model is provided to illustrate and predict how a rationalconsumer maximizes satisfaction, given
his or her tastes (indifference curves) and theconstraints that the consumer faces (the budget
line). The “At the Frontier”section pre-sents a different way to examine consumer tastes and
derive a consumer’s indifferencecurves.