Micro economics - I
Micro economic theory presents some of the basic analytical techniques or tools of analysis
of economics. It has been one of the most important courses in all economics business curricula.
This Course is designed to provide basic understanding of the behavior of individual
economic agents – Consumer, Producer. It will introduce the students the basic ideas and tools that
will be utilized throughout I the other courses of the degree programme.
Module I: Introduction to Micro Eonomics – Nature and scope of micro economics –
Microeconomic models and methodology – Positive and normative analysis -
induction and deduction, Value judgements.
Ref: Dominic Salvatore Micro Economics
Module II : Price Determination in a Competitive Market - Demand, supply and equilibrium
- Market demand curve –market supply curve – Change in Market Equilibrium –
Functions of prices - changes in demand and supply – Extention and contraction in
demand - Increase and Decrease in demand - Elasticity of demand and supply - Price
Elasticity of demand – Point and Arc method – Price elasticity and total expenditure
– Factors determining price elasticity - TR, MR and price Elasticity – Income
elasticity and its interpretation- Cross elasticity - substitutes and complementary
goods
Assignment/Seminar Topic-
1. Algebriac Explanation to market Equilibrium
2. Give estimated price income and cross elasticities for selected commodities and indicate
from the price elasticities whether demand is elastic or inelastic, from the income elasticity
whether the commodity is a luxury, a necessity or an inferior good.
Ref: 1. Dominic Salvatore – Schaum‘s outline series, Microeconomic Theory
2. Watson and Getz -Price Theory and its Uses
Module III: Theory of consumer behavior – Utility - Cardinal Versus Ordinal utility –
Consumer Equilibrium under cardinal utility - Consumer behavior under ordinal
utility - assumptions – Indifference curve - properties - MRS – Equilibrium of the
consumer under ordinal utility – Budget constraints - Budget line - Income effect -
Engel curve - Normal good; inferior good – Consumer‘s response to price changes -
Price effect and utility maximization – Derivation of individual demand curve for
normal good – Decomposition of Price effect into income effect and substitution
effect – Hicksian and Slutsky‘s methods – Normal, inferior and Giffen goods –
Application of Indifference Curves - Theory of Revealed Preference – Revealed
Preference axiom - Consumer surplus - Marshall and Hicks.
Assignment/Seminar TopicEvaluation
of alternate Government policies by using indifference curve analysis
Ref: Koutsoyiannis . A Modrern Micro Economics
Module IV: Theory of Production –Production Function-short run versus long run production
function – TP, AP, MP and their interrelationships - Production with one variable
input - Law of variable proportions - Production with two variable input - Returns to
scale - Iso-quants - properties - MRTS – Elasticity of substitution - Isocost line –
Least cost input combination - Producer‘s equilibrium - Expansion path and long run
cost curves – Cobb-Douglas production function (concept only)
Assignment/Seminar Topic: Graphical presentation of the Returns to scale for a
homogeneous production function.
Ref: 1. Dominic Salvatore - Micro Economics
2. Koutsoyiannis . A, Modrern Micro Economics, Page-79.
Additional Readings:
1. Robert .S Pindyck and Daniel L. Rubinfeld (2009)- Microeconomics seventh edition,
Pearson Education
2. H.R Varian Intermediate Microeconomics- A Modern Approach.
3. Walter Nicholson and Christopher Snyder (2010 )- Theory and applications of intermediate
microeconomics‘ 11th edition, Souht Western, Cengage learning
N. B: Seminar/ Assignment Topics are for internal evaluation only
Micro economics - II
This part of the syllabus is designed to introduce fundamental market concepts and
structures. The objective of the course is to apply the principles Micro economic analysis to the
decision making of firms and market.
Module I: Theory of Costs
Explicit and implicit costs, opportunity cost, private cost, social cost, economic cost,
accounting cost, sunk cost, fixed and variable cost, marginal and average cost -Short
run and Long run cost curves - Modern theory of costs - Short- run costs - AFC,
AVC, ATC – Longrun L shaped cost curves.
Seminar/assignment topic: Traditional theory of costs - Cost concepts- Geometry of unit cost
curves -relation between AFC, AVC, AC and MC graphically.
Ref: 1. Koutsoyiannis. A , ‗Modern Microeconomics‘, Chapter – 4
2. Dominik Salvatore, ‗Microeconomic Theory-Schaums outline series‘
Module II: Market structure: Perfect Competiiton
Perfect competition –chareteristics – Price determination in the market period - Short
run Equilibrium – shut down point - Longrun equilibrium of a firm and industry –
Constant, increasing and decreasing cost industries – Welfare effects of goveremnt
intervention – Impact of a tax or subsidy.
Module III: Monopoly
Monopoly – Sources of monopoly – AR and MR curve of a monopolist - Short run
and Long run equilibrium – Supply curve of a monopolist – The multiplant firm –
Monopoly power – measuring monopoly power – Lerner Index - social cost of
monopoly – Regulation of monopoly - Price discrimination – first degree, second
degree and third degree – International price discrimination and dumping –Two part
tariff, tying and bundling – Peakload pricing - Monopsony – Bilateral monopoly.
Seminar/assignment topic: Some applications of market structure, Efficiency
and Regulation
Ref: 1. Koutsoyiannis, ‗A Modern Microeconomics‘, Chapter 5, 6, 7
2. Watson and Getz, ‗Price Theory and its uses‘
3. Dominik Salvatore, ‗Principles of Microeconomics‘
Module IV: Monopolistic Competition and Oligopoly
Monopolistic competition and Oligopoly – Features of monopolistic competetion –
Short run and long run equilibrium - Product differentiation and selling costs –
Oligopoly - Charecteristics – Collusive versus non-collusive oligopoly – Cournot
model – Kinked demand curve model - Cartel and price leadership
Ref: 1. Koutsoyiannis, ‗A Modern Microeconomics‘, Chapter 5, 6, 7
2. Watson and Getz, ‗Price Theory and its uses‘
3. Dominik Salvatore, ‗Principles of Microeconomics‘
Module V: Pricing and Employment of Inputs
Marginal Productivity theory of input demand – Competitive factor markets -
Demand curve of the firm for one variable input –Demand curve of the firm for
several variable inputs - Market demand curve for an input - Supply of inputs to a
firm – The market supply of inputs – Equilibrium in a competitive factor market –
Factor market with monopoly power – Factor market with monopsony power.
Ref: 1. Koutsoyiannis. A, ‗Modern Microeconomics‘
2. Dominik Salvatore, ‗Micro economic Theory‘, Schaums Outline series,
Chapter - 13
Additional Readings:
1. Robert .S Pindyck and Daniel L. Rubinfeld (2009)- Microeconomics seventh edition,
Pearson Education
2. H.R Varian Intermediate Microeconomics- A Modern Approach.
3. Walter Nicholson and Christopher Snyder (2010 )- Theory and applications of intermediate
microeconomics‘ 11th edition, Souht Western, Cengage learning
N. B: Seminar/ Assignment Topics are for internal evaluation only
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