MICROECONOMICS – I

SYLLABUS

UNIT I

Introduction to Microeconomics : Problem of scarcity and choice – production possibility frontier – functions of an economic system – methods of formulating economic theories – deductive method and inductive method – economic models– types of microeconomic analysis – positive and normative analysis, statics, comparative statics, and dynamics – short run and long run analysis, partial and general equilibrium analysis – importance of the concept of the ‘margin’ in microeconomics – microeconomic policy goals – efficiency and equity.   Read Complete Note

UNIT II

Demand and Supply Analysis: Shifts of demand versus movements along a demand curve – shifts of supply versus movements along a supply curve – market equilibrium and impact of changes in demand and supply – dynamic demand and supply model: cobweb model – elasticity of demand – price elasticity of demand – determinants, methods of estimation – outlay method, point method, and arc method – income elasticity of demand and cross elasticity of demand – elasticity of supply – uses of elasticity – demand forecasting – objectives and methods of demand forecasting – seller’s view – concepts of revenue – TR, AR and MR – MR and price elasticity – break-even analysis.    Read Complete Note

UNIT III

Theory of Consumer Behaviour:  Consumer preferences and choice – cardinal utility and ordinal utility – law of diminishing marginal utility – consumer equilibrium under cardinal utility – derivation of demand curve – law of equimarginal utility – water-diamond paradox – criticisms of cardinal utility approach – indifference curve analysis – characteristics – MRS – budget line – consumer’s equilibrium – income effect and Engel curve, case of giffen goods – price effect and derivation of demand curve – splitting price effect into income effect and substitution effect:Hicksian and Slutsky’s approaches – criticisms of ordinal utility approach – revealed preference theorem – derivation of demand curve – distinction between weak and strong ordering – consumer’s surplus – Marshallian and Hicksian approaches.    Read Complete Note

UNIT IV

Theories of Production and Cost:  Production function – short run and long run production function – law of variable proportions– isoquants – properties – MRTS – ridgelines and economic regions of production– isocost lines – optimal input combination – producer’s equilibrium – expansion path – elasticity of factor substitution – laws of returns to scale economies and diseconomies of scale – empirical production function: Cobb-Douglas production function – properties – cost functions – cost concepts – explicit and implicit costs, economic and accounting costs, sunk cost, opportunity cost – traditional theory of costs – short run and long run analysis of costs – envelope curve – modern theory of cost – short run and long run- L-shaped and saucer-shaped cost curves.   Read Complete Note