Mathematical Economics-I

Paper Code: 
ECO 513
Credits: 
3
Contact Hours: 
45.00
Max. Marks: 
100.00
Objective: 

1.      To apply mathematical techniques to consumer behavior.

2.      To apply mathematical techniques to the theory of firms.

3.      To understand the Price and Output Determination under Perfect Competition mathematically.

9.00
Unit I: 
Theory of Consumer Behaviour-I
  • Nature of the utility function, properties of indifference curves, Rate of commodity substitution;
  • Maximization of Utility ;
  • Derivation of ordinary and Compensated Demand Functions.
9.00
Unit II: 
Theory of Consumer Behaviour-II
  •          Price and Income Elasticity of demand; nature of goods
  •          Income and Leisure-derivation of labour supply function and its properties ;
  •         The Slutsky Equation- Derivation for two commodity case, its elasticity form, Direct and Cross effects, Substitutes and Complements.
9.00
Unit III: 
Theory of Firm-I

(All the concepts covered under unit III and unit IV shall be illustrated with the help of Cobb-Douglas production function only).

  • Nature of  the production function, isoquants and isocost line;
  •  Optimizing Behaviour- constrained output maximization, constrained cost minimization and profit maximization;
  •  Elasticity of substitution.
9.00
Unit IV: 
Theory of Firm-II
  •    Homogeneous Production Functions-Properties, Euler’s theorem, Linearly homogeneous production function as a special case;
  •   Properties of Cobb-Douglas production Function.
9.00
Unit V: 
Price and Output Determination under Perfect Competition
  •  Perfect Competition:  short run and long run equilibrium, derivation of supply function, effects of taxes,
  •  Existence and uniqueness of equilibrium, Stability of equilibrium, Static stability, dynamic stability- Lagged adjustment- Cobweb model.
Essential Readings: 

1.      Henderson, J.M. and Quandt, R. E.,  Microeconomic Theory: A Mathematical Approach, McGraw Hill, 1980.

2.      Chiang, A. C., Wainwright, K.,  Fundamental Methods of Mathematical Economics, McGraw Hill, 4th Edition, 2005.

References: 

1.      Mehta, B.C. and Madnani, GMK, Mathematics for Economists, Sultan Chand & Sons, 2008.

2.      Mehta, B.C., Mathematical Economics: Microeconomic Models, Sultan Chand & Sons. 

Academic Session: 
2022-23
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