Mathematical Economics - I

Paper Code: 
DECO 511A
Credits: 
6
Contact Hours: 
90.00
Max. Marks: 
100.00
Objective: 

1.      To apply mathematical techniques to consumer behaviour

2.      To apply mathematical techniques to the theory of firms

3.      To understand the price & output determination under Perfect Competition mathematically

18.00
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

                       Different types of utility functions

18.00
Unit II: 
Theory of Consumer Behaviour-II

·         Price, income and cross price elasticities of demand; nature of goods

·         Relationship between elasticity, MR and TR

·          Income and leisure-derivation of labour supply function and its properties

·         Slutsky Equation- Derivation for two commodity case, its elasticity form, Direct and Cross effects, Substitutes and Complements

18.00
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).

·         Production function – definition and nature

·         Isoquant – definition, slope and MRTS;  Isocost line

·         Optimizing behavior of firm- constrained output maximization, constrained cost minimization and profit maximization

·         Elasticity of substitution – definition and measurement 

18.00
Unit IV: 
Theory of Firm-II

·         Homogeneous Production Functions- definition and properties,

·         Linearly homogeneous production function

·          Euler’s theorem

·         Derivation of cost and input demand function from Cobb Douglas Production Function

·         Properties of Cobb-Douglas production Function

18.00
Unit V: 
Perfect Competition

·         Perfect Competition - characteristics

·         Short run and long run equilibrium of firm and industry

·         Derivation of supply function

·          Effects of various taxes ,

·         Equilibrium – definition, existence and uniqueness,

·         Stability of equilibrium- static stability and dynamic stability (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: