MICROECONOMIC THEORY - I

Paper Code: 
ECO 121
Credits: 
4
Contact Hours: 
60.00
Max. Marks: 
100.00
Objective: 
  1. To acquaint the students with the optimization behaviour of consumers, particularly underrisk and uncertainty and asymmetric information.
  2. To help students understand optimizing behaviour of a firm and acquaint them with the use of the concepts of economies of scale, economies of scope and learning curve.
  3. To help students explain the determination of price and output under perfect competition and the effects of various taxes under perfect competition.

 

12.00
Unit I: 
Theory of Consumer Behaviour-I

Cardinal Utility Analysis; Indifference Curve Analysis, Goods, Bads and Neutrals, Consumer’s Equilibrium, Corner Solution, Slutsky Equation-Price, Income and Substitution Effects (Normal, Inferior and Giffen goods), ICC Curve, PCC Curve, Demand Curve- Ordinary and Compensated, Engel Curve, Elasticity of demand.

12.00
Unit II: 
Theory of Consumer Behaviour-II

Network Externalities- Bandwagon, Snob and Veblen effects, Consumer Surplus- Marshall’s Measurement, Measurement of Consumer Surplus through Indifference Curve; Revealed Preference Hypothesis; Analysis of consumer behavior under risk and uncertainty; Asymmetric information, Behavioral Economics.

12.00
Unit III: 
Theory of Production

Production function – short run and long run; Law of variable proportions Isoquants and Isocost lines;  Optimum Factor Combination, Expansion Path, Ridge Lines, returns to scale; Cobb-Douglasproduction function, Elasticity of Substitution, Euler's theorem, Technical Progress-Capital Deepening and Labour Deepening.

12.00
Unit IV: 
Theory of Cost

Cost Concepts, Short run and long run cost curves; Modern Theory of Cost, Economies of scale; Economies of Scope and Learning curveanalysis.

12.00
Unit V: 
Price and Output Determination under Perfect Competition

Short run and long run equilibrium of the firm and industry, increasing, decreasing and constant cost industry, effects of taxes under perfect competition.

Essential Readings: 
  1. Koutsoyiannis, A., Modern Microeconomics, Macmillan,  2ndEdition, 2008. .

 

  1. Pindyck, Robert S., Rubinfeld, Daniel L. and Mehta, Prem L., Microeconomics, Pearson Education, 2017.

 

  1. Varian, Hal R.,Intermediate Microeconomics – A Modern Approach, W.W. Norton, 8th ed., 2014.

 

  1. Salvatore, Dominick, Microeconomics: Theory and Application, Oxford University Press, 2008.

 

References: 
  1. Green, H., Consumer Theory, Penguin, 1972.
  2. Shephard, R. W., Cost and Production Functions, Princeton University Press, 1953.
  3. Marshall, A., Principles of Economics, Macmillan, 1926.
  4. Knight, Frank H., Risk, Uncertainty aand Profit, London School Reprints of Scarce, Works, No. 16, 1933.
  5. Samuelson, P. A., Foundations of Economic Analysis, Harvard University Press, 1983

 

Academic Session: 
2022-23
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