BCH-104-(G1): MICRO ECONOMICS

Course Objectives:
The purpose of this paper is to make the students aware about importance of
production and cost meaning of competition and how to ensure that demand fulfills
supply.

Expected Outcomes:
The student must understand the importance of economics at micro level and must
understand the importance of demand and supply.

UNIT –1-Basics of Demand and Supply

The concept of demand and demand function - Derivation of Individual demand
curve and Market demand curve– Shifting of the demand curve – The supply
function and the supply curve – Derivation of individual supply curve and market
supply curve – Shifting of the supply curve- Determination of equilibrium price.
Elasticity of demand- price, income and cross elasticity, elasticity of supply.
Demand - supply analysis including impact of taxes and subsidy.
UNIT – II-Theory of Consumer Behavior
Cardinal analysis – Law of diminishing marginal utility. Ordinal approach –
Indifference curve analysis – Budget line – Consumer Equilibrium – Income
consumption curve and Price consumption curve –substitution effect and income
effect of price change.
UNIT III-Cost Analysis
Concepts of costs and their interrelationship, short period costs and long period
costs,. Concept of explicit costs, implicit costs and opportunity costs of production,
derivation of short run and long run cost curves. Break-even-analysis & its uses.
Economies and Diseconomies of scale and the shape to the long run average cost,
Production function: Fixed and variable inputs, production function- law of
variable proportions. Relationships among TP, AP, and MP, marginal rate of
technical substitution, Concept of Isoquant and Isocost -economic region of
production, optimal combination of resources, the expansion path, returns to scale.
UNIT IV-Revenue Concepts
Under different market conditions: TR, AR, MR and relationship among AR, MR.
Perfect competition – Assumptions, Short run and long run equilibrium – Supply
curve in the short run (shutdown and breakeven point concepts). Monopoly – Short
run and long run equilibrium; and the rule of thumb for pricing.
UNIT-V- Monopolistic Competition
Price and output decision, Short run and long run equilibrium.
Oligopoly Market – Short run and long run equilibrium. Non-Collusive (Cournot
duo poly model and Kinked demand models) Collusive Oligopoly: (Cartels, Price
Leadership model, dominant firm)

Text Books:
1. Pindyck, R.S., D. L. Rubinfeld and P. L. Mehta; Microeconomics,
Pearson Education.
2. N. Gregory mankiw, Principles of Micro Economics, Cengage Learning
3. Browining, E.K. and J.M. Browning; Microeconomic Theory and
Applications Kalyani Publishers, New Delhi.
4. Gould, J.P. and E.P. Lazear; Microeconomic Theory, All India
Traveller Bookseller, New Delhi.
Reference Books:
1. Lipsey, R.G. and K.A. Chrystal; Economics, Oxford University Press.
2. Maddala G.S. and E. Miller; Microeconomics: Theory and
Applications, MCGraw-Hill International.
3. Salvatore, D. Schaum’s Outline of Theory and Problems of Microeconomic
Theory, McGraw-Hill, International Edition.