MA EconomicsFirst SemesterEcon. 551 Microeconomics-I SYLLABUS

Credit 4
Teaching Hours: 64

Course Objective:
This course intends to equip the students with the methods and tools of economic analysis for giving advanced knowledge of microeconomic theory and suggesting ways to apply the knowledge in formulating and analyzing economic models and theories.

Unit 1. Methodological Concepts 8 Hours
Equilibrium: meaning and stability test; Analysis of equilibrium: static, dynamic, and comparative statics;

Models in economics: definition, importance, types (economic and econometric), and choice between models;

Methods of analysis: deductive, inductive, and
hypothetico-deductive methods;

Importance of assumptions, hypothesis, and empiricism
in economics;

Scientific paradigm of economics;

Unit 2. Consumer Behavior 16 Hours
Preference ordering; the consumption decision; Consumer’s equilibrium (with indifference curve approach);

changes in prices and derivation of compensated and uncompensated demand curves;

comparative statics of consumer behavior;

types of goods;

concept of duality in consumer theory;

the expenditure function;

the indirect utility function;

estimating cost of living;

Lancasterian demand theory and linear
expenditure system;

revealed preference theory

Unit 3. Behavior under Uncertainty 8 Hours
Consumption and uncertainty;

Expected utility;

von Neumann-Morgenstern utility;

The Allais paradox and the Ellsberg paradox;

Gambling and insurance;

The Friedman–Savage hypothesis;

The insurance market: moral hazard and adverse selection;

Reducing risk and uncertainty

Unit 4. Technology 14 Hours
Measurement of inputs and outputs;

Production function for a single product;

Decision period related to production analysis;

Elasticity of substitution;

Production with one and two variable inputs;

Producer’s equilibrium: optimal choice of inputs, constrained output
maximization, constrained cost minimization, profit maximization, effects of changes in outlay on equilibrium position;

Homogeneous and homothetic technologies;

Technical rate of substitution;

Returns to scale;

Calculation of these values in some standard production functions such as Cobb-Douglas, Leontief, and CES;

Derivation of cost function from production function

Unit 5. Market 18 Hours
The competitive firm,

the profit maximization problem,

the firm and the industry demand and supply functions,

different types of cost and revenue functions,

identical cost functions,

market equilibrium,

identical firms, short-run and long-run equilibrium,

taxes and subsidies,

monopoly, special cases of monopoly,

comparative statics,

welfare and output,

quality choice, price discrimination,

first-degree price discrimination,

second degree price discrimination,

third degree price discrimination,

welfare effects,

tying and bundling,

monopolistic competition and cartel

References:
Cowell, F. (2006): Microeconomics: Principles and analysis. New Delhi: Oxford University Press
Gravell, H. and R. Rees (2004): Microeconomics, third edition, Pearson
Koutsoyiannis, A. (1979): Modern microeconomics, second edition, Macmillan.
Mas-Colell, A., Whinston, M.D. and Green J. (1995): Microeconomic theory. New Delhi: Oxford University Press
Salvatore, D. (2009). Principle of microeconomics, 5th edition. New Delhi: Oxford University Press
Varian, H.R. (2009): Microeconomic Analysis, third edition, first Indian edition, Viva Books