PAPER – I Total Marks: 100
Table of Contents
Part I MICROECONOMICS
1. Microeconomics:
Meaning of microeconomics. Choice, scarcity and opportunity cost. Production Possibility frontier. Goals of microeconomic policy: efficiency and equity.
2. Market economy:
Demand, Supply and Price determination. Individual and market demand. Changes in demand. Individual and market supply. Changes in supply. Market equilibrium and impact of changes in demand and supply on market equilibrium. Elasticity of Supply and Demand. Point and Arc elasticity. Price, income and cross elasticities. Application of the concept of elasticity.
3. The theory of Consumer Behaviour:
Concept of utility and derivation of Demand curve. Cardinal and ordinal Utility. Consumer’s Surplus. Indifference Curves and their shapes. Marginal rate of substitution and convexity of Indifference Curves. The budget constraint and the equilibrium of the consumer. Income-Consumption and the Engel’s Curve. Price- consumption and Demand curve. Income and Substitution effects of a price change, the Hicksian method and the Slutsky method. Identification of normal goods, inferior goods and Giffen goods.
4. The theory of Production:
The concepts of production cost and profit. Production function. The law of variable proportions. Cost curves in the short run and in the long run. Choice of input mix. The principle of Substitution. Iso- quants, Iso-cost line and the condition for cost minimization. The expansion path and returns to scale. Economies of scale. The very long run and the endogenous technical change.
5. Market structures and behaviour of firms.
Perfectly competitive markets. Assumptions of the model. The supply curve of a firm and an industry in the short run. Short run and the long run equilibrium of the firm and industry. The shape of the long run industry supply curve and the effects of changing technology. The allocative efficiency of perfect competition.
Monopoly: Shape of the demand curve under monopoly. Elasticity of the demand curve and its implication for a monopolist. Short run and long run equilibrium. Price discrimination and its consequences. Analysis of price discrimination between markets. Dumping. Cartels as monopolies. The allocative inefficiency of monopoly. Comparison between perfect competition and monopoly. Imperfectly competitive market structures: Monopolistic competition. The concept of industry and group. Short run and long run equilibrium of a firm. Excess capacity. Comparison with perfect competition and monopoly.
Oligopoly and its basic dilemma. Duopoly. Models of Non-collusive oligopoly: Cournot’s duopoly model, Chamberlain’s oligopoly model, Sweezy’s kinked demand model. Collusive Oligopoly. Cartels: Joint profit maximization and market sharing cartels. Price leadership models. Mergers.
6. The theory of Factor Pricing:
Demand and Supply of inputs. Input demand in the short run and in the long run. The firms demand curve. The firm’s demand curve for a single variable input. The industry’s demand curve for an input. Elasticity of demand for inputs. The supply of inputs. Determination of price, quantity and income of an input. Monopsony.
RECOMMENDED BOOKS:
1. Lipsey and Chrystal, Economics. 10th edition. Oxford University Press.
2. Koutsoyiannis, A., Modern Microeconomics, London, Macmillan.
3. Miller, E. and Maddala, G.S., Microeconomics Theory and Applications, McGrawHill International.
PART II MATHEMATICAL ECONOMICS
1. Variables, Constants and parameters. Relations and functions. Types of functions: algebraic and non-algebraic. Graphic representation of economic functions. Equations and identities, simultaneous equations. Solution of market models, income determination model and IS-LM analysis.
2. Derivatives and their application in economics. Slope versus elasticity. Price, income and cross elasticities of demand. Income determination, multipliers and comparative statics. Optimization of economic functions. Constrained optimization in economics.
RECOMMENDED BOOKS
1. Chiang, A.C., Fundamental Methods of Mathematical Economics, McGraq Hill, Kogakusha, Ltd.
2. Dowling, E.T., Introduction to Mathematical Economics, Schuam’s outlines.