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The document outlines a syllabus for an Introduction to Microeconomics course, covering topics such as demand and consumer behavior, production and cost, and market structures like perfect competition. It defines economics as the study of how societies allocate scarce resources to satisfy unlimited wants, and microeconomics as the analysis of individual and firm-level economic decisions. Additionally, it discusses different economic systems, including market, command, and mixed economies, and the fundamental economic questions of production and distribution.

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12 views25 pages

Me 01

The document outlines a syllabus for an Introduction to Microeconomics course, covering topics such as demand and consumer behavior, production and cost, and market structures like perfect competition. It defines economics as the study of how societies allocate scarce resources to satisfy unlimited wants, and microeconomics as the analysis of individual and firm-level economic decisions. Additionally, it discusses different economic systems, including market, command, and mixed economies, and the fundamental economic questions of production and distribution.

Uploaded by

srijitamandal2006
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Introduction to Microeconomics

SYLLABUS
Unit:I Demand and Consumer behaviour Concept of demand, demand function, law of
demand, derivation of individual and market demand curves, shifting of the demand curve;
elasticity of demand. Consumer behaviour: Marshallian utility approach and Indifference
Curve approach; utility maximization conditions . Income-Consumption Curve (ICC) and
Price-Consumption Curve (PCC): Derivation of demand curve from PCC. Unit: II
Production and Cost Production function: Short-run and Long-run; Relation among Total
Product, Average Product and Marginal Product, Law of returns to a variable factor, Law of
Returns to Scale; Concepts of Iso-quant and iso-cost line; Conditions for optimization
(graphical approach).
Cost: Accounting and Economic Costs; Social and Private Costs; Short-run and Long-run
Costs; Relation between Average and Marginal Costs; Determination of LAC curve from
SAC curves, LMC.
Unit: III Perfect Competition Concept of Perfectly Competitive market: Assumptions, Profit
maximization conditions; Related concepts of Total Revenue, Average Revenue and Marginal
Revenue, Short-run and Longrun equilibrium of a firm; determination of short-run supply
curve of a firm, measuring producer surplus under perfect competition, Stability analysis–
Walrasian and Marshallian, demand supply analysis including impact of taxes and subsidy.
Session Outline

• What is Economics
• Review of Economic Terms
-
What is Economics?

• The word Economy derived from the Greek word “okios”


which means household.
What is Economics?

• Human wants are unlimited


• Resources available to satisfy these wants are scarce / limited
• People wants to maximize their gains
What is Economics?

• Economic agents / society have some economic problems


because of scarcity of resources
• They need to choose scarce resources among alternatives
(scarce resources) based on choice and valuation of
alternatives
WHAT IS ECONOMICS?

Thus economics is the study of how economic agents or


societies choose to use scarce productive resources that have
alternative uses to satisfy wants (needs) which are unlimited
and of varying degree of importance
WHAT IS MICROECONOMICS?

• Study of economic phenomena at micro level i.e. individual and


firm level

• Microeconomics is the study of how individual firms or


consumers do and/or should make economic decisions taking
constraints into account.
Basic Assumptions

• Ceteri paribus
• Rationality
CETERI PARIBUS

• Ceteri paribus is a Latin phrase that means all variables other


than the one being studied are assumed to be constant.

• Literally ceteris paribus means “other things being equal”


Economic Rationality

• Rationality implies acting objectively , keeping in view the ends


and means, the objectives and constraint .
ECONOMIC RATIONALITY

• Economics assume rationality on the parts of its subject like


consumer, producer and seller.

• Economic rationality means economic agents see feasible,


known and alternative course of action, rank them on priority
and choose the one which is highest in ranking order.
REVIEW OF ECONOMIC TERMS

• Resources are factors of production or inputs.


– Examples:
• Land
• Labor
• Capital
• Entrepreneurship
Review of Economic Terms

 Land refers to everything on Earth that is in its natural state,


or Earth's natural resources.
 Labor refers to all the people who work in the economy.
REVIEW OF ECONOMIC
TERMS

 Capital includes money needed to start and operate a


business. At a national level, capital includes infrastructure,
such as roads, ports, sanitation facilities, and utilities.
 Entrepreneurship refers to the skills of people who are willing
to risk their time and money to run a business.
REVIEW OF ECONOMIC
TERMS
• Scarcity is the condition in which resources are not available to
satisfy all the needs and wants of a specified group of people.
• Example: Most underdeveloped nations have natural resources,
but do not have capital or skilled labor to develop them.
REVIEW OF ECONOMIC TERMS

• Because of scarcity, an allocation decision must be made.


The allocation decision is comprised of three separate choices:

– What and how many goods and services should


be produced?
– How should these goods and services be produced?
– For whom should these goods and services be produced?
REVIEW OF ECONOMIC TERMS

• Economic Decisions for the Firm

– What: The product decision – begin or stop providing goods


and/or services.
– How: The hiring, staffing, procurement, and capital budgeting
decisions.
– For whom: The market segmentation decision – targeting the
customers most likely to purchase.
REVIEW OF ECONOMIC TERMS

• Three processes to answer what, how, and for whom


– Market Process: use of supply, demand, and material
incentives
– Command Process: use of government or central authority,
usually indirect
– Traditional Process: use of customs and traditions
Different Types of Economy
• Market / Capitalist Economy:
–What? Consumers decide what should be produced in a market
economy through the purchases they make.
–How? Production is left entirely up to businesses. Businesses
must be competitive in such an economy and produce quality
products at lower prices than their competitors.
DIFFERENT TYPES OF
ECONOMY
• An economy, or economic system, is the way a nation makes
economic choices about how the nation will use its resources to
produce and distribute goods and services

Market / Capitalist Economy: In a pure market economy there is no


government involvement in economic decisions. The government
lets the market answer the following three basic economic
questions.
Different Types of Economy

• Market / Capitalist Economy:


• For whom? In a market economy, the people who have more
money are able to buy more goods and services.
• Based on Adam Smith’s invisible hand principle
• Examples: USA / European countries
DIFFERENT TYPES OF
ECONOMY
Command / Socialist Economy
In a command economy the government answers the three basic
economic questions.
What? A dictator or a central planning
products are needed.
How? Since the government owns all committee
means of production in a
decides what
command economy, it decides how goods and services will be
produced.
DIFFERENT TYPES OF ECONOMY

• Command / Socialist Economy:

• For whom? The government decides who will get what is


produced in a command economy.

• Exp. China, Mexico and former USSR


DIFFERENT TYPES OF ECONOMY

• Mixed Economy: Private sector is allowed to use free market


within the broader political and economic policy framework,
public sector reserves certain trade / industry / services /
activities
• Example : India.

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