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AG ECON 501 MICROECONOMICS I                                                                               (3L + 0P) I

Objective
  The objective of this course is to give students a thorough understanding of the principles of economics that apply to the decisions of individual consumers and producers within the larger economic system.

Theory

UNIT I
  Theory of Demand- Consumer Behaviour- Cardinal Utility theory – Indifference Curves theory- Applications of Indifference Curves analysis- Income and Substitution effect- Derivation of demand curve- Consumer surplus-Equilibrium of the consumer- Elasticity of demand - Market demand - Constant elasticity demand function - Distributed lag models of demand- Nerlove’s stock adjustment principle- Houthakker’s and Taylor’s dynamic demand model.

UNIT II
  Theory of production and costs- Production functions- Returns to scale – long run analysis of production – Law of variable proportions- Technological progress- Equilibrium of the firm- Choice of optimal combination of factors of production- Derivation of cost function from production function- Production function of a multiproduct firm- Iso-revenue curve of the multiproduct firm- Linear production functions- Linear programming- Feasible point sets- Optimal solutions- Duality- Production under uncertainty- Theory of costs- Cost curves- Traditional theory of costs- Modern theory of costs- Short and Long run costs- Marginal cost, Minimum Average Total Costs- Analysis of Economies of Scale- Social and Private costs.

UNIT III
  Theory of Price in Perfectly Competitive markets- The supply curve of the firm and industry- Short run equilibrium of the firm and industry- Equilibrium of firm and industry in long run- Optimal Resource Allocation- Dynamic Changes- Shift in market demand- - Differential Cost conditions - Taxation applications - The stability of equilibrium - Dynamic equilibrium with lagged adjustment - Futures market- Hedging/ risk assumption.

Suggested Readings