**DESCRIPTION OF COURSES**

**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**

- Henderson, J.M. and Quandt, R.E. 2000.
*Microeconomic Theory: A Mathematical Approach*. McGraw-Hill. Koutsoyiannis, A. 2003.*Modern Microeconomics.*The Macmillan Press. - Varian, Hal R. 1999.
*Intermediate Microeconomics*. Affiliated East-West Press.