Course : Microeconomics

Faculty : Dr.Venkatraja.B
Email ID : venkatraja@sdmimd.ac.in
Batch : 2014-16
Term : I
Credits : 3

Objectives:

 Expose the students to the fundamental principles and issues of

managerial economic theory;
 To learn application of economic theories in the decision making process so as
to maximize output or minimize cost by allocating resources in an efficient
manner;
 To enable application of micro economic tools and techniques in anticipating
changes in the business environment.

Pedagogy: Delivery of lecture with graphical presentation and mathematical

derivation, Class Room Participation and selected Case Discussions.

Course Evaluation Pattern

Component % Marks
Class participation 15
Quiz/Test 15
Assignment/Micro Test 15
Mid term 25
End term 30
Total 100
Notes:
(i) Attendance is one component of Class Participation.
(ii) You are expected to be in the class at least 5 minutes prior to the
commencement of the session. Late comers will not be entertained.

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 Course Outline

Introduction to Economics
Definition and Scope of Economics, Definition of Managerial Economics,
The Basic Process of Decision Making, Application of Economics in
Managerial Decision Making Problems.
Supply and Demand Analysis
The Demand schedule and Demand curve, Supply Curve, Shifts in
Demand Curve & Supply Curve, Determinants of Demand and Supply,
Equilibrium / Disequilibrium in the Market.
Effect of a Shift in Supply or Demand on Quantity Demand and Price,
Simultaneous Shifts of Supply and Demand.
Exceptions to Law of Demand & Supply
Application of Law of Demand & Supply
Elasticity and its Application
Elasticity of Demand- Price Elasticity of Demand and its Degrees
Income Elasticity of Demand and Cross Elasticity of Demand
Price Elasticity of Demand for different types of goods: Normal,
Inferior and Giffen Goods
Price Elasticity of Supply
Application of Elasticity in Managerial Economics.
Consumer Behavior

How does a rational consumer behave? Objectives of a consumer, Utility

and satisfaction, Marginal Utility and the Law of Diminishing Marginal
Utility, Equilibrium Condition under Cardinal Approach and Derivation of
Demand Curve.
Indifference Curve Analysis: Indifference Curve, Budget Constraint,
Equilibrium Condition, Changes in Income and Price, Price effect,

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 Substitution effect, Income effect,
Derivation of the Demand Curve from Indifference Curve.

Production analysis
Production Function, Average and Marginal product, Increasing Returns,
Diminishing Returns, Economies of Scale and Diseconomies of Scale.
Analysis of Costs
Basic Cost concepts, Marginal and Average Costs, Sunk Cost, Short run
and Long run cost curves and Economies of Scope.
Theory of Firm
Definition of a Firm. Distinction among Firm, Industry and Market. How
does a firm Maximize Profit? Equilibrium Condition, Different Market
Structure, Break-Even Analysis and Shut-down Point.
Market Structure and Pricing Policy
Pricing under different Market Structures (Price and Cost curves, and
Equilibrium under different forms of market),
Perfectly Competitive Market,
Monopoly, Oligopoly, and
Monopolistic Market Structure
Application of Game Theory in Oligopoly Market Structure
Introduction to Game Theory, Dominant Strategy, Nash Equilibrium, Zero-
Sum Game, Prisoner’s Dilemma.

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 Session Plan

No. of Topics
Sessions
Introduction to Economics
2 Definition and scope of managerial economics

Ref: NGM-Ch 1 & PRM –Ch 1

Supply and Demand Analysis
2
Ref: NGM –Ch 4 & 18, Chuhan-Ch 2
Elasticity Approach
2
Ref: NGM – Ch 5 & 6 S.P Das- Ch 2
Consumer Behaviour and Indifference Curve
2
Ref: NGM – Ch 21, PRM- Ch 3
Production Analysis
3
Ref: PRM – Ch 5
Analysis of Costs
2
Ref: NGM-Ch 13, PRM Ch-6
Theory of Firm and Market Structure
3
Ref: NGM – Ch 14,15,16 & 17
Game Theory and Oligopoly Market Structure
3
Ref: PRM – Ch12

1 Summing up

NGM - N.Gregory Mankiw; PRM - Pindyck,Rubinfeld & Mehta.

Recommended Text Book:

Mankiw, G (2012): Principles of Microeconomics, 6th Edition, Cengage Learning, New Delhi.

References:
Pindyck, Robert S, Danies L Rubinfeld and Prem L Mehta (2009): Microeconomics, Seventh
Edition, Pearson Education, New Delhi.

Salvatore, Dominick (2008): Managerial Economics, Seventh Edition, Oxford University

Press.
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