This course comprises introduction to microeconomics, market equilibrium and efficiency, elasticity of demand and supply, analysis of consumer’s behaviour, theory of production, cost and revenue curves, product pricing theories and practices and factor pricing.

This course aims to enhance the understanding of microeconomic theories and their practical applications by developing students’ skill in the application of theories in business decisions making.

Unit 1: Introduction (15 LHs)

• Microeconomics: Meaning, scope, uses, and limitations.

• Business Economics: Nature and scope of business economics.

• Basic Concepts:

  • Production Possibility Curve (PPC).

  • Marginal analysis and Incremental analysis.

  • Static and Dynamic equilibrium analysis in microeconomics.

• The Ten Principles of Economics.

Unit 2: Market Equilibrium and Efficiency (20 LHs)

• Demand: Function, types, determinants, and movement vs. shift in the demand curve.

• Supply: Function, types, determinants, and movement vs. shift in the supply curve.

• Market Equilibrium: Determination and effect of changes in demand and supply.

• Government Policy: Impact of Taxes, Subsidies, and Price Controls.

• Market Efficiency: Concept and measurement via Consumer’s Surplus and Producer’s Surplus.

Unit 3: Elasticity of Demand and Supply (20 LHs)

• Price Elasticity of Demand: Concept, degrees, and calculation (Percentage and Average methods).

• Advanced Elasticity: Point price elasticity and relationship with total expenditure.

• Other Elasticities: Income elasticity, Cross elasticity, and Advertisement elasticity.

• Supply Elasticity: Concept, degrees, and calculation methods.

Unit 4: Analysis of Consumer's Behavior (20 LHs)

• Cardinal Approach: Assumptions, consumer's equilibrium, and derivation of the demand curve.

• Ordinal Approach (Indifference Curve): Assumptions, properties, and Marginal Rate of Substitution (MRS).

• Equilibrium & Effects:

  • Price Line and Consumer’s equilibrium.

  • Price Effect and Price Consumption Curve (Normal vs. Giffen goods).

  • Income Effect and Income Consumption Curve (Normal vs. Inferior goods).

  • Decomposition of price effect into income and substitution effects.

Unit 5: Theory of Production (15 LHs)

• Production Functions: Short-run and Long-run; Cobb-Douglas production function.

• Laws of Production: Law of variable proportions and Laws of return to scale.

• Isoquants: Assumptions, properties, and Marginal Rate of Technical Substitution (MRTS).

• Cost Minimization: Iso-cost curves and optimal employment of inputs.

Unit 6: Cost and Revenue Curves (20 LHs)

• Cost Concepts: Explicit/Implicit, Accounting/Economic, Opportunity, and Separable/Common costs.

• Short-Run Costs: Derivation of TC, AC, and MC; why the AC curve is U-shaped.

• Long-Run Costs: Derivation of LAC and LMC; U-shaped, L-shaped, and falling LAC curves.

• Revenue: Curves under perfect and imperfect competition; relation between Price Elasticity and Revenue.

• Scale: Economies of scale and economies of scope.

Unit 7: Product Pricing Theories and Practices (25 LHs)

• Market Structures: Characteristics and the profit maximization goal.

• Perfect Competition: Short-run and long-run equilibrium; industry supply curve.

• Monopoly: Short-run/long-run equilibrium and economic effects.

• Monopolistic Competition: Equilibrium, product variation, and selling expenses.

• Pricing Practices: Cartels, Price Discrimination, Cost-plus, Predatory, Skimming, and Penetration pricing.

Unit 8: Theory of Factor Pricing (15 LHs)

• Rent: Modern theory of rent.

• Wages: Marginal productivity theory, collective bargaining, and minimum wage fixation.

• Interest: Nominal vs. Real rates; Loanable Funds and Liquidity Preference theories.

• Profit: Economic vs. Business profit; Dynamic and Innovation theories of profit.