Table of Contents

**Introductory Microeconomics Syllabus | ECO 101 | BBA Second Semester Syllabus | Pokhara University**

**Course Objectives**

This course is designed to reinforce and expand students’ understanding of the basic microeconomic theory. It aims to provide students with an introductory-level treatment of economic theory with emphasis on the technique besides the results. Besides, it helps the students to master the basic tools used by the prominent economists, and makes them able to apply these tools in a variety of contexts to set up and solve economic problems.

**Course Description**

The first three units of this course examine the two fundamental microeconomic topics, viz. the introduction to microeconomics, consumer theory and producer theory. Then the course focuses on market competition with the introduction of monopoly, oligopolistic and monopolistic competition. The major concentrations of this course are: supply and demand, consumer demand theory: preferences and choice, rationality assumptions, and budgetary constraints, producer theory: production and costs functions, market structure: perfect competition, monopoly, monopolistic competition, and oligopoly and distribution theory.

**Course Outcomes**

By the end of this course, students should be able to:

- explain basic economic terminology (as e.g. opportunity costs, marginal utility, consumer’s equilibrium etc) in a comprehensive and intuitive way;
- describe and justify the main assumptions behind simple economic models as e.g. the demand and supply model, the perfect competition model, the monopoly model, etc;
- illustrate diagrammatically these models and perform policy experiments (e.g. introducing taxes);
- derive numerically economic instruments and learn how to use them in practice (e.g. price elasticity, optimum commodity purchase, profit maximization, Lerner’s index etc.);
- solve algebraically simple microeconomic models in order to determine the equilibrium economic variables, and reflect on the solutions with a critical mind;

**Course Contents**

**Unit I: Introduction to Microeconomics (6 hours)**

Introduction to Economic Theory: Problem of Scarcity, Introduction to Microeconomics and Macroeconomics, Function of Microeconomic Theory, Comparative Statics and Dynamics, Positive and Normative Economics, and Fundamental Principles of Economics.

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**Unit II: Theory of Consumer Behavior (10 hours)**

Meaning and Concept of Demand, Meaning and Concept of Supply, Law of Demand and Supply, Shifts in Demand and Supply, Price Elasticity of Demand, Income Elasticity, Cross Price Elasticity and Price Elasticity of Supply, Determinants of Elasticity, Uses and Importance of Elasticity. Cardinal Approach of Utility, Consumer Equilibrium, Ordinal Approach of Utility, Indifference Curve, Marginal Rate of Substitution, Budget Line, Consumer’s Equilibrium, Application of Ordinal Analysis- Separation of Substitution and Income Effect from Price Effect for Normal, Inferior and Giffen Good.

**Unit III: Production and Cost (8 hours)**

Short Run and Long Run Production Functions: Law of Variable Proportions, Law of Returns; Optimal Input Combination; Classification of Costs; Short Run and Long Run Cost Curves and Interrelationships. Economies of Scale: Internal and External. Revenue Curves: Optimum Size of the Firm, Factors Affecting the Optimum Size.

**Unit IV: Market Structures and Pricing (8 hours)**

Equilibrium of the Firm and Industry: Perfect Competition, Monopoly, Monopolistic Competition, Monopoly Power, Discriminating Monopoly, Aspects of Non‐price Competition; Meaning of an Oligopolistic Behavior.

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**Unit V: Theory of Distribution (8 hours)**

Input Price and Employment under Perfect Competition and Imperfect Competition. Demand and Supply Curve of a Firm for an Input. Input Pricing under Bilateral Monopoly. Concepts of Wage Differential, Minimum Wage and Brain Drain.

**Basic Texts**

Mankiw, N. G. *Principles of Microeconomics*, Dryden Press, Harcourt Brace College Publishers.

Salvatore, D. *Theory and Problems of Microeconomics Theory*, *Schaum’s Outline Series*. New Delhi: Tata

**References**

Salvatore, D. *Principles of Microeconomics*. New Delhi: Oxford University Press.

Koutsoyiannis, A. *Modern Microeconomics*. London: Macmillan Education Ltd.

Dwivedi, D. N. *Principles of Microeconomics*. New Delhi: Pearson Education.

Cowell, F. A. *Microeconomics Principles and Analysis.* New Delhi: Oxford University Press.

Watson, D. S. & Getz, M.* Price Theory and its Uses.*New Delhi: AITBS Publishers and Distributors.

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