Punjab College of Technical Education, Ludhiana

Course Instructor: Shweta Miglani Subject: Micro EconomicsSubject Code: - BB 103 E-mail Id & Contact Number: k_shweta81@yahoo.co.in, 9915633055 Total No. of Lectures: 40

Course Objective:

The Course is helpful in understanding the microeconomic concepts. This is a module in basic microeconomic concepts and principles. It gives the student a fairly rigorous grounding in the essential tools of microeconomic analysis. The aims and objectives of the module, together with information on learning methods are given below.

After the completion of the course, students would be able to:

Understand modern micro economic concepts, theories and methods.

Apply micro economic models and methods in order to analyse government policies.

Grading criteria

Max Marks: - 100Internal Assessment: - 40External Assessment:-60

Break up for InternalsMSE: - 15 Marks (60)Presentation:-5 Marks (20)Tests:-10 Marks (2 Tests) (40)Assignments:-4 Marks (2 Assignments) (16)Case Study: - 3 Marks (2 Case Studies) (12)Viva: - 3 Marks (12)

Break Up of the Course

1

LECTURE NO TOPIC ASSIGNMENTS TESTS

CASE STUDY

ACTIVITY

1 Ice breaking Session

2-3

Micro economics: 1)Meaning 2) Nature 3) Scope

4

Basic Concepts of Economics:

1) Static and Dynamic Approaches

2) Equilibrium3) Utility

5

Basic Concepts of Economics: (contd)

4) Opportunity Cost5) Marginal and

Incremental Principles

6Micro economics and Business Assignment No. 1

7

Theory of Demand:1) Nature of Demand2) Individual Demand3) Market Demand

8Case Study 1

9

Theory of Demand: (contd..)4) Determinants of

demand

10-12

Theory of Demand: (contd..)5) Elasticity of Demand

and its determinants 6) Measurement of Ed

13

Theory of Demand: (contd..)7) Demand as

multivariate function14 Activity 1

15

Theory of Consumer Behaviour:

1) Utility Analysisa) Cardinal utility

analysis

16

b) Law of diminishing marginal utility

17 c) Law of equi

2

marginal utility.

18

d) Consumer Equilibrium

e) Ordinal utility analysis

19-21

Theory of Consumer Behaviour: (contd..)

2) Indifference Curve Analysis

22

Theory of Consumer Behaviour: (contd..)

3) Applications of IC

23-24

Theory of production and costs:

1) concept of production function

25

Theory of production and costs:( contd..)

2) production with oneand two variable inputs

26

Theory of production and costs:( contd..)

3) optimal input combination

27

Theory of production and costs:( contd..)

4) theory of cost in short run

28-29

Theory of production and costs:( contd..)

5) theory of cost in long run

30 Revenue function

31

Theory of firm and market organization:

1) Breakeven analysis

322) pricing under perfect

competition

333) pricing under

monopoly34 4) price discrimination35 De beers

Diamond

3

Monopoly

36

5) pricing under monopolistic

competition Assignment 237 6) selling cost

38

7) pricing under oligopoly: cournot model

Coke and Pepsi

39 8) kinked demand curve40 9) price leadership

Tests would be incorporated as per the schedule fixed in the coming days.

Assignments:

Students are supposed to submit the assignments on the given date and late submission

will not be allowed. Copying an assignment will award you a zero and NO

IMPROVEMENTS will be allowed for the same.

Assignment 1:

1) Give examples of a product you use little of because negative utility comes quickly. 

2) Give examples of a product you use a lot of because negative utility comes slowly. 

 3) Give example of advertisements that take advantage of the idea that there isn't declining utility with this product.

Assignment 2

Select different Income Groups from the society and try to identify a product each

which is being used in common by that income category. List down the factors that will

affect the demand of that product and also try to find out price elasticity of that product.

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Assignment 2: E- Assignment

1. List down 5 different products that operate under monopolistic competition. Also

compare their prices with the substitutes of other companies.

2. List down 5 different products that operate under monopoly form of market. Discuss the

price wars followed by any one company in detail.

Presentation:

The class would be divided into groups of 4 each. Each group will have 16 minutes for

presentation. Following are the presentation topics:

1. Cola wars

2. Consumer and consumerism

3. India- Most favoured destination for Automobile market

4. Indian Economic Indicators

5. Indian Tax system

6. Brain drain- Is it eating up Indian resources?

7. Types of accounts in banks

8. Impact of Bharat bandhs on Indian Economy

9. Sources of Revenues for Indian Govt.(min. 50)

10. Expenditures of Indian Govt.

11. India and China – Building Blocks of Global economy

12. Persistent Unemployment inspite of ample job opportunities

13. MNCs - Creating or eating up Indian resources

14. Poverty – Redefining limits

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15. Indian Automobile

16. Fiscal Consolidation- Need of an Hour

Case Study

Case Study 1

Two Ways To Reduce The quantity of Smoking Demanded

Public policymakers often want to reduce the amount that people smoke. There are two ways that

policy can attempt to achieve this goal.

One way to reduce smoking is to shit the demand curve for cigarettes and other tobacco

products. Public service announcements, mandatory health warnings on cigarette packages, and

the prohibition of cigarette advertising on television are all policies aimed at reducing the

quantity of cigarettes demanded at a given price. If possible these policies shift the demand curve

for cigarettes to the left.

Alternatively, policymakers can try to raise the price of cigarettes. If the government taxes the

manufacturers of cigarettes, for example, cigarette companies pass much of this tax on to

consumers in the form of higher prices. A higher price encourages the consumers to reduce the

numbers of cigarettes they smoke. In this case, the reduced amount of smoking does not

represent a shift in the demand curve. Instead, it represents a movement along the same demand

curve on a point with a higher price and lower quantity.

How much does the amount of smoking respond to changes in the price of cigarettes?

Economists have attempted to answer this question by studying what happens when the tax on

cigarette changes. They have found that 2% increase in price causes a 4% decrease in the

quantity demanded. Teenagers are found to be especially sensitive to the price of cigarettes. 10%

increase in price causes a 12% drop in teenage smoking.

A related question is how the price of cigarettes affects the demand for other drugs such as

marijuana. Opponents of cigarette taxes often argue that tobacco and marijuana are substitutes,

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so that high cigarette prices encourage marijuana. There is another view which says that lower

cigarette prices are associated with greater use of marijuana. In other words, tobacco and

marijuana appear to be complements rather than substitutes.

Y

P

Shift in the demand curve

Y Axis: price of cigarettes per pack

X

No. of cigarettes smoked per day

Case Study 2

The DeBeers Diamond Monopoly

A classic example of a monopoly that arise from the ownership of key source is DeBeers, the

South African diamond company. DeBeers controls about 80% of the world’s production of

diamonds. Although the firm’s share is not 100%, it is large enough to exert substantial influence

over market price of diamonds.

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A Policy to discourage smoking shifts the demand curve to the leftD1

D2

A

How much market power does DeBeers have? The answer depends in part on whether there are

close substitutes for its product. If people view emeralds, rubies and sapphires as good

substitutes for diamonds, then DeBeers has relatively little market power. In this case, any

attempt by DeBeers to raise the price of diamonds would cause people to switch to other

gemstones. But if people view these other stones as very different from diamonds, then DeBeers

can exert substantial influence over the price of its product.

DeBeers pays for large amount of advertising. At first, this decision might seem surprising. If a

monopoly is the sole seller of its product, why does it need to advertise? One goal of DeBeers

ads is to differentiate diamonds and other stones in the minds of the consumers. When their

slogan tells you that “diamonds are forever,” you are meant to think that same is not true of

emeralds, rubies and sapphires. If the ads are successful, consumers feel that diamonds are

unique, rather than as one among many gemstones and this perception will give DeBeers greater

market power.

Activity 1

Select any 20 families in your vicinity preferably covering all income categories. Conduct a

study on changing Demand patterns of three generations (Grand Parents, Parents,

children) through a questionarre.

Activity 2

Economic Concepts Covered in the Lesson Plan:

• Law of Diminishing Marginal Utility

• Opportunity Cost

• Utility

a. On the paper, students will rate the benefit of consuming a piece of candy based on a

scale of 1-10. In economics terminology, this benefit gained from consuming a good or

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service is called utility. 1 represents the lowest utility and 10 the highest utility. Those in

the audience will also con

b. duct their own “virtual” rating as you imagine your level of utility of consuming the piece

of candy.

b. The scribe will collect the ratings from the five volunteers.

c. Distribute one piece of candy to each of the five volunteers and give the following

instructions:

d. Consume the piece of candy and once the volunteer has finished level of utility, based on a

scale of 1-10, is recorded.

e. Distribute the second piece of candy, have the volunteers rate their utility, ask the scribe to

record the ratings. The audience will also rate the second piece. Explain the difference between

utility and marginal utility.

f. Distribute the third piece of candy following the same procedure as above.

g. What do the students notice about the data?

h. Why do you suppose the marginal utility ratings declined?

i. At what point did the marginal utility of consuming begin to decline?

j. Is it possible that this same decline in marginal utility would occur for other items that we

consume? How about a t-shirt? What do you predict would happen to the marginal utility ratings

for the second, third and fourth for the exact same t-shirt?

k. Can you think of an example when the Law of Diminishing Marginal Utility would not hold

true, where an individual’s satisfaction or benefit would continue to increase?

Activity 3

Select any one economic news and analyze its impact on the Indian economy.

Activity 4

Word Finder

Terms to be discussed:

Interest rates, GDP, National income, Per capita income, Foreign exchange, how economy works

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