Indian Institute of Foreign Trade Kakinada

Program Name and Batch: IPM 2023-26

Course Name: Microeconomics

Course Coordinators: Dr. Sujata Kar

Email: sujatakar@iift.edu; jabhat@iift.edu.

Semester: I Credits: 4

Course Introduction: Most of our day-to-day decision-making behavior is guided by

economic principles and economic theories provide a background to these principles.
Economic decision making at the individual and/or firm level constituting the basic
components or entities are dealt with in microeconomics. In today’s changing and
competitive world, prompt and effective managerial decision making is the key to
success. Microeconomic theories provide the fundamental theoretical understanding
necessary to make efficient business-related decisions and provide optimal solutions to
the associated business problems when dealing with the issues related to functioning of
the market, securing efficiency in production process and the possible course of action in
various competitive frameworks.
In this course students will develop their understanding of economics and learn a variety
of techniques that will allow them to solve business problems relating to demand, supply,
consumer behavior in economic decision making, costs, prices, revenues, profits, and
competitive strategies. The overriding goal of the course is to make students better
decision-makers in businesses or in institutional contexts. A subsidiary purpose of the
course is to sharpen analytical skills so that students are better able to recognize and solve
decision problems in different contexts.

Course Objectives
 To introduce the basic concepts of Microeconomic Theory
 To develop an understanding about the concepts of demand, elasticity of demand and related
issues.
 To introduce concepts and tools relevant for consumer behavior and rational choice.
 To augment firm level decision making in terms of relevant theories of production, cost and
revenue.
 To introduce interaction among firms in the market through competition at perfect and
imperfect levels.

Pedagogy: Classroom lectures, class discussions and assignments. Active class participation
will be encouraged during the course. The course is designed around interactive class
lectures, assigned readings from textbook(s) and various articles, case studies, current
news analysis and assignments. The students are expected to be well-versed with the
assigned readings before they come to each class. The class lectures serve as
complements to textbook readings and in many cases may overlap the materials covered
in textbook(s). In some cases, lecture notes and subsequent discussions may cover some
issues not explicitly found in prescribed textbook(s) or reading materials. However,
students must be well-prepared with all assigned course materials.

 Linkages with Other Courses:

 Lessons from this course will be important in linking with the discussions under
Macroeconomics, India and Global Economy, Electives in the Finance Domain, International
Economics, Global Business Environment, India, Global Trade and WTO.
 Since the course will be taught in the first semester, it will help the students in the subsequent
courses, where market functioning, competitiveness and opportunities will be discussed.
 The course will also help the students in writing their dissertation during the last semester.

Evaluation Components:
 Quiz (Best three out of four): 30 Marks
 Mid-term Exam: 30 marks
 End Term Exam: 40 marks.*
(End Term should be 40% and no single component can be more than 30%. The evaluation component/s
which provide a direct measure of one or more programme learning goals may be marked with * and at
least one such component should be indicated)

Text Book:

(MT) “Microeconomics”, N. Gregory Mankiw, Mark P. Taylor, C.R., 4th Edition (2022).
Cengage (India).
References:

(PR) Robert Pindyck and Daniel Rubinfeld: Microeconomics, (Eighth Edition), Pearson India.
(AWDM) Allen, Weigelt, Doherty and Mansfield: Managerial Economics: Theory, Applications
and Cases (Seventh Edition), Viva Books
(PNG) Png, Ivan: Managerial Economics (Fifth Edition – Special Indian Edition), Routledge
(CF) Case E. Karl & Ray C. Fair, “Principles of Economics”, Pearson Education, 12th
Edition/Latest edition

Additional Reading:

(PL) “Managerial Economics”, H.C. Petersen & W. C. Lewis, Fourth Edition, Prentice-Hall
India.
(KW) “Managerial Economics: An Economic Foundation for Business Decisions”, Barry
Keating & J. Holton Wilson, Second Edition, Biztantra.
(MH) “Managerial Economics”, Mark Hirschey, Tenth Edition, Thomson South-Western.
(EM) “Managerial Economics – Theory, Applications & Cases”, Edwin Mansfield, Fourth
Edition, Norton & Company.
(RA) “Mathematical Analysis for Economists”, R G D Allen, Macmillan India Limited.
(AC) “Fundamental Methods of Mathematical Economics”, Alpha C. Chiang, Third Edition,
McGraw-Hill International Edition.
(HV) “Intermediate Microeconomics – A Modern Approach”, Hal R Varian, Third Edition, W W
Norton & Company.
(DS) Salvatore, Dominick: Principles of Microeconomics, (Fifth Edition), Oxford University
Press
(BBT) Baldani, Bradfield and Turner: An Introduction to Mathematical Economics (Second
Indian Reprint), South-Western Cengage Learning
(B) Boyes: The New Managerial Economics (First Edition), Houghton Mifflin Company
(MMH) Mcguigan, Moyer and Harris: Managerial Economics: Applications, Strategy, and
Tactics (Ninth edition), South-Western Cengage Publishing (Thomson International)
(SS) Sloman & Sutcliffe: Economics for Business (Third Edition), Pearson Education India.
(TT) Truett &Truett: Managerial Economics: Analysis, Problems, Cases (Eighth Edition), Wiley
India.
(GM) Mankiw, N. (2007). Economics: Principles and applications, 4th ed. Cengage Learning.
(SN) Samuelson, P., & Nordhaus, W. (1985). Principles of economics. McCraw-liill, New York,
any edition.
(BW) Bernheim, B., Whinston, M. (2009). Microeconomics. Tata McGraw-Hill.

Session Plan:
Session Topic and Sub topics Reading
1.5 (with brief description of what intends to be achieved) Reference /
Hour Cases
Module I: Introduction to Basic Concepts of Micro Economics
1-2 Introduction  MT
 Economics - Micro & Macro Economics (Chapter 1,
 Central problems of an economy 2)
  Wants, Goods, Utility, Value, Price and Market.
 The economic problem: scarcity and choice
 Concept of opportunity cost
 Relevant Case studies/Numerical Examples
3-5 Understanding Demand Pattern  MT
 Demand - Demand Schedule & Demand Curve (Chapter
 Demand Function 3,6)
 Determinants of Demand
 Law of Demand - Reasoning
 Exceptions to Law of Demand
 Extension and Increase in demand
 Individual and Market Demand
 Relevant Case studies/Numerical Examples
6-7 Understanding the Drivers of Supply Decisions  MT
 Supply Function (Chapter
 Determinants of supply 3,6)
 Law of Supply Market Equilibrium
 Basis of Supply
 Market Equilibrium and Comparative Statics.
 Relevant Case studies/Numerical Examples
8-10 Elasticity of Demand & Supply PR:2;
 Own Price Elasticity of demand AWDM:
 Measurement and Factors affecting Price Elasticity of demand
 Income elasticity of Demand 2;
 Cross-Price Elasticity of Demand  PNG:3;
 Elasticity of Supply
 The Advertising Elasticity of Demand
 Short-run versus Long-run Elasticity
 Relevant Case studies/Numerical Examples
11-13 Consumer Behavior and Rational Choice PR:3 and
 Concept of cardinal and ordinal utility 4;
 Total utility and Marginal utility – Relationship AWDM:
  Law of diminishing marginal utility and law of equi-marginal utility 3:
 Indifference curve analysis- assumptions, properties and types
 Budget line- Shift and Rotation
 Consumer’s equilibrium- Maximizing Utility subject to Budget
Constraint
 Relevant Case studies/Numerical Examples
14-16 Production Theory  PR:6;
 Production Function with one Variable Input AWDM:
 The Law of Diminishing Marginal Returns 4:
 Production Function with two Variable Inputs
 Returns to Scale- Types of Returns to scale
 Cost minimizing equilibrium condition- single product firm
 Relevant Case studies/Numerical Examples
17-19 Cost Analysis  MT
 Explicit & Implicit Costs (Chapter 6)
 Opportunity Costs  PR:7;
 Sunk Costs versus Avoidable PNG: 7
 Short-Run Cost Functions
 Different Cost Relationships
 Long-Run Cost Functions
 Relevant Case studies/Numerical Examples
20-21 Revenue Analysis
 Revenues: Concepts of revenue
 Total, average and marginal revenue
 Relationship
 Price Elasticity and Marginal Revenue
 Relevant Case studies/Numerical Examples
Module II: Understanding the Competitive Market Framework
22-24 Firm Operations in Competitive Markets  AWDM:
 Characteristics of Perfect Competition 7;
 Demand facing a Price-taking Firm  PR:8 & 9
 Profit Maximization in the Short run
 Short run Supply for the Firm & Industry
  Profit Maximization in the Long run
 Relevant Case studies/Numerical Examples
Module III: Imperfectly Competitive Market and Strategic
Decisions
25-26 Monopoly  MT
 Monopoly Market Characteristics (Chapter
 Sources, Measures & Determinants of Market Power 14)
 Profit Maximization under Monopoly  PNG
 Price Elasticity and Optimal Pricing Policy (Chapter 8)
 Deadweight loss from Monopoly  TM: 11
 Regulating Natural Monopolies
 Relevant Case studies/Numerical Examples
27 (1  Basics of Oligopoly  AWDM:
hour) 8; MT
(Chapter
16)
 PR 13