Module Code and Title:         CET101          Introductory Microeconomics

Programme:                          BA in Development Economics

Credit Value:                         12

Module Tutor:                       Sonam Yeshey

General objective: This module is designed to expose students to principles of microeconomic theory. The emphasis will be on helping them to ‘think like economists’. This module will introduce undergraduate students to the principles of economic thinking, basic concepts of microeconomics and, how the rational choices/decisions are made by different economic agents.

Learning outcomes – On completion of this module, learners should be able to:

1. Identify underlying assumptions of economic models.
2. Explain the importance of standard assumptions in the microeconomic models.
3. Find solutions to basic microeconomic problems using graphical approaches.
4. Analyse the role of market mechanisms.
5. Explain the consequences of government interference in price mechanisms.
6. Explain consumer responses to particular stimuli using indifference curve analysis.
7. Determine the behaviour of firms under different market structures.

Learning and Teaching Approach: This module will be taught by means of lectures, tutorials, workshops and self-directed study. Lectures will aim at explanation of various concepts and theories. Lectures will be complemented by tutorials for self-exploration and problem solving in smaller groups. In a series of workshops, students will be divided into smaller groups of 5-6 to work on problem statements to collectively find solutions.

Assessment Approach:

A. Individual Assignment: Portion of Final Marks: 20%

Evaluate basic assumptions (both explicit and implicit) related to human choices, and, explain deviation from the rational behaviour. The assignment should have a maximum limit of 300 words.

4%       Identify key assumptions

6%       Logical analysis of their relevance

6%       Explain deviation from the rationalist behaviour

2%       Language

2%       Academic structure of assignment

B. Class Tests: Portion of Final Marks: 20%

Four small written tests will be conducted (worth 5% each) that will comprise 30 min duration and cover 2-3 weeks of material. The tests will have a maximum of 5 questions (covering conceptual understanding, and problem solving elements).

C. Classroom experiment: Portion of Final Marks: 10%

In groups of 4, students will complete a task based on optimising decisions made by households/firms.

1%       Identification of data needed

3%       Analytical Methods

2%       Identification of assumptions

4%       Result analysis

D. Midterm Examination: Portion of Final Mark: 15%

Students will take a written exam of 1.5 hr duration covering topics up to the mid-point of the semester.

Pre-requisites:

Subject matter:

Focus should only be towards graphical approaches/simple mathematical approaches for solution generation, avoiding the use of calculus.

1. Exploring the core subject matter of Economics
   • The scope and method of economics; scarcity and choice
   • Questions of what, how and for whom to produce
   • The basic competitive model; prices, property rights and profits
   • Incentives and information
   • Rationing; opportunity sets; economic systems
   • Reading and working with graphs
   • Supply and Demand
   • How Markets Work, Markets and Welfare
   • Individual demand and supply schedules and the derivation of market demand and supply
   • Shifts in demand and supply curves; role prices in resource allocation
   • Concept of elasticity- price, income, cross and elasticity of substitution and their applications; consumer and producer surplus; taxes and their efficiency costs
2. Household decisions
   • Preferences and their representation with indifference curves
   • Budget constraint
   • Consumer’s optimum choice
   • Income and substitution effects using Hicks and Slutsky approaches
   • labour supply and savings decisions
3. Behaviour of Firms
   • Cost and Revenue Concepts
   • Perfect Market Structure
   • Behaviour of profit maximizing firms and the production process (use only graphical approach for solution).
   • Short-run costs and output decisions
   • Costs and output in the long run
4. Imperfect Market Structure
   • Monopoly and anti-trust policy; discriminating monopoly
   • Government policies towards competition
   • Imperfect competition: monopolistic competition, oligopoly and duopoly;(discuss only the main features of these market)
5. Market for Inputs
   • Labour and land markets
   • Concept of derived demand
   • Input productivity and marginal revenue product and input demand curves
   • Competitive input markets and public policy

Reading List:

1. Essential Reading
   • Case, K.E., & Fair, R.C. (2007). Principles of Economics. Pearson Education.
   • Pindyck, R., Rubinfeld D., and Mehta P. (2009). 7^th Ed. Pearson.
2. Additional Reading
   • Browning, E.J. & Zupan, M.A. (2011). Microeconomics Theory and Applications. Wiley.
   • Mankiw, N.G. (2007). Economics: Principles and Applications. Cengage Learning India Private Limited.
   • Stiglitz, J.E. & Walsh C.E. (2007). New York: W.W. Norton & Company, Inc.

Date: January 15, 2016