1 Chapter 1. Introduction
Q.1, What is Economic actvity?
Q.2. What is meant by Scarcity?
Q.3.How Economic problems arises?
Q.4 What is Positive and Normative statement?
Q. 5. What do you mean by market economy?
Saturday, May 23, 2009
Tuesday, April 14, 2009
Consumer Equilibirum.
<Consumer Equilibrium
Concept of Utility: -
The term UTILITY refers to that quality of a commodity Or service which satisfy human wants.
Wants satisfying power of a good is called utility.
Total utility: - It is the sum total of utility derived from the consumption of all the units of a commodity.
“Total utility refers to the entire amount of satisfaction obtained from the consuming various quantities of a commodities.”
TU X = f (Q X)
Total Utility:-
It refers to additional utility derive from the consumption of an additional unit of a commodity.
“Marginal utility is the increase in total utility which results from a unit increase in consumption.”
Total utility and marginal utility schedule: -
Unit of Commodity Total Utility Marginal Utility
0 0 -
1 6 6-0 = 6
2 10 10-6 = 4
3 12 12-10 = 2
4 12 12-12 = 0
5 10 12-10 = -2
Consumer’s equilibrium:- A consumer will be in equilibrium when he maximize his satisfaction with given income and price OR a consumer said to be in equilibrium when he gets maximum satisfaction out of his limited income and he has no tendency to change his choices.
ASSUMPTIONS: -
1. Consumer is rational.
2. Marginal utility of money is constant.
3. Utility can be measured in cardinal.
4. There is independence of utility.
5. Income of the consumer remains constant.
6. The tastes of the consumer remain constant.
Equilibrium in case of one commodity follows three conditions: -
1. Price of the commodity.
2. MU and T U of the commodity.
3. M U of money.
A consumer will be MU X / P X = MU M
Consumer’s equilibrium with two commodities: -
Suppose consumer is buying two commodities X and Y with available income.
Think that consumer is buying X commodity than he will be in equilibrium : -
MU X/P x =MU M
Like wise ,for commodity – Y, Consumer will be in equilibrium when:
MU Y/P y= MU M
Now think that consumer buy X and Y commodity than he will be in equilibrium: -
MU X/P X = MU Y/P Y= MU M
A DIAGRAMATIC PRESENTAION:-
WE know that consumer will be in equilibrium when:-
MU X/PX = MU Y/PY= MU M,
INDIFFERENCE COVERS ANALYSIS AND CONSUMER EQUILIBRIUM :-
Meaning of Indifference cover analysis:-
Indifference Curve is that curve which shows different combination of goods that yield the same level of satisfaction or utility to the consumer.
A consumer will be in equilibrium where: -
(i) An I C is tangent to the budget line.
(ii) Tangency between IC and Budget line is in convex shape.
(iii) The consumer is assumed to be rational.
(iv) Utility is ordinal concept.
(v) Diminishing MRS
(vi) Consistency of Choice.
(vii) Transitivity of choice.
(viii) Monotonic Preference.
Properties or features of I C
(i) Downward sloping to the right.
(ii) Convex to the Origin.
Budget line: - Budget line is that line which explains the different possible combination which a market offers to a consumer on a given income and given prices.
A consumer will be in equilibrium where: -
(i) An I C is tangent to the budget line.
(ii) Tangency between IC and Budget line is in convex shape.
Which is explaining with the help of following diagram:-
A consumer is in equilibrium at point E on IC 2 curve. He is getting maximum satisfaction at point E.
Concept of Utility: -
The term UTILITY refers to that quality of a commodity Or service which satisfy human wants.
Wants satisfying power of a good is called utility.
Total utility: - It is the sum total of utility derived from the consumption of all the units of a commodity.
“Total utility refers to the entire amount of satisfaction obtained from the consuming various quantities of a commodities.”
TU X = f (Q X)
Total Utility:-
It refers to additional utility derive from the consumption of an additional unit of a commodity.
“Marginal utility is the increase in total utility which results from a unit increase in consumption.”
Total utility and marginal utility schedule: -
Unit of Commodity Total Utility Marginal Utility
0 0 -
1 6 6-0 = 6
2 10 10-6 = 4
3 12 12-10 = 2
4 12 12-12 = 0
5 10 12-10 = -2
Consumer’s equilibrium:- A consumer will be in equilibrium when he maximize his satisfaction with given income and price OR a consumer said to be in equilibrium when he gets maximum satisfaction out of his limited income and he has no tendency to change his choices.
ASSUMPTIONS: -
1. Consumer is rational.
2. Marginal utility of money is constant.
3. Utility can be measured in cardinal.
4. There is independence of utility.
5. Income of the consumer remains constant.
6. The tastes of the consumer remain constant.
Equilibrium in case of one commodity follows three conditions: -
1. Price of the commodity.
2. MU and T U of the commodity.
3. M U of money.
A consumer will be MU X / P X = MU M
Consumer’s equilibrium with two commodities: -
Suppose consumer is buying two commodities X and Y with available income.
Think that consumer is buying X commodity than he will be in equilibrium : -
MU X/P x =MU M
Like wise ,for commodity – Y, Consumer will be in equilibrium when:
MU Y/P y= MU M
Now think that consumer buy X and Y commodity than he will be in equilibrium: -
MU X/P X = MU Y/P Y= MU M
A DIAGRAMATIC PRESENTAION:-
WE know that consumer will be in equilibrium when:-
MU X/PX = MU Y/PY= MU M,
INDIFFERENCE COVERS ANALYSIS AND CONSUMER EQUILIBRIUM :-
Meaning of Indifference cover analysis:-
Indifference Curve is that curve which shows different combination of goods that yield the same level of satisfaction or utility to the consumer.
A consumer will be in equilibrium where: -
(i) An I C is tangent to the budget line.
(ii) Tangency between IC and Budget line is in convex shape.
(iii) The consumer is assumed to be rational.
(iv) Utility is ordinal concept.
(v) Diminishing MRS
(vi) Consistency of Choice.
(vii) Transitivity of choice.
(viii) Monotonic Preference.
Properties or features of I C
(i) Downward sloping to the right.
(ii) Convex to the Origin.
Budget line: - Budget line is that line which explains the different possible combination which a market offers to a consumer on a given income and given prices.
A consumer will be in equilibrium where: -
(i) An I C is tangent to the budget line.
(ii) Tangency between IC and Budget line is in convex shape.
Which is explaining with the help of following diagram:-
A consumer is in equilibrium at point E on IC 2 curve. He is getting maximum satisfaction at point E.
Friday, April 10, 2009
INTRODUCTION_AND_CENTRAL_PROBLEMS_OF_AN_ECONOMY
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Friday, April 3, 2009
INTRODUCTION AND CENTRAL PROBLEMS OF AN ECONOMY.
INTRODUCTION AND CENTRAL PROBLEMS OF AN ECONOMY.
Origin of Economics: The word Economic was derived from Latin words OIKOU (a house) and NOMOS (to manage) Thus economics was used t manage household . Till the end of 19 Centenary Economics was called POLITICAL ECONOMY, later it was called Economics.
The Science of economics was born with the Publication of Adam Smith’s A Inquiry into the nature and Cause of Wealth of Nations in the year1776.
(Adam Smith is regarded as Father of Economics)
Definition: -Economics is a subject matter that studies different economic activities as directed toward the maximization or maximization of profit at the level of an individual, and maximization of social welfare at the level of the country.
According to Robbins, “It is the science which studies human behavior as are relationship between ends and scarce means which have alternative uses.
Acc. to Samuelson, “ It is the study of men and Society choose, with the use of money , to employ scarce productive resources which could have alternative uses, to produce various commodities over time and distribute them for consumption now and in future among various people and the group of society.”
Economic Activities: - By economics activities we mean that which is based on or is related to the use of scare resources for the satisfaction of human wants.
Example:- Consumption, Investment.
Economic Problem:-Economics problems is concerned with the use of scare resources among alternative human wants and in using these resources towards the end of satisfying wants as fully as possible.
Why an Economic problem arises? An economic problem arises whenever limited resources are used to satisfy different ends.
Causes to arise economic problems: -
1. Human wants are unlimited wants.
2. Economic Resources are Limited means.
3. Resources have alternative uses.
CENTRAL PROBLEMS:-Central problems are reflected in an economy in the form of Economics problems of an economy.
Kind of Central Problems: -
1. Allocation of resources:
(a) What goods to produce and how much to produce?
(b) How to produce?
(c) For whom to produce?
Central problems: and Brach of Economics: -
Central Problems Branches of Economics.
Allocation of resources :
(a) What and how much to produce?
(b) How to produce?
(c) For whom to produce?
(d) Fuller utilization of resources.
(e) Economic efficiency.
(f) Economic growth.
Price theory.
Theory of production.
Theory of distribution.
Theory of Income and Employment.
Welfare economics.
Growth Economics.
Production possibility curve: -
It shows all possible combination of two goods that an economy can produce when the the resources are fully and efficient utilised.
Production posibility set: - It referse to different combination of the goods and services that can be produces from a given amount of resources and a given stock of technological knowledge.
Production Possibility schedule: -
Goods Combination
A B C D E
Wheat 100
90 70 40 0
Rice
0 10 20 30 40
PPC, OR Transformation curve OR PP Line/ Frontier AE Curve (PPC) is drawn on the assumption that: -
(a) The given resources of the economy are fully and efficiently utilized employed and
(b) Given technology remained constant.
OPPORTUNITY COST:-It is define as the cost of alternative opportunity given up or scarified. It is the value of next best alternative.
Example:- On a piece of Land both wheat and sugarcane can be grown with the same resources. If wheat is grown with the same resources. If more wheat is grown than opportunity cost of producing certain quantity of wheat is the quantity of sugarcane forgone or given up.
Marginal Opportunity Cost: - The marginal opportunity cost is calculated in terms of the loss of output of say Y good of every addition unit o say X good produced when resources are shifted from Y good to X good.
Marginal opportunity Cost = Change Y / Change X
Production Possibility and Central Problems
PPC can be used to explain Central problems;-
A. What to produce? And how much to produce?
B. Fuller Utilization of resources.
C. Economic efficiency.
D. Economic growth.
E. What to Produce and how much to produce? : -
Fuller Utilization of resources: -
F. Economic efficiency: -
All point on production possibility curve is efficient in production. The aim of the economy, which wants to be economically efficient, is to be on the PPC. Any point beyond the boundary is unattainable.
G. Economic growth: - With discovery of new stock of resources or in advancement in technology the production capacity of the economy increases. Economy will produce more of Y good OR more of X good or Both X and Y goods.
H.
Growth of resources: -
Economy Meaning and type: -
An economy is an organization of economic activities which provides people with the mean to work and earn a living.
There are three form of an economy: -
1. The Market Economy.
2. The Centrally planned economy.
3. The mixed economy.
The Market Economy: - The market economy is a political system based on private property and private profit. In this system prices are determined by Market forces of Demand and Supply. This type of system is also called laissez – faire Or Capitalistic economy.
Features: -
1. Provide ownership of property.
2. Freedom of enterprises.
3. Profit motive of production.
4. Price mechanism guided production decisions.
5. Existence of completion.
6. Consumers are supreme.
7. Very unequal distribution of income.
8. Absence of role of govt.
The Centrally planned economy: - Central planned economy or socialist economy or command economy is based on govt. control and social welfare motive.
Features: -1. Public ownership of property or factors of production.
2. No freedom of enterprises.
3. Social welfare motive.
4. No competition.
5. Absence of consumer sovereignty.
6. Complete role of Govt.
The mixed economy.:- All economy are mixed economies , with element of both market and command or planned.
Features:-
1.Private and Govt. ownership. 2. Private sector produces for profit motive and govt. sector for welfare motives.
3. There is freedom of private enterprises but no freedom in public sector.
4. Consumer sovereignty exists.
5. Freedom of occupation exists.
Important Questions:-
POSITIVE AND NORMATIVE ECONOMICS:-
Positive economics deals with the what is or how an economic problem facing a society is actually solved.
Normative economic analysis deals with what ought to be or how an economic problems be solved?
MICRO AND MACRO ECONOMICS: -
MICRO ECONOMICS: - Micro economics is study of behavior of individual decision making units, such as Consumer, Resources owner and firms.
Macro Economics: - Macro economics define as the study of over all economic phenomena, such as problem of full employment, GNP, Saving, investment, aggregate consumption, aggregate investment and economic growth.
Important Questions: -
Origin of Economics: The word Economic was derived from Latin words OIKOU (a house) and NOMOS (to manage) Thus economics was used t manage household . Till the end of 19 Centenary Economics was called POLITICAL ECONOMY, later it was called Economics.
The Science of economics was born with the Publication of Adam Smith’s A Inquiry into the nature and Cause of Wealth of Nations in the year1776.
(Adam Smith is regarded as Father of Economics)
Definition: -Economics is a subject matter that studies different economic activities as directed toward the maximization or maximization of profit at the level of an individual, and maximization of social welfare at the level of the country.
According to Robbins, “It is the science which studies human behavior as are relationship between ends and scarce means which have alternative uses.
Acc. to Samuelson, “ It is the study of men and Society choose, with the use of money , to employ scarce productive resources which could have alternative uses, to produce various commodities over time and distribute them for consumption now and in future among various people and the group of society.”
Economic Activities: - By economics activities we mean that which is based on or is related to the use of scare resources for the satisfaction of human wants.
Example:- Consumption, Investment.
Economic Problem:-Economics problems is concerned with the use of scare resources among alternative human wants and in using these resources towards the end of satisfying wants as fully as possible.
Why an Economic problem arises? An economic problem arises whenever limited resources are used to satisfy different ends.
Causes to arise economic problems: -
1. Human wants are unlimited wants.
2. Economic Resources are Limited means.
3. Resources have alternative uses.
CENTRAL PROBLEMS:-Central problems are reflected in an economy in the form of Economics problems of an economy.
Kind of Central Problems: -
1. Allocation of resources:
(a) What goods to produce and how much to produce?
(b) How to produce?
(c) For whom to produce?
Central problems: and Brach of Economics: -
Central Problems Branches of Economics.
Allocation of resources :
(a) What and how much to produce?
(b) How to produce?
(c) For whom to produce?
(d) Fuller utilization of resources.
(e) Economic efficiency.
(f) Economic growth.
Price theory.
Theory of production.
Theory of distribution.
Theory of Income and Employment.
Welfare economics.
Growth Economics.
Production possibility curve: -
It shows all possible combination of two goods that an economy can produce when the the resources are fully and efficient utilised.
Production posibility set: - It referse to different combination of the goods and services that can be produces from a given amount of resources and a given stock of technological knowledge.
Production Possibility schedule: -
Goods Combination
A B C D E
Wheat 100
90 70 40 0
Rice
0 10 20 30 40
PPC, OR Transformation curve OR PP Line/ Frontier AE Curve (PPC) is drawn on the assumption that: -
(a) The given resources of the economy are fully and efficiently utilized employed and
(b) Given technology remained constant.
OPPORTUNITY COST:-It is define as the cost of alternative opportunity given up or scarified. It is the value of next best alternative.
Example:- On a piece of Land both wheat and sugarcane can be grown with the same resources. If wheat is grown with the same resources. If more wheat is grown than opportunity cost of producing certain quantity of wheat is the quantity of sugarcane forgone or given up.
Marginal Opportunity Cost: - The marginal opportunity cost is calculated in terms of the loss of output of say Y good of every addition unit o say X good produced when resources are shifted from Y good to X good.
Marginal opportunity Cost = Change Y / Change X
Production Possibility and Central Problems
PPC can be used to explain Central problems;-
A. What to produce? And how much to produce?
B. Fuller Utilization of resources.
C. Economic efficiency.
D. Economic growth.
E. What to Produce and how much to produce? : -
Fuller Utilization of resources: -
F. Economic efficiency: -
All point on production possibility curve is efficient in production. The aim of the economy, which wants to be economically efficient, is to be on the PPC. Any point beyond the boundary is unattainable.
G. Economic growth: - With discovery of new stock of resources or in advancement in technology the production capacity of the economy increases. Economy will produce more of Y good OR more of X good or Both X and Y goods.
H.
Growth of resources: -
Economy Meaning and type: -
An economy is an organization of economic activities which provides people with the mean to work and earn a living.
There are three form of an economy: -
1. The Market Economy.
2. The Centrally planned economy.
3. The mixed economy.
The Market Economy: - The market economy is a political system based on private property and private profit. In this system prices are determined by Market forces of Demand and Supply. This type of system is also called laissez – faire Or Capitalistic economy.
Features: -
1. Provide ownership of property.
2. Freedom of enterprises.
3. Profit motive of production.
4. Price mechanism guided production decisions.
5. Existence of completion.
6. Consumers are supreme.
7. Very unequal distribution of income.
8. Absence of role of govt.
The Centrally planned economy: - Central planned economy or socialist economy or command economy is based on govt. control and social welfare motive.
Features: -1. Public ownership of property or factors of production.
2. No freedom of enterprises.
3. Social welfare motive.
4. No competition.
5. Absence of consumer sovereignty.
6. Complete role of Govt.
The mixed economy.:- All economy are mixed economies , with element of both market and command or planned.
Features:-
1.Private and Govt. ownership. 2. Private sector produces for profit motive and govt. sector for welfare motives.
3. There is freedom of private enterprises but no freedom in public sector.
4. Consumer sovereignty exists.
5. Freedom of occupation exists.
Important Questions:-
POSITIVE AND NORMATIVE ECONOMICS:-
Positive economics deals with the what is or how an economic problem facing a society is actually solved.
Normative economic analysis deals with what ought to be or how an economic problems be solved?
MICRO AND MACRO ECONOMICS: -
MICRO ECONOMICS: - Micro economics is study of behavior of individual decision making units, such as Consumer, Resources owner and firms.
Macro Economics: - Macro economics define as the study of over all economic phenomena, such as problem of full employment, GNP, Saving, investment, aggregate consumption, aggregate investment and economic growth.
Important Questions: -
Monday, March 30, 2009
New syllabus for Class XII Economics by CBSE-2009-10
Class XI
3 Hours 100 Marks
Units Periods Marks
Part A : Statistics for Economics
Period Marks
1. Introduction 5 3
1. Introduction 5 3
2. Collection, Organisation and Presentation of Data 25 12
3. Statistical Tools and Interpretation 64 30
4. Developing Projects in Economics 10 5
104 50
Part B: Indian Economic Development
5. Development Policies and Experience (1947-90) 18 10
6. Economic Reforms since 1991 14 8
7. Current Challenges facing Indian Economy 60 25
8. Development experience of India-A
comparison with neighbours 12 7
104 50
Part A : Statistics for Economics
In this course, the learners are expected to acquire skills in collection, organisation and
presentation of quantitative and qualitative information pertaining to various simple economic
aspects systematically. It also intends to provide some basic statistical tools to analyse, and interpret
any economic information and draw appropriate inferences. In this process, the learners are also
expected to understand the behaviour of various economic data.
Unit 1: Introduction 5 Periods
3. Statistical Tools and Interpretation 64 30
4. Developing Projects in Economics 10 5
104 50
Part B: Indian Economic Development
5. Development Policies and Experience (1947-90) 18 10
6. Economic Reforms since 1991 14 8
7. Current Challenges facing Indian Economy 60 25
8. Development experience of India-A
comparison with neighbours 12 7
104 50
Part A : Statistics for Economics
In this course, the learners are expected to acquire skills in collection, organisation and
presentation of quantitative and qualitative information pertaining to various simple economic
aspects systematically. It also intends to provide some basic statistical tools to analyse, and interpret
any economic information and draw appropriate inferences. In this process, the learners are also
expected to understand the behaviour of various economic data.
Unit 1: Introduction 5 Periods
What is Economics?
Meaning, scope and importance of statistics in Economics
Unit 2: Collection, Organisation and Presentation of data 25 Periods
Collection of data - sources of data - primary and secondary; how basic data is collected;
methods of collecting data; Some important sources of secondary data: Census of India
and National Sample Survey Organisation.
Organisation of Data: Meaning and types of variables; Frequency Distribution.
Presentation of Data: Tabular Presentation and Diagrammatic Presentation of Data: (i)
Geometric forms (bar diagrams and pie diagrams), (ii) Frequency diagrams (histogram,
polygon and ogive) and (iii) Arithmetic line graphs (time series graph).
Meaning, scope and importance of statistics in Economics
Unit 2: Collection, Organisation and Presentation of data 25 Periods
Collection of data - sources of data - primary and secondary; how basic data is collected;
methods of collecting data; Some important sources of secondary data: Census of India
and National Sample Survey Organisation.
Organisation of Data: Meaning and types of variables; Frequency Distribution.
Presentation of Data: Tabular Presentation and Diagrammatic Presentation of Data: (i)
Geometric forms (bar diagrams and pie diagrams), (ii) Frequency diagrams (histogram,
polygon and ogive) and (iii) Arithmetic line graphs (time series graph).
Unit 3: Statistical Tools and Interpretation 64 Periods
(For all the numerical problems and solutions, the appropriate economic interpretation may be
attempted. This means, the students need to solve the problems and provide interpretation for
the results derived)
Measures of Central Tendency- mean (simple and weighted), median and mode
Measures of Dispersion - absolute dispersion (range, quartile deviation, mean deviation and
standard deviation); relative dispersion (co-efficient of quartile-deviation, co-efficient of mean
deviation, co-efficient of variation); Lorenz Curve: Meaning and its application.
Correlation - meaning, scatter diagram; Measures of correlation - Karl Pearson’s method (two
variables ungrouped data) Spearman’s rank correlation.
Introduction to Index Numbers - meaning, types - wholesale price index, consumer price index
and index of industrial production, uses of index numbers; Inflation and index numbers.
Unit 4: Developing Projects in Economics 10 Periods
The students may be encouraged to develop projects, which have primary data, secondary
data or both. Case studies of a few organisations / outlets may also be encouraged. Some
of the examples of the projects are as follows (they are not mandatory but suggestive):
(i) A report on demographic structure of your neighborhood;
(ii) Consumer awareness amongst households
(iii) Changing prices of a few vegetables in your market
(iv) Study of a cooperative institution: milk cooperatives
The idea behind introducing this unit is to enable the students to develop the ways and
means by which a project can be developed using the skills learned in the course. This
includes all the steps involved in designing a project starting from choosing a title, exploring
the information relating to the title, collection of primary and secondary data, analysing
the data, presentation of the project and using various statistical tools and their interpretation
and conclusion.
Part B: Indian Economic Development
Unit 5: Development Policies and Experience (1947-90): 18 Periods
A brief introduction of the state of Indian economy on the eve of independence.
Common goals of Five Year Plans.
Main features, problems and policies of agriculture (institutional aspects and new
agricultural strategy, etc.), industry (industrial licensing, etc,) and foreign trade.
Unit 6: Economic Reforms since 1991: 14 Periods
Need and main features - liberalisation, globalisation and privatisation;
An appraisal of LPG policies
Unit 7: Current challenges facing Indian Economy: 60 Periods
Poverty- absolute and relative; Main programmes for poverty alleviation: A critical assessment;
Rural development: Key issues - credit and marketing - role of cooperatives; agricultural
diversification; alternative farming - organic farming
Human Capital Formation: How people become resource; Role of human capital in
economic development; Growth of Education Sector in India
Employment: Growth, informalisation and other issues: Problems and policies
Infrastructure: Meaning-and Types: Case Studies: Energy and Health: Problems and
Policies- A critical assessment;
Sustainable Economic Development:
Meaning; Effects of Economic Development on Resources and Environment.
Unit 8: Development Experience of India: 12 Periods
A comparison with neighbours
India and Pakistan
India and China
Issues: growth, population, sectoral development and other developmental indicators.
Class XII
3 Hours 100 Marks
Units Periods Marks
Part A : Introductory Microeconomics
1 Introduction 10 4
2. Consumer Equilibrium and Demand 32 18
3. Producer Behaviour and Supply 32 18
4. Forms of Market and Price Determination 22 10
5. Simple applications of Tools of demand and supply 8 -
104 50
Part B : Introductory Macroeconomics
6. National Income and Related Aggregates 30 15
7. Money and Banking 18 8
8. Determination of Income and Employment 25 12
9. Government Budget and the Economy 17 8
10. Balance of Payments 14 7
104 50
181
Part A : Introductory Microeconomics
Unit 1: Introduction 10 Periods
What is an economy? Central problems of an economy : what, how and for whom to produce; concepts
of production possibility frontier and opportunity cost.
Distinctions between (a) planned and market economies, (b) positive and normative perspectives in
economics, and (c) microeconomics and macroeconomics .
(Non-evaluative topics: Some basic tools in the study of economics - equation of a line, slope of a
line, slope of a curve.)
Unit 2: Consumer Equilibrium and Demand 32 Periods
Consumer's equilibrium – meaning of utility, marginal utility, law of diminishing marginal utility, conditions
of consumer's equilibrium using marginal utility analysis.
Indifference curve analysis of consumer's equilibrium-the consumer's budget (budget set and budget
line), preferences of the consumer (indifference curve, indifference map) and conditions of consumer's
equilibrium.
Demand, market demand, determinants of demand, demand schedule, demand curve, movement
along and shifts in the demand curve; price elasticity of demand - factors affecting price elasticity of
demand; measurenment of price elasticity of demand – (a) percentage-change method and (b) geometric
method (linear demand curve); relationship between price elasticity of demand and total expenditure.
Unit 3: Producer Behaviour and Supply 32 Periods
Production function: Total Product, Average Product and Marginal Product.
Returns to a Factor.
Cost and Revenue: Short run costs - total cost, total fixed cost, total variable cost; Average fixed cost,
average variable cost and marginal cost-meaning and their relationship.
Revenue - total, average and marginal revenue.
Producer's equilibrium-meaning and its conditions-under (a) total revenue-total cost approach and (b)
marginal revenue-marginal cost approach.
Supply, market supply, determinants of supply, supply schedule, supply curve, movements along and
shifts in supply curve, price elasticity of supply; measurement of price elasticity of supply – (a) percentagechange
method and (b) geometric methods.
Unit 4: Forms of Market and Price Determination 22 Periods
Perfect competition - meaning and features.
Market Equilibrium under perfect competition – Determination of equilibrium price, Effects of shifts in
demand and supply.
Non - Competitive Markets - monopoly, monopolistic competition, oligopoly - their meanings and
features.
182
Unit 5: Simple applications of Tools of demand and supply 8 Periods
(not to be examined)
Part B : Introductory Microeconomics
Unit 6: National Income and related aggregates 30 Periods
Macroeconomics: Its meaning.
Some basic concepts of macroeconomics: consumption goods, capital goods, final goods, intermediate
goods; stocks and flows; gross investment and depreciation.
Circular flow of income; Methods of calculating National Income – Value Added or Product method,
Expenditure method, Income method.
Concepts and aggregates related to National Income:
Gross National Product (GNP), Net National Product (NNP), Gross and Net Domestic Product
(GDP and NDP) - at market price, at factor cost; National Disposable Income (gross and net),
Private Income, Personal Income and Personal Disposable Income; Real and Nominal GDP.
GDP and Welfare
Unit 7: Money and Banking 18 Periods
Money – its meaning and function.
Supply of money – Currency held by the public and net demand deposits held by commercial banks.
Money creation by the commercial banking system.
Central banking and its functions (example of the Reserve Bank of India).
Unit 8: Determination of Income and Employment 25 Periods
Aggregate demand and its components.
Propensity to consume and propensity to save (average and marginal).
Short–run fixed price in product market, equilibrium output; investment or output multiplier and the
multiplier mechanism.
Meaning of full employment and involuntary unemployment.
Problems of excess demand and deficient demand; measures to correct them - change in government
spending, availability of credit.
Unit 9: Government Budget and the Economy 17 Periods
Government budget - meaning, objectives and components.
Classification of receipts - revenue receipt and capital receipt; classification of expenditure - revenue
expenditure and capital expenditure.
Various measures of government deficit - revenue deficit, fiscal deficit, primary deficit:their meaning
and implications.
Fiscal policy and its role (non-evaluative topic).
Unit 10: Balance of Payments 14 Periods
Balance of payments account - meaning and components; balance of payments deficit-meaning.
Foreign exchange rate – meaning of fixed and flexible rates and managed floating.
Determination of exchange rate in a free market.
183
18.
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