1. Punjab College of Technical Education, Ludhiana
Course Instructor: Shweta Miglani
Subject: Micro Economics
Subject 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: - 100
Internal Assessment: - 40
External Assessment:-60
Break up for Internals
MSE: - 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
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2. LECTURE CASE ACTIVITY
NO TOPIC ASSIGNMENTS TESTS STUDY
1 Ice breaking Session
Micro economics: 1)Meaning
2) Nature
2-3 3) Scope
Basic Concepts of
Economics:
1) Static and Dynamic
Approaches
2) Equilibrium
4 3) Utility
Basic Concepts of
Economics: (contd)
4) Opportunity Cost
5) Marginal and
Incremental
5 Principles
Micro economics and
6 Business Assignment No. 1
Theory of Demand:
1) Nature of Demand
2) Individual Demand
7 3) Market Demand
Case
8 Study 1
Theory of Demand: (contd..)
4) Determinants of
demand
9
Theory of Demand: (contd..)
5) Elasticity of Demand
and its determinants
10-12 6) Measurement of Ed
Theory of Demand: (contd..)
7) Demand as
13 multivariate function
14 Activity 1
Theory of Consumer
Behaviour:
1) Utility Analysis
a) Cardinal utility
15 analysis
b) Law of
diminishing
16 marginal utility
17 c) Law of equi
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3. marginal utility.
d) Consumer
Equilibrium
e) Ordinal utility
18 analysis
Theory of Consumer
Behaviour: (contd..)
2) Indifference Curve
Analysis
19-21
Theory of Consumer
Behaviour: (contd..)
22 3) Applications of IC
Theory of production and
costs:
1) concept of production
23-24 function
Theory of production and
costs:
( contd..)
2) production with one
25 and two variable inputs
Theory of production and
costs:
( contd..)
3) optimal input
26 combination
Theory of production and
costs:
( contd..)
4) theory of cost in short
27 run
Theory of production and
costs:
( contd..)
5) theory of cost in long
28-29 run
30 Revenue function
Theory of firm and market
organization:
31 1) Breakeven analysis
2) pricing under perfect
32 competition
3) pricing under
33 monopoly
34 4) price discrimination
35 De beers
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4. Diamond
Monopoly
5) pricing under
monopolistic
36 competition Assignment 2
37 6) selling cost
7) pricing under
oligopoly: cournot Coke and
38 model Pepsi
39 8) kinked demand curve
40 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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5. 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
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6. 14. Poverty – Redefining limits
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.
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7. 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,
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
A Policy to discourage smoking
D1 shifts the demand curve to the left
D2
P
A
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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8. 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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9. 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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