Bb 103 micro economics shweta


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Bb 103 micro economics shweta

  1. 1. Punjab College of Technical Education, Ludhiana Course Instructor: Shweta Miglani Subject: Micro Economics Subject Code: - BB 103 E-mail Id & Contact Number:, 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 1
  2. 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 2
  3. 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 3
  4. 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. 4
  5. 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 5
  6. 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. 6
  7. 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. 7
  8. 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 8
  9. 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 9