Introduction
Meaning of microeconomics and macroeconomics
What is an economy? Central problems of an economy : what, how and for whom to produce; concepts
of production possibility frontier and opportunity cost.
Consumer's Equilibrium and Demand
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; measurement 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.
Producer Behaviour and Supply
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 in terms of marginal revenue-marginal cost.
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)
percentage-change method and (b) geometric method.
Forms of Market and Price Determination under Perfect Competition with simple applications.
Perfect competition - Features; Determination of market equilibrium and effects of shifts in demand
and supply.
Other Market Forms - monopoly, monopolistic competition, oligopoly - their meaning and features.
Simple Applications of tools of Demand and Supply: Price ceiling, price floor.
National Income and Related Aggregates
Some basic concepts: 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.
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
Money and Banking
Money - its meaning and functions.
Supply of money - Currency held by the public and net demand deposits held by commercial banks.
Money creation by the commercial banking system.
Central bank and its functions (example of the Reserve Bank of India): Bank of issue, Govt. Bank,
Banker's Bank, Controller of Credit through CRR, SLR, Reverse Repo, Open Market Operations,
Margin requirement.
Determination of Income and Employment
Aggregate demand and its components.
Propensity to consume and propensity to save (average and marginal).
Short-run equilibrium output; investment multiplier and its 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.
Government Budget and the Economy
Government budget - meaning, objectives and components.
Classification of receipts - revenue receipts and capital receipts; classification of expenditure - revenue
expenditure and capital expenditure.
Measures of government deficit - revenue deficit, fiscal deficit, primary deficit their meaning.
Balance of Payments
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.