COM 1501 Macroeconomics

Course Code COM   1501
Course Title Microeconomics
Number of Credits 5
Academic Year 1

Microeconomics is an introductory course in the theory of markets with relevant applications to business, social and individual issues. This course introduces economic analysis of individual, business, and industry choices in the market economy. Topics include; the price mechanism, demand and supply, optimizing economic behavior, costs and revenue, market structures, factor markets, and market failure. It also provides introductory analysis of the role of governments in seeking to ensure the efficient operation of markets.

  • To introduce economic theories, tools and methods of analysis.
  • To understand the economic environment which functions through individuals, firms, industries, and government.
  • To identify the outcome and pricing decisions of firms operating under difference market conditions.
  • To understand the government microeconomic policy and its economic impact on individuals and businesses.

Upon completion of this course, the students will be able to:

  • Define economics and explain microeconomic concepts
  • Use the supply and demand model to determine the equilibrium price and quantity in a market
  • Use marginal analysis to explain maximizing behavior of firms and Individuals.
  • Describe how price and output decisions are made in different market structures.
  • Understand the application of microeconomic principles on business decision making.
  • Describe the conditions that may lead to market failure and government’s intervening role.

1. Introducing Economics
1.1 Nature and Scope of Microeconomics
1.2 Economic Systems
1.3 Basic Economic Problems
1.4 Scarcity, Choice, Opportunity Cost, and Production Possibility Frontier
1.5 Microeconomics Vs Macroeconomics

2. Demand, Supply, Market Equilibrium and Elasticity
2.1 Law of Demand
2.2 Market Demand Curve for a commodity
2.3 Law of Supply
2.4 Market Supply Curve for a commodity
2.5 Equilibrium Price and Quantity
2.6 Changes in the Equilibrium
2.7 Elasticity
2.8 Types of Elasticities
2.9 Determinants of the Price Elasticities
2.10 Government Intervention to the Market

3. The Theory of Consumer Behavior
3.1 Cardinal Utility approach
3.1.1 Total and Marginal Utility
3.1.2 Consumer Equilibrium
3.1.3 Derivation of Individual’s Demand Curve

3.2 Ordinal Utility approach
3.2.1 Define Indifference Curve
3.2.2 Marginal Rate of Substitution (MRS)
3.2.3 Characteristics of Indifference Curve
3.2.4 Budget Constraint
3.2.5 Consumer Equilibrium
3.2.6 Income-Consumption Curve and “Angle” Curve
3.2.7 Price-Consumption Curve and Consumer’s Demand Curve
3.2.8 Income Effect and Substitution Effect

4. Theory of Production
4.1 Production with One Variable Input
4.1.1 Production Function
4.1.2 Total, Average and Marginal product
4.1.3 The Stages of Production
4.1.4 The Law of Diminishing Returns
4.1.5 The Optimal use of variable input

4.2 Production with Two Variable inputs
4.2.1 Long Run production Function
4.2.2 Iso-quant
4.2.3 The law of Diminishing Marginal Rate of Substitutions (MRTS)
4.2.4 Iso-quant for Perfect Substitutes and Complementary Inputs
4.2.5 Iso-Cost lines
4.2.6 Long Run Firm Equilibrium
4.2.7 Production Expansion Path
4.2.8 Ridge Lines
4.2.9 Returns to Scale (Increasing, Decreasing and Constant)

5. Cost of Production and Profit Maximization Principle
5.1 Cost concepts
5.2 Short-run Cost function and cost curves
5.3 Long-run cost-output relationship
5.4 Economies and diseconomies of scale
5.5 Profit Maximization
5.5.1 Total Approach
5.5.2 Marginal Approach

6. Market Structures
6.1 Perfect Competition
6.1.1 Characteristics
6.1.2 Short-Run Equilibrium of a Firm
6.1.3 Short- Run Supply Curve of a Firm
6.1.4 Short-Run Equilibrium of the Industry
6.1.5 Long-Run Equilibrium of a Firm
6.1.6 Long-Run Equilibrium of the Industry

6.2 Monopoly
6.2.1 Characteristics
6.2.2 Cost and revenue curves under monopoly
6.2.3 Short-Run Equilibrium of the monopoly
6.2.4 Long-Run Equilibrium of the monopoly
6.2.4 Price Discrimination

6.3 Monopolistic Competition
6.3.1 Characteristics
6.3.2 Profit – Maximizing Price and Output in the Short Run
6.3.3 Profit-Maximizing Price and Output in the Long Run

6.4 Oligopoly
6.4.1 Models of the Oligopoly Kinked Demand Curve Cournets’ Model Cartels Model or Collusive Oligopoly Price Leadership

7. Factors of Production
7.1 Meaning of Factors of Production
7.2 Labour – Wages
7.2.1 A Perfectly Competitive Labour Market
7.2.2 The Labour Supply Curve
7.2.3 The Labour Demand Curve
8.2.4 The equilibrium wage and level of employment in perfectly competitive labour market

7.3 Land- Rent
7.3.1 Meaning of Rent
7.3.2 Economic Rent
7.3.3 Transfer Earning

7.4. Capital – Interest
7.4.1 Meaning of Capital
7.4.2 Classical Theory of Interest

Lectures, seminars, course manuals, workshops, assignments, self study.

  1. Lipsey, R.G and Kenneth Alec Chrystal, K.A (1995), Oxford University Press, London.
  2. Lipsey, R.G. “An Introduction to Positive Economics”, Eighth Edition, Weidefeld & Nicolson, London.
  3. Salvatore, D. (2006) “Microeconomics”, Schaum’s outlines, Forth Edition, McGraw – Hill Company.
  4. Samuelson,P.A. and Nordhaus, W.D. (2010) “Economics”, 19th Edition, McGraw Hill Companies.
  5. මහාචාර්ය ඊ. දයාරත්න, සූක්ෂ්ම ආර්ථික විද්‍යාව.
  6. මහාචාර්ය ඊ. දයාරත්න, උසස් පෙළ හා වෘත්තීය විභාග සඳහා ආර්ථික විද්‍යාව, කතෘ ප‍්‍රකාශනයකි.
  7. මහාචාර්ය ඊ. දයාරත්න, උසස් පෙළ හා වෘත්තීය විභාග සඳහා ආර්ථික විද්‍යාව I, කතෘ ප‍්‍රකාශනයකි.
  8. මහාචාර්ය ඊ. දයාරත්න, උසස් පෙළ හා වෘත්තීය විභාග සඳහා ආර්ථික විද්‍යාව II, කතෘ ප‍්‍රකාශනයකි.