MICRO ECONOMIC THEORY
Module 1: Consumer Theory
Laws of preference –Cardinal, ordinal and revealed preference - Budget constraints and
consumer equilibrium-elasticity of demand- income and substitution effect- consumer
surplus, modern demand theory.
Module 2: Theory of Production and Costs
Goals of firm- Theory of production- concept and types production function- theory of cost-
modern cost theory.
Module 3: Theory of market
Competitive and non-competitive- supply of firms and industry- perfect competition-
monopoly- price discrimination- Monopolistic/imperfect competition -Strategic interactions -
Duopoly (Cournot and Bertrand- collusive and non-collusive models of oligopoly.
Module 4: General Equilibrium and welfare
General and partial equilibrium- Walrasian general equilibrium- tatonnement process-
graphical treatment of general equilibrium 2×2×2 model- role of value judgement Pareto
welfare economics- Arrow’s impossibility theorem - the theory of second best – Scitovsky’s
double compensation criterion - Rawl’s theory of justice- A.K Sen’s social welfare function –
equity efficiency trade-off.
Module 5 Market failure
Public goods and the free rider problem. Externalities. The Coase Theorem. Imperfect
Competition. Asymmetric Information (Moral Hazard and Adverse Selection). Optimal
Contracts: Incentives vs Risk.
MACRO ECONOMIC THEORY
Module 1: Introduction
Competing schools of macroeconomic thought- Determination of output, employment and
Price level in Classical and Keynesian models
Module 2: ISLM approach
Neo-classical and Keynesian Synthesis- The ISLM model- Keynesian and Neo-Classical
Version- Extensions of ISLM model with govt sector- Relative efficiency of fiscal and
Monetary policies- ISLM model with labour market and flexible prices- Three Sector Macro
Model
Module 3: Demand and supply of money
Demand for money: Keynesian, Patinkin’s real balance, Tobin, Baumol and Friedman
Approaches – Supply of money- Financial Intermediation- Mechanistic and behavioural
model Of money determination- money and credit multiplier-Money supply determination
in an Open economy- Asset market equilibrium – Fisher Effect-Disequilibrium money and
Buffer Stock models
Module: 4 Behavioural Foundations of Macro economics
Consumption function: Current Income Theories (views of Keynes, Kuznets’s consumption
Puzzle, Drift hypothesis of Smithies and views of Duesenberry)- Fischer’s Intertemporal
Choice model- Normal Income Theories (views of Friedman and Modigliani and others)-
Endogenous Income Theory – Robert Hall Random Walk Hypothesis- David Laibson
Behavioural Hypothesis- Empirical Evidence
Investment function: Neo-classical theory of investment – MEC and Keynesian theory of
Investment – Cost of capital and MEC- Accelerator theory of investment (simple and
flexible )- Capital Stock Adjustment Principle –Interaction of Accelerator and Multiplier –
Profit theory of 38 investment- Financial theory of investment – Tobin’s q ratio- Modigliani-
Miller theory – Investment under Uncertainty, Asymmetric Information and Irreversible
Investment.
Module 5: The Open Economy
Balance of payment and Keynesian analysis - Internal and External Equilibrium- Mundel-
Fleming model- Fixed and Flexible Exchange Rate with Capital Mobility –the Impossible
Trinity – effectiveness of fiscal and monetary police- fiscal sustainability and public debt
QUANTITATIVE TOOLS FOR BEHAVIOUR
ECONOMICS
Module 1:
Basics – frequency distribution – measures of central tendency and dispersion –
moments, skewness and kurtosis – numerical problems
Probability – concept of probability – discrete and continuous random variables – probability
and cumulative distribution functions – joint probability and cumulative distribution
functions – mathematical expectations and variance – concepts and theorems – moment
generating and characteristic functions –Special probability distributions – binomial, poisson,
exponential, normal, chi square, t and F distributions – central limit theorem.
Module 2:
Basics – exponents, polynomials, functions, limits, continuity, and derivatives – rules –
partial derivatives – differential and total differential – integration – rules –economic
applications.
Set theory – convex and concave sets and functions – local and global maximum and
minimum.
Module 3:
Optimisation – maxima and minima – constrained – Lagrangian multiplier method – first and
second order conditions – solving numerical problems.
Module 4:
Linear algebra – vectors – matrix – definition – types – relations and operations – trace,
partitioned matrices – determinants – rank – properties – inverse – properties of inverse –
solution to a system of linear equations – existence of uniqueness of solution – Cramer’s rule
– inversion method.
Module 5:
Characteristic roots and vectors – properties – quadratic forms – definiteness – distribution
of quadratic function.
PRINCIPLES OF COGNITIVE ECONOMICS
Module 1: Introduction
Shared interest of economics and psychology- relevance for psychology for economics-
economic psychological models of behaviour-mental economics.
Module 2: Motivation and personality
Motivation and personality in economic behaviour- need for achievement- locus of control-
sensation seeking and risk attitude- altruism- time preference- cognitive style-life style.
Module 3: Perception, learning and attitude
Perception-psychophysics- perceptual judgement- price perceptism- perception of money and
Inflation.
Learning- classical conditionality-operand conditioning- conflict model buying behaviour-
Attitude and utility- images.
Module 4: Limited information processing
Information processing in consumer decision making- information processing capacity-
heuristic in information processing- aspiration levels in information process- models of
information processing.
Module 5: Economic expectation, emotions and wellbeing
Economic expectation – buying intention- consumer confidence- relation between attitude
and behaviour.
Emotions and utility functions- emotion and consumer choice- subjective wellbeing-
wellbeing and income- poverty, unemployment and consumer satisfaction.
