Indian Institute of Management Calcutta

Programme : PGP
Name of the Course: MICROECONOMICS
Core / Elective: CORE Cap (for Elective): NOT APPLICABLE
Credit: 3
Academic Year & Term: 2020-21, TERM –I
Course Coordinator: PROF. CONAN MUKHERJEE
Email: : [email protected]

Instructor: PROF. SOURAV BHATTACHARYA (Sessions 1 – 20)

[Sections: ]

Affiliation: IIMC
Email: : [email protected]

Instructor: PROF. RUNA SARKAR(Sessions 1 – 20) [Sections D

and E]
Affiliation: IIMC
Email: : [email protected]

Instructor: PROF. ARIJIT SEN (Sessions 1 – 20) [Section ]

Affiliation: IIMC
Email: : [email protected]

Instructor: PROF. CONAN MUKHERJEE (Sessions 1 – 20)

[Section ]

Affiliation: IIMC
Email: : [email protected]

Introduction to Course /Course Description

The course provides a rigorous introduction to the way markets function in today’s economies.

Course Objective and Key-takeaways from the course

The course objective is to acquaint students with both the strengths of markets as a mechanism for decentralized
decision-making as well as various reasons why markets might fail.

The key takeaways from the course are (1) an understanding and appreciation of the way markets determine
allocation of scarce resources of the economy, (2) causes of market failures and (3) evaluation of public policy
measures to address market failures. These also help business students understand the basic conditions that
determine the success of enterprises in various types of competitive environments.

Course Level Learning Goals

1. Possess state-of-the-art knowledge of theory and practice in all functional fields of management and the ability to
think critically, and apply them to diagnose and find solutions to organizational problems, even in unfamiliar or
uncertain situations.

3. Develop a global perspective that is built upon knowledge of economic, technological, regulatory and political
forces that are shaping a new international order in the 21st century.

6. Acquire capacity to apply their professional knowledge and skills to diagnose and resolve business problems in
actual organizational settings.

International Components in your course (if any)

Various examples which transcend boundaries are used in this course. Students are regularly encouraged to read
items from The Economist, Knowledge@Wharton, New York Times etc. For example, (i) students are encouraged to
read about the way patent laws determine innovation patterns in the western hemisphere, (ii) comparison of
profitability of international aviation with domestic aviation sectors, (iii) functioning of global oil markets etc.

Pre-requisites

High school mathematics (including calculus).

Required Text Book(s)

Microeconomics, Bernheim and Whinston. McGraw-Hill (2014)

Recommended Text Book(s):

Microeconomics, Pindyck and Rubinfield. Perason (2018)

Microeconomics, Hubbard and O’ Brien. Pearson (2019)

Technology enabled learning component for your course

Additional and topical materials (readings, videos, interactive simulations) are regularly uploaded on the LMS. In
addition, slides on class discussion, readings videos and interactive simulations are made available to students.
Session Plan

S No. Topic Intended learning outcome References (READINGS FROM

`REQUIRED’ TEXT BOOK)
1 INTRODUCTION The student should know policy issues CHAPTERS 1 & 3
related to resource allocation
questions, choices between centralized
and decentralized decision-making,
complications in defining market,
positive/normative model of practical
decision-making.

2. DEMAND AND SUPPLY The student should be able to CHAPTER 2

FRAMEWORK distinguish between shift and
movement along supply and demand
curves, and use it to solve for
equilibrium. The student should also
learn about different types of
elasticities and their potential uses in
business situations

3. REPRESENT CONSUMER The student should know how to use CHAPTER 4

PREFERENCES indifference curve graphs to analyze
consumer decision-making, and
understand concepts of substitute and
complement goods.

4. BEST CHOICE POINTS The student should know how to CHAPTER 5, SECTION 6.1
AND DEMAND CURVES analyze graphically impact of change
in prices and other parameters on
consumer demand. In addition they
should have an initial understanding
of the revealed preference approach of
motivating a demand curve.

5. APPLICATIONS- The student should learn about the

ELASTICITIES, LABOUR relationship between price elasticities SECTIONS 2.4, 6.3
SUPPLY CURVES, and welfare distribution in society,
CONSUMER SURPLUS, and be able to use this information to
TAXES & SUBSIDIES obtain a quantitative evaluation of
simple tax/transfer schemes.

6. CONSUMER CHOICE Students should be able to analyze risk CHAPTER 11

UNDER RISK and risk attitudes of an individual
using expected values, risk premium,
and certainty equivalent - and describe
optimum decisions under risk and
uncertainty.
S No. Topic Intended learning outcome References (READINGS FROM
`REQUIRED’ TEXT BOOK)
7. PRODUCTION & Students should know how to analyse CHAPTER 7
TECHNOLOGY firm level decision making, and be
able to graphically describe relations
between average product and
marginal product of a firm. In
addition, they should be familiar with
ideas of diminishing returns and
returns to scale, particularly in
relation to Cobb Douglass production
function.

8. COSTS – I Students should be able to distinguish CHAPTER 8

between the short run and long run,
and various kinds of costs in each
case. They should be able to
conceptualize a cost function for a
given production function.

9. COSTS –II Students should able to obtain optimal CHAPTER 8

input purchase decisions using a cost
function. They should also know how
to optimally choose output production
strategies across multiple plants.

10. PROFIT MAXIMIZATION Students should be able to obtain a CHAPTER 9, SECTION 10.2
marginal revenue curve from demand
curve, and appreciate that profit-
maximizing price and output for an
individual firm depends crucially on
this curve. They should be able to
analyze the shut-down decision of a
firm, and derive a supply curve in a
competitive setting. Further, the
contrast between profit and producer
surplus should be clear.

11. PERFECT COMPETITION Students should be able to extend CHAPTER 14

findings about a single competitive
firm to obtain market demand and
supply curves in a competitive market.
They should be able to trace short run
fluctuations in firm outputs due to a
demand shock, and thereby, analyze a
long run perfectly competitive industry
equilibrium.

Students should be able to analyze

S No. Topic Intended learning outcome References (READINGS FROM
`REQUIRED’ TEXT BOOK)
12. MONOPOLY causes of monopoly power and CHAPTER 17
compute the profit maximizing price
and quantities. Further, they should be
able to assess of social costs of
monopoly using consumer and
producer surpluses vis-a-vis a
perfectly competitive market. Finally,
they should aware of possibilities as
well as limitations on government
regulation of a monopoly market.

Students should be aware of innovative

13. PRICING STRATEGIES – I pricing tools available to a monopolist CHAPTER 18
to capture consumer surplus as
revenue. The methods discussed in this
class are perfect price discrimination
and imperfect price discrimination
based on observable customer
characteristics.

Students continue to learn techniques

14. PRICING STRATEGIES – II of monopoly pricing. In particular, CHAPTER 18
they are expected to know imperfect
price discrimination based on un-
observable characteristic such as
quantity dependent pricing.
Additionally, they should be aware of
two-part tariff methods of capturing
consumer surplus for identical
consumers. Finally, they should know
concepts of pure and mixed bundling.

GAME THEORY – I Students should be able to distinguish

15. between one-stage and multiple-stage CHAPTER 12
games, as well construct payoff tables.
They should be able to apply this
knowledge to analyze a prisoners'
dilemma game and obtain dominant
strategies, dominated strategies, and
Nash Equilibria for this game.

GAME THEORY – II Students should be able to distinguish

16. between mixed strategy and pure CHAPTER 12
strategy, and analyze their difference
with respect to Nash equilibrium, both
in game of repeated play as well as
one-time games. Finally, students
should be able to appreciate the
strategic complexities that may arise
from incomplete information games.

IMPERFECT Students should be able to analyze

S No. Topic Intended learning outcome References (READINGS FROM
`REQUIRED’ TEXT BOOK)
12. MONOPOLY causes of monopoly power and CHAPTER 17
compute the profit maximizing price
and quantities. Further, they should be
able to assess of social costs of
monopoly using consumer and
producer surpluses vis-a-vis a
perfectly competitive market. Finally,
they should aware of possibilities as
well as limitations on government
regulation of a monopoly market.

Students should be aware of innovative

13. PRICING STRATEGIES – I pricing tools available to a monopolist CHAPTER 18
to capture consumer surplus as
revenue. The methods discussed in this
class are perfect price discrimination
and imperfect price discrimination
based on observable customer
characteristics.

Students continue to learn techniques

14. PRICING STRATEGIES – II of monopoly pricing. In particular, CHAPTER 18
they are expected to know imperfect
price discrimination based on un-
observable characteristic such as
quantity dependent pricing.
Additionally, they should be aware of
two-part tariff methods of capturing
consumer surplus for identical
consumers. Finally, they should know
concepts of pure and mixed bundling.

GAME THEORY – I Students should be able to distinguish

15. between one-stage and multiple-stage CHAPTER 12
games, as well construct payoff tables.
They should be able to apply this
knowledge to analyze a prisoners'
dilemma game and obtain dominant
strategies, dominated strategies, and
Nash Equilibria for this game.

GAME THEORY – II Students should be able to distinguish

16. between mixed strategy and pure CHAPTER 12
strategy, and analyze their difference
with respect to Nash equilibrium, both
in game of repeated play as well as
one-time games. Finally, students
should be able to appreciate the
strategic complexities that may arise
from incomplete information games.

IMPERFECT Students should be able to analyze

Evaluation Components

 Components  Weightage

Mid-term 50%
End-term 50%

Online Course Management (moodle)/course web

→ All presentations made in class will be uploaded on the course website.

→ Relevant readings, ideas, simulations, and practice quizzes are uploaded after each class.
→ Instructors communicate with students using messaging facility of MOODLE regarding examinations
expectations from classes and any other issues.
→ Students are encouraged to use MOODLE to communicate with peers, faculty and initiate interesting
discussion.