1 Utility and Indifference Curve

Law of diminishing marginal utility

Derivation of the individual demand curve

Indifference Curve
Indifference curves cannot intersect

Budget line

Effect on the budget line of a change in income

Effect on the budget line of a change in price

The optimum consumption point

Changes in Max’s Budget

Changes in relative prices

Income and substitution effect of a price change

Income, substitution and price effects of normal goods : price of a normal good falls
Income, substitution and price effects of inferior goods : price of an inferior good falls

Income, substitution and price effects of Giffen goods: price of the giffen good falls
2 Production, Cost and Growth
A short run production function

Effect of an increase

Total Product
Average and marginal physical product

Costs in the short-run

AVC, AFC, ATC and MC curves

LRAC envelope curve

Falling, constant and rising LRAC curve

X inefficiency
3 Revenue and Profit
Revenue for a price taking firm

Revenue for a price-setting firm

Profit of a Price Taking Firm

The total profit : shaded region

Profit of a Price Setting Firm
4 Perfect Market Structures

Short-run Equilibrium for Perfect Competition

i) Super normal Profit

ii) Normal profit

iii) economic loss

Economic loss and derivation of the short run supply curve

Perfect Competition in the Long-run

i) Firms keep entering the market until economic profits are zero
ii) Firms keep leaving until there are no longer any economic profits

The Long-run Industry Supply Curve

Productive Efficiency

i) Macro level

ii) micro level

Allocative efficiency
Barriers to entry: Economies of scale:

Monopoly: Equilibrium Price and Output

Allocative Inefficiency
Deadweight loss Monopoly

Economies of Scale

Controlling Monopolies
I) Price controls
ii) Marginal Cost pricing:

iii) Natural Monopoly

First Degree Price discrimination

Third Degree Price Discrimination
6 Labour Market

Demand for Labour and Profit Maximization

Backwards bending supply curve

Industry Supply of Labour

Trade union restricts the supply of labour

Economic Rent and Transfer Earnings

An individual firm

Labour market: employers and employees are wage takers

individual worker
Monopsony in the Labour Market

Effect of trade union on employment: Perfect competition

Bilateral monopoly: a monopsony competeing with a trade union

Wage Differential
7 Government Microeconomic Intervention

Sources of market failure : Market power

Negative Production Externality

Positive Production Externality

Positive Consumption externality

Negative Consumption Externality

Pollution permits
Consequences of government intervention : Deadweight loss
8 Circular Flow of Income

Circular Flow of Income : Closed Economy

Sector model-consumption

Equilibrium in the income expenditure model

Saving function

Equilibrium in the injections-leakages approach

The consumption function shifting below and the saving function shifting
upward.
Multiplier Effect

Determinants of Investment : Interest Rates

Paradox of Thrift

Budget Balance
3 Sector Model's 3 sector equilibrium
International variations in inflation rate

Inflationary gap

deflationary gap
9 Economic Growth and Sustainability

Actual growth

Potential growth

Business Cycle
Negative output Gap

Positive output gap

Effect of automatic stabilisers

10 Unemployment
Unemployment

Unemployment in the economy with a negative AD shock

Fiscal Policy
11 Money and Banking

Monetary Expansion

Market for loanable funds

Demand for money-liquidity preference theory

Liquidity Preference

Loanable funds theory and Keynesian theory

i) money supply fixed ii) rise in money supply

Liquidity Trap
12 Government Macroeconomic Intervention
Relationship between growth and inflation

Relationship between growth and inflation : supply side measure

Phillips curve
Expectations-augmented Phillips curve

Laffer Curve
14 Exchange Rates

Fixed or Pegged Exchange rate

Managed Float

J curve
15 Economic Development

Kuznet Curve

Lorenz curve and gini coefficient

16 Globalisation
Tariffs