BBA

Course Title: Business Economics
Code No: FO 113
Area of Study: Foundation
Credit: 3

Course Objective: The objective of the course is to develop fundamental understanding of microeconomic
theories and methods as they are applied to business and decision making.
Course Contents:
Unit 1: Introduction of microeconomics LH: 4
Problems of Scarcity, Central problems of Economics, Meaning, Definition and Types of Microeconomics, and
Importance of Microeconomics in Business Decisions
Unit II: Theory of Demand and Supply LH: 12
Demand: Concept, Derivation of Individual and Market Demand Curves, Movement along a Demand Curve
and Shift in Demand Curve, Demand function and Determinants of demand, Elasticity of Demand (price,
income, cross) [Numerical problems], Measurement of Price Elasticity of Demand (Point, Arc, Total outlay,
Percentage), Relationship between Elasticity and Average revenue (AR)- Marginal revenue (MR), Importance
of Elasticity of Demand
Supply: Concepts, Supply function, Elasticity of Supply and its measurement
Unit III: Theory of consumer behavior LH: 9
Concepts of Cardinal Utility, Derivation of Marginal Utility (MU) and Total Utility (TU) curves, approach of
Ordinal Utility: Indifference curve (meaning, assumptions, MRS and properties), Budget line and its shift,
Consumer’s equilibrium, Income effect, Price effect, Substitution effect, Decomposition of Price effect into
Income and Substitution effect, Derivation of ICC and PCC for normal and inferior goods

Unit IV: Theory of Production LH: 7
Concept, forms of product (TP, AP, MP), Short-run and Long-run production functions: concepts, law of
variable proportions, concepts and properties of Iso-quants, MRTSLK, Iso-costs, Producer’s equilibrium:
optimal employment of inputs (two variables) [numerical problems], Law of returns to scale, Expansion path
Unit V: Cost and Revenue Curves: LH: 4
Cost concepts, Short-run costs and relationship to each other, Long-run cost and its derivation, U-shaped AC
curves: reasons; Revenue and revenue curves under different market
Unit VI: Theory of product pricing: LH: 8
Market types and its characteristics, concept of equilibrium of firms and industry,
Perfect competition: price and output determination in SR and LR by TC-TR and MC-MR approach,
Monopoly: price and output determination in SR and LR by TC-TR and MC-MR approach, price discrimination
(concepts, degrees and objective)
Monopolistic competition: short-run equilibrium, long-run equilibrium, excess capacity
[Numerical problems for profit maximization condition]
Unit VII: Theory of factor pricing: LH: 4
Rent: concept, modern theory of rent; Wages: Marginal productivity theory of wages; Interest: Liquidity,
preference theory of interest; Profits: Innovation theory of Profit

Suggested References:
N.G. Mankiw., Principles of Microeconomics, 4e, South- Western Cengage Learning India Ltd.,
Dwevidi D.N., Microeconomics Theory and Applications, 2003, Pearson Education, New Delhi,
Koutsoyianuis A., Modern Micro Economics, MacMillan Press
Jhingan, M.L., Micro Economic Theory, Konark Publishers
Chopra, P.N., Advance Micro Economics, Kalyani Publication

Ahuja, H.L., Advance Economic Theory, S.Chand and Company
Joshi Shyam, Micro Economics,
RG Shrestha and GM Adhikari, Micro Economics, 2011, Asmita Books Publishers, Kathmandu