(i) Meaning of micro and macro economics:

Meaning, difference.

A basic understanding of the micro and macro

economics is needed. Interdependence and

differences between micro and macro

economics.

(ii) Demand: meaning, factors affecting demand;

Demand function; Law of Demand; derivation

of demand curve; movement and shift of the

demand curve; exceptions to the Law of

Demand.

Law of Diminishing Marginal Utility, Law of

Equimarginal Utility, consumers equilibrium

through utility approach.

The concept of demand (exante) and effective

(expost) demand. A demand function to be

specified incorporating the determinants of

demand. Diagrams should be used in

explaining the Law of Demand, its derivation

using demand schedule. Derivation of market

demand curve from individual demand curve.

Law of Diminishing Marginal Utility, Law of

Equimarginal Utility and consumer’s

equilibrium with the help of schedule and

graph.

(iii) Elasticity of demand: meaning, types of

elasticity of demand, measurement of

elasticity of demand; factors affecting

elasticity of demand; importance of the

concept of elasticity of demand.

Various methods of measurement of the

elasticity of demand: point method, arc

method, percentage method, expenditure

method and geometric method. (7umericals

required on percentage method only). The

cross and income elasticity of demand must be

explained. Use diagrams wherever necessary.

Degrees of elasticity of demand to be

explained.

(iv) Supply: meaning; difference between stock

and supply; determinants of supply; time

period and supply; Law of Supply; movement

and shift of the supply curve; elasticity of

supply

Difference between stock (actual supply) and

supply (intended supply) with reference to the

time period, with the help of certain examples.

A supply function should be specified and

explained. Law of Supply, supply schedule

and supply curve. Derivation of market supply

curve from individual supply curve.

Movement and shift of the supply curve.

Meaning and degrees of elasticity of supply

(methods of measuring elasticity of supply are

not to be included).

(v) Equilibrium price and effect of changes in

demand and supply on the equilibrium price.

A basic understanding of the concept of

equilibrium. The effects of changes in demand

and supply - both along the curves and shift of

the curves to be explained.

(vi) Concept of product and production function:

returns to a factor, total, average and marginal

physical products; Law of Variable

Proportions and its three stages; returns to

scale.

A production function to be specified and

explained (concept only - specific production

function not required). Law of Variable

Proportions: statement, assumptions,

schedule (for the purpose of understanding

and not for testing), diagram and explanation

to the three stages and criticism. A

comparison should be made between Law of

Variable Proportion and the returns to scale

concepts.

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(vii) Main market forms: perfect competition,

monopolistic competition, oligopoly,

monopoly; characteristics of the various

market forms; equilibrium of firm under short

run and long run under perfect competition.

Features of perfect competition, monopolistic

competition, oligopoly and monopoly.

Equilibrium of firms under short run and long

run, under perfect competition (to be

explained with the help of diagrams).

(viii) Cost and revenue: Basic concepts of cost;

fixed cost, variable cost, total cost, marginal

cost and average cost – their relationships;

opportunity cost; short run and long run cost

curves – internal and external economies and

diseconomies. Revenue: meaning; average

revenue, marginal revenue and total revenue

and their relationships under perfect

competition and imperfect competition.

Basic concepts – private cost, economic cost,

social cost, money cost, real cost, explicit

cost, implicit cost.

Cost concepts – Fixed cost, variable cost,

total cost, marginal cost, average cost with

schedule and diagram; relationship between

average cost, marginal cost, total cost.

Derivation of long run average cost curve

from short run average cost curve.

Opportunity cost – meaning only.

Revenue – Average revenue, marginal

revenue, total revenue – concepts and

relationships under perfect competition and

imperfect competition.

(ix) Factor pricing: basic concepts of rent, wages,

interest and profit.

Basic concepts of economic rent, transfer

earning, quasi-rent; nominal wages and real

wages, collective bargaining; gross interest,

net interest, gross profit and net profit.

(i) Circular flow of Income.

A simple model explaining the circular flow of

income with two, three and four sector models

with leakages and injections.

(ii) Nature of goods and services produced.

Economic and non economic goods, economic

and non economic services, intermediate and

final goods, consumer goods and producer

goods, single-use and durable-use goods.

(iii) Concepts and definition of NY, GNP, GDP,

NNP, private income, personal income,

personal disposable income and per capita

income; relationship between the income

concepts.

A brief understanding of the mentioned

national income aggregates is needed. The

concepts of G7P and 77P should be

explained both at factor cost and market

prices.

(iv) Methods of measuring National Income:

product or value-added method; income

method and expenditure method with simple

numericals based on them.

Simple numericals based on all the methods to

be covered for better understanding of the

concept. Precautions and difficulties of

measuring 7ational Income for each method.

(i) Need for international trade; basis of

international trade in terms of the Theory of

Comparative Costs (Ricardo).

7eed, advantages, disadvantages of

international trade; the Theory of Absolute

Cost and Comparative Cost in terms of

Opportunity Cost to be explained as a basis of

international trade. Production Possibilities

Curve (PPC) - to be used for illustration.

(ii) Balance of Payments: Balance of Trade -

meaning; causes of disequilibrium in B.O.P.;

measures to correct the disequilibrium in the

B.O.P.

The concepts of balance of trade, balance of

current account and balance of capital

account to be explained. The causes of

disequilibrium and the measures, both

monetary and fiscal to be explained.

70

(i) Public Revenue: meaning; Taxes: types,

direct, indirect taxes, cannons of taxation;

progressive, proportional, regressive,

digressive (meaning only). Sources of central

and state revenue (names only); VAT.

A basic understanding of the above mentioned

concepts. The concept of VAT to be explained.

MODVAT, CE7VAT (for the purpose of

understanding and not for testing).

(ii) Public Expenditure: meaning, reasons for

growth of public expenditure in recent times.

The growth of the public expenditure in view

of increasing functions and responsibilities of

the government to be explained.

(iii) Public Debt: reasons for external and internal

borrowing by the government; methods of

debt redemption; effects of borrowing on the

Indian economy.

Public Debt: meaning; types:

internal-external, productive-unproductive,

redeemable-irredeemable, funded-unfunded,

voluntary and forced, short-term and longterm,

marketable and non-marketable debts;

reasons for external and internal borrowing

by the government; debt redemption

methods, effects of borrowing on the Indian

economy.

(iv) Fiscal Policy: meaning, objectives and

instruments of fiscal policy.

Meaning, objectives and instruments of fiscal

policy (taxation, public debt, public

expenditure).

(v) Deficit Financing: meaning, types of deficit,

“why” deficit financing and effects of deficit

financing. Indian compulsion for deficit

financing.

To be explained in the context of rising public

expenditure and inadequacy of revenues of

the government to meet this requirement.

Types of deficits: a conceptual understanding

of fiscal deficit, budget deficit, revenue deficit

and primary deficit.

(vi) Budget: meaning, importance and types;

budgetary procedure: preparation, enactment,

execution and parliamentary control over

finance, in brief.

Meaning, importance and types of budget –

union, state, planned, performance,

supplementary, zero-base, vote on account,

revenue, capital; concept of deficit, surplus

and balance budgets.

The budgetary procedure requires only a brief

mention (for the purpose of understanding

and not for testing).