TOPICS

Price theory (Demand Analysis)

1. Price and value
2. Importance of prices

• Definition of demand

1. Difference between demand, wants and effective demand
2. Classification of demand (individual/household, market/aggregate demand)
3. Law of demand

• Relationship between price and quantity (Demand schedule, demand curve and demand function)
• Nature and characteristics of normal demand curve

1. Reasons behind the download sloping demand curve
2. Factors affecting demand
3. Abnormal/ exceptional demand and curve

• Reasons/situations for abnormal demand curves
• Types of demand (competitive, joint, derived and composite)
• Change in demand and change in quantity demanded

1. Factors affecting changes in demand

• Revision question

Elasticity of demand

2. Definition of elasticity of demand
3. classification of elasticity of demand (price elasticity of demand, cross elasticity of demand, income elasticity of demand )

• price elasticity of demand

1. cross elasticity of demand
2. income elasticity of demand

Supply analysis

1. definition of supply
2. classification of supply

• law of supply

1. relationship between price and quantity supplied (supply schedule, supply curve and supply function)
2. changes in supply and changes in quantity supply
3. types of supply

• factors affecting supply
• exceptional supply curve

1. revision questions

Elasticity of supply

1. definition of elasticity of supply
2. types of elasticity of supply

• importance

Theory of price determination

5. Concept of market
6. Price determination under free and regulated markets

• Price determination in a free market

1. Equilibrium price and quantity in the product and factor markets
2. Definition of equilibrium price and quantity
3. Price mechanism(price system)

• Functions/advantages of price mechanism
• Disadvantages of price mechanism

1. How market price is determined in a market economy
2. Tabular, graphical and functional determination
3. Effects of tax on equilibrium price and quantity

• Effects of subsidy on equilibrium price and quantity
• Price determination in a regulated market
• Reasons for price control

1. Types of price controls/regulations (maximum, minimum and minimum wage)

• Maximum price control
• Effects of price ceiling
• Reasons/importance of price ceiling
• How to make price ceiling policy effective

1. Minimum price control

• Effects of minimum price control
• Reasons/importance of minimum price control
• How to price floor policy effective
• Minimum wage legislation
• Reasons/importance of minimum wage effective
• Effects of minimum wage
• How to make minimum wage policy wage
• General effects of government price legislation
• Review questions

Theory of consumer behavior

6. Introduction
7. Concept of utility

• Terms relating to the theory of utility (marginal utility, total utility and average utility)

1. The law of diminishing marginal utility
2. Relationship between marginal utility, average utility and total utility
3. Relation between marginal utility, price and quantity demanded of a commodity

• Theories used in explaining the behavior of a consumers
• The cardinal utility theory

1. Analysis marginal utility theory
2. Equilibrium of consumer or utility maximization
3. Conditions for determining consumer equilibrium (utility maximization)

• Paradox of value
• Weakness/limitations/criticism of marginal utility theory
• Consumer surplus analysis

1. Substitution and income effects

• Example and revision questions

Theory of production

7. Concept of production
8. Definition

• Examples of production

1. Production efficiency
2. Technical efficiency
3. Economic efficiency

• Time periods in production
• Production analysis in the short-run

1. Law of diminishing marginal returns (law of variable proportion)
2. Assumptions of the law of diminishing marginal returns
3. Stages of production

• Relationship involving MP, TP and AP
• Economic importance of the law of diminishing marginal returns
• Long-run production theory

1. Law of returns to scale

• Economics of scale
• Scale of production
• Labour intensive method of production
• Capital intensive of production

1. Advantages and disadvantages of capital intensive method of production

• Worked examples
• Revision questions

Theory of cost

8. Meaning of cost of production
9. Definition of cost

• Terminologies used in cost theory

1. Economist’s and accountant’s view cost
2. Short-run cost concepts and their constructions (curves)
3. Relationship of various cost curves

• Why the short-run marginal cost curve is U-shaped
• The long-run average cost (LRAC) analysis

1. Derivation of the average long-run average cost curve
2. Why the long-run average cost curve is U-shaped
3. Revision questions

The theory of the firm or market structures

9. Introduction
10. Difference a firm and an industry

• Criteria for distinguishing market structures

1. Types of market structures
2. Some important concepts
3. Meaning of term equilibrium

• Determination of profit maximization output level
• Profit and types of profit

1. Perfect competition
2. Characteristics of perfect competition
3. Determination of price and output under perfect competition

• Short-run equilibrium of perfectly competitive firm
• Long-run equilibrium
• Monopoly

1. Relevant previous knowledge

• Definition
• Characteristics of a monopoly firm
• Difference between monopoly and monopolist
• Sources of monopoly power

1. The power of the monopoly

• Why government sometimes promote monopoly power
• Demand and revenue concepts
• The demand curve under monopoly
• Definition and relationships
• Equilibrium analysis
• Short run equilibrium analysis
• The state or the government can control monopoly power
• Long-run equilibrium analysis
• The relationship between price, marginal cost and average cost
• Terms relating to monopoly analysis
• Consumer sovereignty
• Price discrimination
• Types of price description
• Trial questions