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The Intermediate Micro Economics – I Course for BA (Hons) Economics Semester III, Delhi University has been taught by Mr. Dheeraj Suri. The Video Lectures are based upon the books prescribed by the University of Delhi. The Duration of Video Lectures is approximately 50 Hours.

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Consumer Equilibrium Test #1

1. Please Read the Questions and all the options Carefully, Before Selecting Your Choice.
2. You are not Allowed to edit your answers after submission.
3. The Paper has ten Questions
4. Time Allowed is 10 Minutes.
5. It is necessary to enter your valid Email id to attempt this test.

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1 / 10

In a two good world there is an individual with income m = 3 and utility function is given by u = = x^0.5y^0.5 . The price of good x is Re. 1 per unit and the price of good y is also Re. 1 per unit.

If the individual can consume any non negative amount of good x and y, then the optimum consumption bundle is

x = 1, y = 1

x = 1.5, y = 1.5

x = 2.5, y = 0.5

x = 0, y = 3

2 / 10

In a two good world there is an individual with income m = 3 and utility function is given by u = x^0.5y^0.5. The price of good x is Re. 1 per unit and the price of good y is also Re. 1 per unit.

If the individual can consume either zero unit of good x or at most one unit of x and any non-negative amount of good y, then the optimum consumption bundle is

x = 1, y = 2

x = 1, y = 3

x = 0, y = 3

x = 3, y = 3

3 / 10

In a two good world there is an individual with income m = 3 and utility function is given by u = x^0.5y^0.5. The price of good x is Re. 1 per unit and the price of good y is also Re. 1 per unit.

If both goods x and y can be consumed in integer amounts (i.e., zero unit, one unit, two units etc.) then the optimum consumption bundle is

x = 3, y = 1

x = 1, y = 3

x = 3, y = 0

x = 1, y = 2 or x = 2, y = 1

4 / 10

Suppose a consumers preferences over commodities 1 and 2 can be represented by the utility function U(x₁, x₂ ) = min⁡{ x₁, x₂ } + max{ x₁, x₂ }, where x₁, x₂ ≥0. The prices of the two commodities are 1 and 2 respectively and the consumers income is 150. Which of the following is true?

At the optimum, the consumer should consume 150 units of commodity 1 and none of commodity 2.

At the optimum, the consumer should consume 75 units of commodity 2 and none of commodity 1.

At the optimum, the consumer should consume 50 units of commodity 1 and 50 units of commodity 2.

At the optimum, the consumer should spend equal amount on the two commodities.

5 / 10

There are three commodities - the first commodity has a negative price -1 per unit, the second commodity is priced at +1 per unit and third is priced at +2 per unit. Income of the person is 100 per day. Then which one of the following is not true?

An individual may afford to consume the positive amounts of each per day

An individual may afford to consume any amounts of goods 2 and 3 per day

An individual may afford to consume (0, 0, 60)

An individual may afford to consume (20, 0, 60)

6 / 10

Satish is very conscious about the food he eats. He only eats rotis and dal; a cup of dal costs Rs. 2 while each roti costs Re. 1 and Satish decides to spend Rs. 13 per day on food. Also he decides to consume exactly 5500 calories a day; he has been told that each roti has 1000 calories while each cup of dal has 500 calories. He spends his entire money allotted on foods. Then

He consumes 3 rotis and 5 cups of dal.

He consumes no more than 3 rotis per day.

He consumes no more than 5 cups of dal per day.

Unless we are given some more information about preference, we cannot say what Satish does.

7 / 10

Let the following utility function represent the preference relation of an individual

U(x, y) = x^0.5 + y
Let Px, Py and M denote the prices of good x, y and money income respectively. Px, Py, M > 0

Optimal consumption bundle of the consumer includes

Only good x

Only good y

both goods x and y

cannot say

8 / 10

Let the following utility function represent the preference relation of an individual

U(x, y) = x^0.5 + y
Let Px, Py and M denote the prices of good x, y and money income respectively. Px, Py, M > 0

Given prices, as M increases optimal consumption of x

increases

decreases

remains constant

cannot say

9 / 10

Let the following utility function represent the preference relation of an individual

U(x, y) = x^0.5 + y
Let Px, Py and M denote the prices of good x, y and money income respectively. Px, Py, M > 0

Let Py = 2, Px = 1/4m, optimal consumption bundle includes

Only good x

Only good y

both goods x and y

cannot say

10 / 10

Let the following utility function represent the preference relation of an individual

U(x, y) = x^0.5 + y
Let Px, Py and M denote the prices of good x, y and money income respectively. Px, Py, M > 0

If Px = Py in the optimal consumption bundle

equal amount of x and y is consumed

consumption of x is more than y

consumption of y is more than x

cannot say

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Exam Pattern

The Question Paper of 75 Marks Will Have Two Parts (Part A & Part B)

Part A Will be of 45 Marks and it is Based Upon Topic 1

Part B Will be of 30 Marks and it is based Upon Topic 2

Course Content of Our Video Lectures

Topic 1 : Consumer Theory [45 Marks]

Part A of Question Paper will be Based Upon this

You will be Required to do 3 out of 5 Questions of 15 Marks Each in Part A

Chapter 1 : Budget Constraint [218 Minutes]

Based Upon Hal Varian Chapter 2

Number of Lectures 7 Lectures

Total Duration of Lectures 218 Minutes

Number of Questions in Notes 40 Questions

Number of MCQ Tests on this Chapter 2 Tests

Important Topics Covered

Budget Constraint, Budget Set, Budget Line, Pivot & Shift in the Budget Line, Numeraire, Tax & Subsidies, Kink in the Budget Line, Rationing, Food Stamp Program, Back Questions of Reading & Workbook

Chapter 2 : Preference [213 Minutes]

Based Upon Hal Varian Chapter 3

Number of Lectures 7 Lectures

Total Duration of Lectures 213 Minutes

Number of Questions in Notes 61 Questions

Number of MCQ Tests on this Chapter 2 Tests

Important Topics Covered

Consumer Preferences, Complete, Reflexive & Transitive Preferences, Indifference Curves, Economic Goods, Bads & Neutrals, Satiation Point, Discrete Goods, Well Behaved Preferences, Marginal Rate of Substitution, Back Questions of Reading & Workbook

Chapter 3 : Utility [150 Minutes]

Based Upon Hal Varian Chapter 4

Number of Lectures 4 Lectures

Total Duration of Lectures 150 Minutes

Number of Questions in Notes 36 Questions

Number of MCQ Tests on this Chapter 2 Tests

Important Topics Covered

Ordinal & Cardinal Utility, Utility Functions, Monotonic Transformations, Examples of Utility Functions (Cobb-Douglas, CES, Perfect Substitutes, Perfect Complements, Quasi Linear Utility Function etc.), Back Questions of Reading & Workbook

Chapter 4 : Choice [319 Minutes]

Based Upon Hal Varian Chapter 5

Number of Lectures 9 Lectures

Total Duration of Lectures 319 Minutes

Number of Questions in Notes 81 Questions

Number of MCQ Tests on this Chapter 2 Tests

Important Topics Covered

Consumer Equilibrium, Interior Optimum, Boundary Optimum, Concave Preferences, Demand Functions for Various Utility Functions, Income Tax V/s Quantity Tax, Back Questions of Reading & Workbook

Chapter 5 : Demand [268 Minutes]

Based Upon Hal Varian Chapter 6

Number of Lectures 4 Lectures

Total Duration of Lectures 268 Minutes

Number of Questions in Notes 53 Questions

Number of MCQ Tests on this Chapter 2 Tests

Important Topics Covered

Demand Functions, Normal Goods, Inferior Goods, Giffen Goods, Income Offer Curve, Engel Curve, Price Offer Curve, Demand Curve, Substitutes and Complements, Back Questions of Reading & Workbook

Chapter 6 : Revealed Preference [171 Minutes]

Based Upon Hal Varian Chapter 7

Number of Lectures 4 Lectures

Total Duration of Lectures 171 Minutes

Number of Questions in Notes 28 Questions

Number of MCQ Tests on this Chapter 2 Tests

Important Topics Covered

Direct Revealed Preferences, Indirect Revealed Preferences, Weak Axiom of Revealed Preference (WARP), Strong Axiom of Revealed Preference (SARP), Quantity & Price Index Numbers and their effect on Consumers Welfare, Indexation of Social Security Payments, Back Questions of Reading & Workbook

Chapter 7 : Slutsky Equation [344 Minutes]

Based Upon Hal Varian Chapter 8

Number of Lectures 9 Lectures

Total Duration of Lectures 344 Minutes

Number of Questions in Notes 55 Questions

Number of MCQ Tests on this Chapter 4 Tests

Important Topics Covered

Price Effect, Income Effect, Substitution Effect, Slutsky Equation, Separation of Income & Substitution Effect for Normal goods, Inferior Goods, Giffen goods and for Various Utility Functions, Law of Demand, Rebating a Tax, Voluntary Real Time Pricing, Hicksian Substitution & Income Effect, Back Questions of Reading & Workbook

Chapter 8 : Buying & Selling [441 Minutes]

Based Upon Hal Varian Chapter 9

Number of Lectures 8 Lectures

Total Duration of Lectures 441 Minutes

Number of Questions in Notes 33 Questions

Number of MCQ Tests on this Chapter 4 Tests

Important Topics Covered

Endowment, Gross Demand, Net Demand, Effect of Change in Endowment & Change in Price on Equilibrium, Offer Curve, Demand Curve, Endowment Income Effect, Labour Supply, Effect of Change in Wage Rate & Overtime Wages on Labour Supply, Back Questions of Reading & Workbook

Chapter 9 : Inter Temporal Choice [370 Minutes]

Based Upon Hal Varian Chapter 10

Number of Lectures 8 Lectures

Total Duration of Lectures 370 Minutes

Number of Questions in Notes 41 Questions

Number of MCQ Tests on this Chapter 2 Tests

Important Topics Covered

Present Value, Future Value, Annuity, Inter Temporal Budget Constraint, Consumer’s Equilibrium with Intertemporal Budget Constraint, Effect of Change in Interest Rate & Change in Inflation Rate on Consumer’s Equilibrium, Slutsky Equation & Intertemporal Choice, Relation Between Real & Nominal Interest Rates, Bonds, Back Questions of Reading & Workbook

Chapter 10 : Risk & Uncertainty [536 Minutes]

Based Upon Bernheim & Whinston Chapter 11

Number of Lectures 11 Lectures

Total Duration of Lectures 536 Minutes

Number of Questions in Notes 36 Questions

Number of MCQ Tests on this Chapter 2 Tests

Important Topics Covered

Risk & State of Nature, Risk Preferences & Indifference Curves, Guaranteed Consumption, Expected Consumption, Certainty Equivalent, Risk Premium, Expected Utility, Nature & Demand for Insurance, Risk Management with Hedging, Diversification etc., Back Questions of Reading

Topic 2 : Production, Costs and Perfect Competition [30 Marks]

Part B of Question Paper will be Based Upon this

You will be Required to do 2 out of 3 Questions of 15 Marks Each in Part B

Chapter 11 : Production Functions [452 Minutes]

Based Upon Nicholson & Snyder Chapter 9

Number of Lectures 14 Lectures

Total Duration of Lectures 452 Minutes

Number of Questions in Notes 56 Questions

Number of MCQ Tests on this Chapter 4 Tests

Important Topics Covered

Production Function, Average & Marginal Products, Diminishing Marginal Productivity, Relation Between TP_L, AP_L & MP_L, Isoquants, Properties of Isoquants, Shape of Isoquants for Various Production Functions (eg., Cobb-Douglas, CES, Fixed Proportions, Linear Production Function, Leontief Production Function etc.), MRTS, Elasticity of Substitution, Returns to Scale, Homogeneous & Homothetic Production Functions, Back Questions of Reading

Chapter 12 : Cost Functions [453 Minutes]

Based Upon Nicholson & Snyder Chapter 10

Number of Lectures 9 Lectures

Total Duration of Lectures 453 Minutes

Number of Questions in Notes 41 Questions

Number of MCQ Tests on this Chapter 2 Tests

Important Topics Covered

Cost Functions, Cost Minimizing Input Choices, Contingent Demand for Inputs, Firm’s Expansion Path, Derivations of Cost Functions for Various Production Functions, Properties of Cost Functions, Shephard’s Lemma, Short Run & Long Run Costs, Relation Between TC, AC, MC & AVC, Effect of Change in Input Prices on Cost Curves, Back Questions of Reading

Chapter 13 : Profit [288 Minutes]

Based Upon Nicholson & Snyder Chapter 11

Number of Lectures 6 Lectures

Total Duration of Lectures 288 Minutes

Number of Questions in Notes 21 Questions

Number of MCQ Tests on this Chapter 4 Tests

Important Topics Covered

Profit Maximization, MR & Elasticity, Price-Marginal Cost Breakup, Short Run Supply by a Price Taking Firm, Shut Down Decisions, Profit Functions, Properties of Profit Functions, Producer Surplus, Short Run & Long Run Profit Functions, Profit Maximization & Input Demand, Unconditional Input Demands, Substitution Effect, Output Effect, Back Questions of Reading

Previous Year Papers

2019

2018

End of Syllabus

Course Description

Intermediate Microeconomics I (HC32)
Core Course (CC) Credit: 6

Course Objective

The course is designed to provide a sound training in microeconomic theory to formally analyze the behaviour of individual agents. Since students are already familiar with the quantitative techniques in the previous semesters, mathematical tools are used to facilitate understanding of the basic concepts. This course looks at the behaviour of the consumer and the producer and also covers the behaviour of a competitive firm.

Course Learning Outcomes

The course trains the students of Economics about the basic elements of consumer theory and production theory and the functioning of perfectly competitive market. This course aims to give students a solid grasp of microeconomic analysis at the intermediate-level using mathematical techniques where appropriate.

Unit 1

Consumer theory. Preference; utility; budget constraint; choice; demand; Slutsky equation; buying and selling; choice under risk and intertemporal choice; revealed preference

Unit 2

Production, costs and perfect competition Technology; isoquants; production with one and more variable inputs; returns to scale; short run and long run costs; cost curves in the short run and long run; review of perfect competition

References

1. Bernheim, B., Whinston, M. (2009). Microeconomics. Tata McGraw- Hill.

2. Snyder, C., Nicholson, W. (2010). Fundamentals of microeconomics. Cengage Learning.

3. Varian, H. (2010). Intermediate microeconomics: A modern approach, 8th ed. W. W. Norton.

Additional Resources

Bergstrom, T., Varian, H. (2014). Workouts in intermediate microeconomics. W. W. Norton.

Syllabus for Intermediate Micro Economics – I as Prescribed by University of Delhi

B.A.Hons_.-Third-Semester-Intermediate-Microeconomics