Applied Economics
Semester III · BCA 206 · 2 credits
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chapters done
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The syllabus asks for
- Scarcity, choice and opportunity cost
- Economic systems
- Microeconomics and macroeconomics
- Goals and instruments of macroeconomics
- Demand, supply and market equilibrium
- Seeing the ideas: frontier, equilibrium and the people behind them
- Eight applications of economic thinking for a BCA student
Key points
- Scarcity forces choice, and each choice costs its best alternative; the PPF illustrates trade-offs and growth.
- Micro studies individual markets and decision-makers; macro studies aggregates; policy pursues several goals with fiscal, monetary and trade instruments.
- Demand and supply determine price and quantity; shifts, controls and taxes can be analysed with equations.
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The syllabus asks for
- Price elasticity of demand
- Income and cross elasticity of demand
- Uses of elasticity
- Elasticity of supply
- Seeing elasticity: five cases, the demand line and the bumper harvest
- Eight uses of elasticity in business, government and Nepal
Key points
- Elasticity measures responsiveness; price elasticity is classified from perfectly inelastic to perfectly elastic and depends on substitutes, necessity, income share and time.
- Total outlay, point and arc methods measure it; income and cross elasticities classify goods and relationships.
- Elasticity guides pricing, taxation and policy.
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The syllabus asks for
- Cardinal utility analysis
- Ordinal utility: indifference curves
- Price effect, income effect and substitution effect
- Seeing utility: diminishing returns, bundle choice and Hicks's split
- Eight uses of utility and indifference-curve analysis
Key points
- Cardinal analysis explains demand through diminishing marginal utility and the equi-marginal principle.
- Ordinal analysis uses indifference curves and the budget line; equilibrium is tangency (MRS = price ratio).
- Price effects decompose into substitution and income effects; PCC gives demand and ICC gives Engel curves.
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The syllabus asks for
- Concepts of cost
- Short-run cost curves
- Long-run cost curves
- Concept of revenue
- Seeing costs and revenues: schedules, the long-run envelope and the MR line
- Eight uses of cost and revenue analysis
Key points
- Economic cost includes implicit costs, so economic profit is lower than accounting profit; normal profit is a cost.
- Short-run cost curves are U-shaped because of diminishing returns; long-run curves are envelopes shaped by scale economies.
- Revenue curves are horizontal under perfect competition and downward-sloping with MR below AR otherwise.
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The syllabus asks for
- Market structures compared
- The rule for profit maximisation
- Perfect competition
- Monopoly
- Monopolistic competition
- Oligopoly
- Seeing the market structures: price taker, monopolist, discriminator, oligopolist
- Eight lessons from market structures for Nepali firms and consumers
Key points
- Every firm maximises profit where MR = MC; the market structure fixes the shape of MR.
- Competition drives price to the minimum of average cost; monopoly restricts output and raises price, creating deadweight loss; price discrimination raises monopoly profit.
- Monopolistic competition gives variety with excess capacity; oligopolists are interdependent and may collude but are tempted to cheat.
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The syllabus asks for
- Circular flow of income and expenditure
- Concepts of national income
- Real and nominal GDP; GDP deflator
- Methods of computing national income
- Seeing national income: flows, the Keynesian cross and the value chain
- Eight uses of national income statistics
Key points
- The circular flow links output, income and spending; equilibrium needs leakages = injections.
- GDP, GNP, NDP, NNP, NI, PI, DI and PCI are successive adjustments for foreign income, depreciation, taxes and transfers.
- Real GDP strips out price changes using the deflator; national income is computed by product, income or expenditure methods, which agree.
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The syllabus asks for
- Concept and functions of money
- Inflation
- Banking: commercial banks and the central bank
- International trade, balance of trade and balance of payments
- Seeing money, inflation, central banking and trade
- Eight roles of money, banks and trade in everyday Nepali life
Key points
- Money serves four functions; its value falls as the price level rises; the money supply (M1, M2) is created by banks via the multiplier and controlled by the central bank.
- Inflation, caused by demand, costs or structure, redistributes income and is fought with monetary, fiscal and supply measures.
- Commercial banks take deposits and lend; the NRB issues currency, regulates banks and conducts monetary policy.
- International trade differs from domestic trade by frictions and currencies; BoT covers goods, while the BoP records all transactions and balances in total.
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The paper
TU assessment: 60% final examination set by the university, 40% internal (assignments, lab work, attendance). Confirm the split in your college's notice.
Where the hours go
Teaching hours are the board's guide to how much of the paper each part carries.
- Unit 5 · Market Structure9 h
- Unit 1 · Introduction6 h
- Unit 2 · Elasticity of Demand and Supply6 h
- Unit 3 · Theory of Consumer Behavior6 h
- Unit 4 · Cost and Revenue Curves6 h
- Unit 6 · National Income Accounting6 h
- Unit 7 · Money, Banking and International Trade6 h