MODERN 
       MICROECONOMICS 
             A.  KOUTSOYIANNIS 
              Professor of 
                    Economics 
            University of 
                  Waterloo, Ontario 
                 M 
                                                ©  A.  Koutsoyiannis 1975 
                                     All  rights reserved. No part of 
                                                                    this publication 
                                     may be reproduced or 
                                                            transmitted, in any form 
                                          or by any means, without permission. 
                                                    First edition 1975 
                                             Reprinted 1976 
                                                           (twice), 1977 (twice) 
                                                      Published 
                                                                by 
                                        THE MACMILLAN PRESS LTD 
                                                 London and 
                                                             Basin!{stoke 
                                          Associated 
                                                     companies in Delhi 
                                                                       Dublin 
                                        Hong 
                                             Kong 
                                                   Johannesburg 
                                                                Lagos 
                                                                      Melbourne 
                                             New 
                                                  YorkS 
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                            ISBN 978-0-333-18285-7              ISBN 978-1-349-15603-0 (eBook) 
                                              DOI 
                                                   10.1007/978-1-349-15603-0 
                                                By the same 
                                                                author 
                                     THEORY OF ECONOMETRICS 
                                                   (Second 
                                                           Edition) 
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               To Charles F. Carter 
                     and 
                  Janet Carter 
                     Contents 
                     Preface                                                                                                              xi 
                                                                       PART ONE 
                                                    THE BASIC TOOLS OF ANALYSIS 
                           INTRODUCTION                                                                                                    3 
                              I   Economic Models                                                                                          3 
                             II   Classification of Markets                                                                               4 
                           III  The Concept of an 'Industry'                                                                               7 
                                  A.     The Importance of the Concept of an 'Industry'                                                   7 
                                  B.     Criteria for the Classification of Firms into Industries                                         8 
                       2  THEORY OF DEMAND                                                                                               13 
                              I   Theory of Consumer Behaviour                                                                           13 
                                  A.     The Cardinal Utility Theory                                                                     14 
                                   B.    The Indifference Curves Theory                                                                  17 
                                  C.     The Revealed Preference Hypothesis                                                              28 
                                  D.  The Consumers' Surplus                                                                             32 
                                  E.     Some Applications of Indifference Curves Analysis                                               35 
                             II  The Market Demand                                                                                       44 
                                  A.     Derivation of the Market Demand                                                                 44 
                                  B.     Determinants of Demand                                                                          45 
                                  C.     Elasticities of Demand                                                                          46 
                                  D.  Market Demand, Total Revenue and Marginal Revenue                                                  50 
                           III    Recent Developments in the Theory of Market Demand                                                     53 
                                  A.     The Pragmatic Approach to Demand Analysis                                                       53 
                                  B.     Linear Expenditure Systems                                                                      58 
                            IV  The Demand for the Product of a Firm                                                                     60 
                       3  THEORY OF PRODUCTION                                                                                           67 
                              I   The Production Function for a Single Product                                                           67 
                             II  Laws of Production                                                                                      76 
                                  A.     Laws of Returns to Scale                                                                        76 
                                  B.     The Law of Variable Proportions                                                                 82 
                           III  Technological Progress and the Production Function                                                       85 
                            IV  Equilibrium of the Firm: Choice of Optimal Combination of Factors 
                                  of Production                                                                                          86 
                                  A.     Single Decision of the Firm                                                                     86 
                                  B.     Choice of Optimal Expansion Path                                                                92