Substitution and decomposition

Substitution and decomposition

Bachelor of Business Studies (BBS) — First Year

Subject: Microeconomics for Business (MGT 207)

Unit 4: Analysis of Consumer's Behavior

Academic Year: 2083/84

Topic Objectives

After studying this topic, students should be able to:

• Explain the scope and key elements of substitution and decomposition.
• Explain the economic reasoning and use appropriate diagrams or relationships in business analysis.

Curriculum Scope

• Substitution effect
• Decomposition of price effect into income and substitution effects

Detailed Microsyllabus

1. Substitution effect

   1. Relative-price changes and substitution between goods.
   2. Compensated comparisons separating purchasing-power changes.
   3. Direction of the substitution response for an own-price change.

2. Decomposition of the price effect

   1. Separate substitution and income effects.
   2. Compare normal, inferior and Giffen-good cases.
   3. Use consistent diagrams and explain the compensation convention adopted.

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Curriculum reference: Tribhuvan University, Faculty of Management, BBS curriculum with first-year syllabus, PDF pages 17-19.

Source note: The curriculum scope above is retained from the existing TU syllabus breakdown. The numbered study subtopics are editorial elaborations for teaching and study, rather than a separately issued TU syllabus. Unit lecture hours apply to the whole unit; no separate topic hours or marks are assigned here. The programme subject list identifies this course as MGT 207; the detailed subject heading in the source prints MGT 203.