Advanced Economic Theory

It gives me immense pleasure to bring out the 21" edition of this popular book. As mentioned in the previous editions, my efforts have been to incorporate in this book the latest trends and tenden- cies in microeconomic theory. In keeping with this approach, I have explained the various important economic concepts and theories such as theory of demand, cost, production, price and output determi- nation under perfect competition, monopoly and oligopoly in mathematical terms. Further, to enable the students to understand better the mathematical exposition of the theories, I have added Chapter 5 which explains the Basic Mathematical Concepts and Optimisation Techniques.
In the present revised 21st edition of the book, some significant changes have been made in some chapters. Among them, mention may be made of the following: Chapter 1: The meaning of economic efficiency has been clearly explained distinguishing
between production efficiency, allocative efficiency and distributive efficiency. • Chapter 7: The concept of utility and its critique by Prof. Amartya Sen has been explained.
distinguished.
choice by risk-averter and risk lover under risky and uncertain situations has been shown. It
has been clearly shown why a risk-averter generally buys insurance and a risk lover indulges
in gambling.
• Chapter 8: The Hicksian substitution effect and Slutsky substitution effect have been clearly Chapter 17: The attitudes towards risk of different individuals have been explained and the
Chapter 28: The chapter explains how economic efficiency is claimed to be achieved under perfect competition and have shown that even in a perfectly competitive economy, there are market failures to achieve economic efficiency when there exist externalities, both positive and negative, public goods and imperfect information. Besides, it has been made clear how a perfectly competitive economy fails to achieve equity in distribution of goods and services. • Chapter 65: The Bergson-Samuelson social welfare function has been critically examined and how it differs from Classical utilitarian social welfare function and Rawl's social welfare
function which gives the highest weight to the welfare of the poorest people in a society has
been brought out. • Chapter 67: The impact of imperfect and asymmetric information on individual's choice has been explained and the problems of adverse selection and moral hazard under conditions of imperfect and asymmetric information has been clarified.
With the above changes, I hope the students will find the book more useful for them. The book is intended to meet the requirements of the students of MA (Economics), MCom, MBA and related courses, BA (Hons) and candidates preparing for competitive examinations such as IAS, IES and Public Service Examinations of different States. I shall greatly appreciate the suggestions for further improvement of the book from fellow teachers.