Intermediate Microeconomic Theory Economics 3070 Summer Introduction and Review: Chapters 1, 2 (plus corresponding study guide)

Transcription

1 Intermediate Microeconomic Theory Economics 3070 Summer 1994 Professor M.J. Greenwood Office: Econ 208 Office Hours: 3:40-4:20 daily and by appointment A Term COURSE OUTLINE Part I. Text: Robert H. Frank, Microeconomics and Behavior, Second Edition (New York: McGraw-Hill, Inc., 1994) Study Guide: James Halteman, Microeconomics and Behavior, Study Guide to Accompany Frank (New York: McGraw-Hill, Inc., 1994) 1. Introduction and Review: Chapters 1, 2 (plus corresponding study guide) 2. The Theory of Consumer Behavior: Chapters 3, 4, 5 (plus corresponding study guide) Part II. 3. The Theory of Production: Chapter 9 (plus corresponding study guide) 4. The Theory of Costs: Chapter 10 (plus corresponding study guide) 5. Perfect Competition and the Theory of Supply: Chapter 11 (plus corresponding study guide) 6. Monopoly: Chapter 12 (plus corresponding study guide) 7. Other Market Structures: Chapters 13, 14 (plus corresponding study guide) Part III. 8. Factor Markets: Chapter 15 (plus corresponding study guide) 9. General Equilibrium: Chapter 17 (plus corresponding study guide) 10. Externalities, Property Rights, and the Coase Theorem: Chapter 8 (plus corresponding study guide)

2 Intermediate Microeconomic Theory Economics 3070 Summer 1993 A Term This course is divided into three sections. The first deals with the theories of consumer behavior and demand. The second treats theories of production, cost, supply, and the firm under various types of market structure, including perfect competition, monopoly, and structures intermediate between these two extremes. The third part of the course focuses on factor markets and general equilibrium (as distinct from partial equilibrium, which is an implicit assumption in most of the earlier material of the course), as well as externalities, property rights, and the Coase Theorem.) EXAMINATION SCHEDULE/GRADING POLICY Two major examinations worth 100 points each will be given, with the exception noted below. The first will be on Monday, June 20, and will treat all material covered through Friday, June 17. The second will be on Thursday, July 7, and will cover only the second part of the course. Each exam will be worth 100 points. In addition to these exams, a quiz will be given on Tuesday, June 14. This quiz, worth 20 points, will cover all material treated through June 13. The idea behind the quiz is to offer the student an opportunity to experience the type of examination given on the two exams noted above. The results of the quiz will be treated like a bonus in that the points will be added into the student's score after the grade distribution (based on 200 points) is determined from the two major exams. Before the quiz and each examination, I will conduct a review session. NOTE: No makeup exams are offered and none will be scheduled.

3 ( Course Outline for Econ 3070 I. Introduction - The Competitive Equilibrium Model 1 A. Demand, Supply and Competitive Equilibrium 1. The Meaning of Equilibrium (l.1-1.6, 1.11, Math Appendix A.l-A.10) 2. Arbitrage 3. Solving Linear Demand and Supply Functions for Competitive Equilibrium ( ) B. Taxes, Subsidies and Competitive Equilibrium (16.6) 1. Introducing a Tax to the Competitive Equilibrium Model - Graphically 2. Incidence of a Tax: Comparison of a Tax on Consumers v. Tax on Producer. C. Elasticity Measures ( ) 1. ARC Formula and Point Formula 2. Income Elasticity 3. Own Price Elasticity 4. Cross Price Elasticity II. Consumer Choice Theory A. Introduction to the Consumer Choice Problem 1. The Subjective Side: Consumer Tastes 2. The Objective Side: Prices and Income 3. The Idea of the Consumption Space a. Two good Case b. N good Case B. The Budget Set (Ch 2) 1. Defining the Affordable Set 2. Geometry of the Budget Line a. Intercepts b. Slope 3. Effect of Income and Price Changes 4. Taxes, Subsidies and Rationing C. Preferences and the Utility Function 1. Preference Theory-The Five Basic Assumptions (Axioms) (Ch 3) 2. Indifference Curves and the Five Axioms a. Marginal Rate of Substitution b. Perfect Substitutes, Perfects Complements 3. Representation of Preferences with a Utility Function (Ch 4) a. Marginal Utility b. Relationship Between MRS and the Marginal Utilities c. Utility functions that represent perfect complements, perfect substitutes, quasilinear preferences, Cobb-Douglas preferences. 1 Book sections listed in parentheses are for Varian

4 D. Optimal Choice (Ch 5) 1. Identifying the Optimal Choice Using the Budget Line and Indifference Curves 2. Comparative Statics on Optimal Choice (Ch 6) a. Income Expansion Path and Engel Curve b. Price Offer Curve and Demand Curve c. Normal and Inferior Goods 3. Slutsky Decomposition of a Price Change (Ch 8) a. Substitution Effect & Income Effect b. Normal, Inferior and Giffen Goods c. Hicksian Decomposition v. Slutsky d. Algebraic Slutsky Decomposition E. Consumption from an Endowment (Ch 9) 1. Budget Line 2. Net Demands 3. Price Offer Curve 4. Applications: a. Labor-Leisure Model (9. 8) b. Intertemporal Choice (Ch 10) i. present value and discounting F. Expected Utility (Ch 12) 1. Probabilities and Expected Value 2. Risk and Expected Utility 3. Application: Lottery Tickets and Insurance m. Theory of the Firm and Market Structure A. The Production Function (Ch 17) 1. Assumptions 2. SR v LR 3. Marginal Product 4. Isoquants 5. Returns to Scale B. Profit Maximization (Ch 18) 1. Short Run 2. Long Run 3. Factor Demand Curves I C. Cost Minimization and the Cost Function (Ch 19) 1. Short Run 2. Long Run 3. The Total and Average Cost Curves (Ch 20) 2

5 r D. Competitive Profit Maximization and Supply (Ch 21) 1. Finn Supply 2. Industry Supply (Ch 22) 3. Economic Rents E. Monopoly (Ch 23) 1. Market Power 2. Profit Maximization of the Monopolist F. Oligopoly (Ch 26) 1. Coumot Model (26.6) 2. Bertrand Model (26.9) 3. Collusion (26.10) IV. General Equilibrium and Welfare Economics A. Introduction to General Equilibrium without Production (Ch 28) 1. Two persons with endowments 2. :Edgeworth Box 3. W alrasian Equilibrium B. Welfare Implications of Competitive Equilibrium 1. Introduction to Social Welfare (Ch 30) 2. Gains from Trade - Consumer and Producer Smplus (Ch 14, 21. 7) 3. Geometric Representation and Calculation of CS and PS for linear demand and supply 4. Connection between Maximizing Gains from Trade and Pareto Efficiency (16.9) 5. Welfare Effects of a Tax ( ) 6. Welfare Effects of Monopoly v. Competition (23.5, 16.9) 7. Externalities and Public Goods (Ch 31 and 33) 3