Faculty of Economics, Thammasat University EE 211 Principles of Microeconomics (3 credits)

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1 Lecture Time: Lecture Venue: Instructor: Faculty of Economics, Thammasat University EE 211 Principles of Microeconomics (3 credits) Semester 1/ Wednesdays and Fridays, pm Room 231, Y Building Asst. Prof. Dr. Saipin Cintakulchai Room 665; Y Building Office hours: Wednesdays and Fridays, pm Course description The principles of microeconomics regarding value, price, resource allocation, introduction to theories of consumption and production with an emphasis on factors determining demand and supply of goods and services, determination of prices and efficiency of resource allocation in perfectly and imperfectly competitive markets; Basic theories regarding factor market and introductory concepts of market failures. Objectives of this course 1. To provide basic microeconomic theory for students to understand many questions about the economy, for example how people make decisions, how the economy works. 2. To introduce how to use microeconomic theory to solve problems and analyze policy issues. Assessment: Assignment and Quiz 10% Midterm Exam: Tuesday October 13, 2015; 09:00 11:00 am 30 % Final Exam: Sunday December 20, 2014; 1:00 4:00 pm 60 % Important Date: Class begin 18 August 2015 Course Withdrawal With "W" October 2015 Last Day of Class 4 December 2015 Main Texts: Lipsey, Richard G., and K. A. Chrystal, Economics, 11 th ed., Oxford University Press, Mankiw, Gregory N., Principles of Economics, Dryden, Semester 1/2015 EE 211 1

2 Lecture Timetable Date Topics References 19, 21 August 2015 (2 lectures) 26 August 16 September 2015 (7 lectures) 1. Introduction 1.1) What is economics? - Economic goods and Free goods 1.2) Goods and services vs. Factors of production 1.3) Methodology of studying economics - Economics as a science: Deductive and Inductive Method 1.4) Economic Model: How theories are developed? 1.5) Economic Tools: Equation and Graph 1.6) The basic economic problems: What, How and For Whom? 1.7) Alternative economic systems: Market vs. Commanded economies 1.8) Positive vs. Normative statements 1.9) Production Possibility Curve (PPC) - Definition and assumptions - An illustration of scarcity, choice and opportunity costs using the PPC 2. Demand, Supply, Equilibrium and Applications 2.1) Market: meaning and components 2.2) Demand 2.2.1) Meaning: Demand vs. Wants 2.2.2) Law of demand 2.2.3) Individual and market demands 2.2.4) Demand determinants 2.2.5) Distinction between change in quantity demanded and shift in demand curve 2.3) Supply 2.3.1) Meaning 2.3.2) Law of supply 2.3.3) Firm and market supplies 2.3.4) Supply determinants 2.3.5) Distinction between change in quantity supplied and shift in supply curve 2.4) Market equilibrium 2.4.1) Meaning Lipsey Chapters 1-2 Mankiw Chapters 1-2 Lipsey Chapters 3-4 Mankiw Chapters 4-8 Semester 1/2015 EE 211 2

3 2.4.2) Determination of the equilibrium 2.4.3) Shocking the equilibrium and adjustments 2.4.4) Comparative static analysis 2.4.5) Consumer s surplus and Producer s surplus 2.5) Elasticity 2.5.1) Elasticity of Demand: meaning and measurement a) Price elasticity of demand b) Income elasticity of demand c) Cross price elasticity of demand 2.5.2) Determinants of Elasticity of Demand 2.5.3) Relation between price elasticity of demand and firm s revenue 2.5.4) Elasticity of Supply: meaning, measurement 2.5.5) Determinants of Elasticity of Supply 2.6) Applications: 2.6.1) Price controls: Price ceiling, Price floor 2.6.2) Effects of Taxes: Specific tax, Ad valorem tax 2.6.3) Production subsidy 18 September 2 October 2015 (5 lectures) 3. The Theory of Consumer Behavior 3.1) Consumer choices: Utility theory 3.1.1) The meaning of utility 3.1.2) Law of diminishing marginal utility 3.1.3) Relationship between total utility and marginal utility 3.1.4) Consumers equilibrium and change in equilibrium 3.1.5) Utility theory and demand curve 3.2) Consumer choices: Indifference theory 3.2.1) Indifference curves (IC) - meaning and properties of indifference curve - Slope of IC and Marginal Rate of Substitution (MRS) - Law of diminishing MRS - Shapes of IC 3.2.2) Budget line and change in budget line 3.2.3) The equilibrium of consumer and change in equilibrium 3.2.4) Substitution and income effects 3.2.5) Indifference theory and demand curve Lipsey Chapter 5 Mankiw Chapter 21 Semester 1/2015 EE 211 3

4 3.2.6) Price Consumption Curve (PCC) and Elasticity of Damand 3.2.7) Income Consumption Curve (ICC) and Engel Curve 13 October Midterm Exam (09:00 11:00 am) October 2015 (3 lectures) 28 October 6 November 2015 (4 lectures) November 2015 (6 lectures) 4. Production and Cost in the Short Run 4.1) Firm, Production function and Cost of production - Firm and the objectives of production - Production function and factors of production - Economic and accounting costs; Private and social costs 4.2) Production function in the short-run 4.2.1) Meaning and relationship of Total Product (TP), Average Product (AP) and Marginal Product (MP) 4.2.2) Law of diminishing returns, Law of diminishing MP 4.2.3) Stages of production 4.3) Cost in the Short Run 4.3.1) Meaning and relationship of Total Cost (TC), Average Cost (AC) and Marginal Cost (MC) 4.3.2) Short-run costs of production: TFC, TVC, TC, AFC, AVC, ATC, MC and their relationship 4.4) Relationship between production and cost in the short run 5. Production in the Long-Run 5.1) Isoproduct or isoquant and Marginal Rate of Technical Substitution (MRTS) 5.2) Isocost 5.3) Least cost combination and Expansion path 5.4) The meaning of returns to scale 5.5) Long-run costs of production: LTC, LAC, LMC 5.6) Relationship between expansion path and LTC 5.7) Relationship between long-run and short-run costs 5.8) Economies and diseconomies of scale 6. Commodity Markets 6.1) Market structure: perfect and imperfect competition 6.2) Producers in perfectly competitive market Lipsey Chapter 6 Mankiw Chapter 13 Lipsey Chapter 6 Mankiw Chapter 13 Lipsey Chapters 7 8 Mankiw Chapters Semester 1/2015 EE 211 4

5 6.2.1) The nature of demand, TR, MR, AR and their relationships 6.2.2) Short-run equilibrium 6.2.3) Firm s and market s short-run supply curves 6.2.4) Long-run equilibrium 6.3) Producers in monopoly market 6.3.1) Causes of monopoly 6.3.2) The nature of demand, TR, MR, AR and their relationships 6.3.3) Short-run and Long-run equilibrium 6.3.4) Economic effects of monopoly: Comparison between perfect competition and monopoly 6.3.5) Regulated monopoly: Fair price and Ideal price 6.4) Monopolistic competition 6.5) Oligopoly 2 December 2015 (1 lecture) 4 December 2015 (1 lecture) 7. Factor Markets 7.1) Firm s demand for a factor - Commodity and factor markets are perfect competition - Commodity market is monopoly and factor market is perfect competition 8. Market Failures 8.1) Meaning and Characteristics 8.2) Origins of Market Failures 8.2.1) Monopoly Power 8.2.2) Public Goods 8.2.3) Externalities 8.2.4) Asymmetric Information 8.3) Consequences of Market Failures 20 December Final Exam ( pm) --- Lipsey Chapter 10 Mankiw Chapter 18 Lipsey Chapter 13 Mankiw Chapters Semester 1/2015 EE 211 5

Faculty of Economics, Thammasat University EE 211 Principles of Microeconomics (3 credits)

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