__Microeconomics__

**Graduate Institute of International and Development Studies**

**EI037 - Fall 2021 - Course- 6 ECTS**

Thursday 12:15-14:00

Thursday 12:15-14:00

**Lecturer: Yuan Zi**

**Office hours**:

**Thursday 10:00-12:00 (class weeks)**

**Course Description**

This course is an introduction to the concepts and tools of Microeconomic analysis. We will start with classic topics of consumer choice, and then firm decisions about optimal production and the impact of different market structures on firms' behavior. Next, we turn our attention to supply and demand, and the basic forces that determine an equilibrium in a market economy. The final section of the course introduces some of the more advanced topics that can be analyzed using Microeconomic theory. Students should be comfortable with basic multivariable calculus, linear algebra, and real analysis.

**Goals**

After the course, you should have developed a range of skills enabling them to understand economic concepts and use those concepts to analyze specific questions.

By the end of this course, you should be able to:

- Understand consumer behavior.
- Understand firm behavior.
- Analyze different types of market structures.
- Understand basic aspects of general equilibrium.
- Understand basic aspects of welfare economics.
- Understand how to apply economic principles to a range of policy questions.

**Main textbooks**

- “Microeconomic Theory”, Andreu Mas-Collel, Michael D Whinston, and Jerry R Green, Oxford University Press (1995). [MMG]

**Additional textbooks**

- “Microeconomic Analysis”, Hal R Varian, Norton (1992).
- “A course in microeconomic theory”, Kreps, David M, Princeton university press (1990).

**NB:**It is sufficient to understand what covers in the course, which mainly follows MMG but simplifies it. Students are encouraged to use the listed textbooks and references to enhance their understanding of course materials when needed.

We all have different backgrounds and prefer different learning styles. Student are encouraged to use google or the library for fragmented learning materials when a question arises. Don’t read a whole textbook when you are confused about one particular thing - it is usually not very helpful and surely not efficient!

Undergraduate-level microeconomics, basic multivariable calculus, linear algebra, and real analysis. Math course ("bootcamp") in the Graduate Institute for students in MA Economics.

**Grading**

There will be a midterm exam (1/3 of the final grade), and a final exam (1/3 of the final grade), as well as 2 problem sets (2 × 1/6 of the final grade).

**Outline (preliminary)**

- September 23 Introduction, Preference and Choice
- September 30 Consumer Theory
- October 7 Classical Demand Theory
- October 14 Welfare Economics and Aggregate Demand
- October 21 Production Theory
- October 28 Midterm Exam
- November 4 Competitive Equilibrium
- November 11 Welfare Theorems
- November 18 Strategic Interactions I
- November 25 Strategic Interactions II
- December 2 Market Power: Workhorse Models
- December 9 Uncertainty
- December 14 Q&A
- December 16 Final Exam

**Mathematics Tool Box recommended by previous lecturers**

Students who do not feel comfortable with calculus and standard mathematical tools for economists are strongly advised to either take the math course (choose it as part of the mandatory sequence or sit-in) or consult and work with Martin Osborne’s tutorial site (the strong point of this tutorial is that it provides exercises with solutions and thus students can practice on their own).

**Lectures**

__Lecture 1. Introduction,__

__Preference and Choice__

__Slides__Reading:

• MWG (1995), Chapter 1

Additional:

• Kreps (1990), Chapters 1-2

• *[Experiment we did] Nicholas G. Rupp, A Classroom Experiment Illustrating the Law of Demand.

__L__

__ecture 2. Consumer Theory__

**Slides**Reading:

• MWG (1995), Chapter 2

Additional:

• Kreps (1990), Chapters 2

__Lecture 3. Classic Demand Theory__

**Slides**Reading:

• MWG (1995), Chapter 3

Additional:

• Kreps (1990), Chapter 2, Varian (1992), Chapters 7 - 8

• *Becker, G.S., 1962. Irrational behavior and economic theory.

*Journal of political economy*,

*70*(1), pp.1-13.

__Lecture 4.__

__Welfare Economics and Aggregate Demand__

**Slides**Reading:

• MWG (1995), Chapters 3.I and 4

Additional:

• Kreps (1990), Chapter 2, Varian (1992), Chapters 10

__Lecture 5. Production Theory__

**Slides**Reading:

• MWG (1995), Chapter 5

Additional:

• Kreps (1990), Chapter 7; Varian (1992), Chapters 1-5

**Lecture 6. Competitive Equilibrium**

**Slides**Reading:

• MWG (1995), Chapter 10 A-C

**Lecture 7. The Fundamental Welfare Theorems**

SlidesSlides

Reading:

• MWG (1995), Chapter 10 D-E

__Lecture 8. Strategic Interactions I__

**Slides**Reading:

• MWG (1995), Chapter 7-9

**Lecture 9. Strategic Interactions II****Slides**Reading:

• MWG (1995), Chapter 7-9

**Lecture****10. Imperfect Competition: Workhorse Models**

**Slides**Reading:

• MWG (1995), Chapter 12

**Seminars**

**Resources**

**The Dixit-Stiglitz Model****1.**

__Solve the model step by step__

- Note here

- Model properties, comparative statics and intuitions: EI037 L10.

**-**The basics of “Dixit-Stiglitz lite” by Jonathan I. Dingel: www.columbia.edu/~jid2106/td/dixitstiglitzbasics.pdf

**2.**

__Competitive equilibrium vs. optimal allocation by social planer__

**- Note here**

**-**Dixit, A.K. and Stiglitz, J.E., 1977. Monopolistic competition and optimum product diversity.

*The American economic review*,

*67*(3), pp.297-308.

**- ***Mankiw, N.G. and Whinston, M.D., 1986. Free entry and social inefficiency.

*The RAND Journal of Economics*, pp.48-58.