Undergraduate study in Economics, Management, Finance and the Social Sciences

Supplement
EC2066 Microeconomics

August 2016: First reading supplement for the 2016 edition of the subject
guide
The subject guide lists the following textbook as essential reading for this course:
Nicholson, W. and C. Snyder Intermediate microeconomics and its application. (Cengage
Learning, 2015) 12th edition [ISBN 9781133189039].
Students can also use the following edition of this textbook and should refer to the
table below for the corresponding page or chapter numbers.
Nicholson, W. and C. Snyder Theory and application of intermediate microeconomics
(Cengage Learning, 2010) 11th international edition [ISBN 9780324599497].
Note that chapter and section headings are almost identical between the two editions.
However, unlike the 12th edition, the 11th edition does not enumerate the sections.
We suggest that you go through the subject guide and mark up the following updates
immediately to prevent any confusion or oversight later on:
Page in
subject Reference in subject guide Replace with
guide
Chapters 2,3, the Appendix to Chapter 13, from
Chapter 14: Sections `Time Periods and the Flow of
Chapters 2,3, the Appendix to Chapter 13, from
Economic Transactions,’ `Individual Savings: The Supply
14 Chapter 14: Sections 14.1, 14.2, 14.5 and from
of Loans,’ and `Present Discounted Value,’ and from
Appendix 14A: Sections A14–3, A14-4.
Appendix 14A: sections `Present Discounted Value’ and
`Discounting Payment Streams’
15 Chapter 2.2 Chapter 2: Section `Assumptions About Preferences’
Chapter 2: Sections `Voluntary Trades and Indifference
17 Sections 2.3–2.5 Curves,’ `Indifference Curve Maps,’ `Illustrating
Particular Preferences’
20 Application 2.6 Same

1
Page in
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guide
Chapter 2: Sections `Showing Utility Maximization on a
22 Sections 2.7–2.9
Graph,’ `Using the Model of Choice,’ `Generalizations’
25 Chapter 3 Same

25 Section 3.2 Chapter 3: Section `Changes in Income’

Chapter 3: Section `Changes in a Good’s Price’ through
26 Sections 3.3–3.8
to section `Two Numerical Examples’ (pp.90–110)
Chapter 3: Section `An Application: The Lump-Sum
26 Section 3.4
Principle’
28 Section 3.10 Chapter 3: Section `Market Demand Curves’
Chapter 3: Section `Elasticity’ through to section `Some
29 Section 3.11–3.16
Elasticity Estimates’ (pp.117–31)
30 Section 3.16 Chapter 3: Section `Some Elasticity Estimates’

31 Section 3.9 Chapter 3: Section `Consumer Surplus’

35 Appendix 13A Same

Chapter 14: Sections `Time Periods and the Flow of
37 Sections 14.1 and 14.2 Economic Transactions’ and `Individual Savings: The
Supply of Loans’
Sections 4.1, 4.2 and 4.3 up to and including the Chapter 4: Sections `Probability and Expected Value,’
discussion on diversification `Risk Aversion,’ `Methods for Reducing Risk and
44
Uncertainty’ up to and including the discussion on
(up to p.135). diversification (up to top of p.151)
44 Section 4.1 Chapter 4: Section `Probability and Expected Value’

46 Section 4.2 Chapter 4: Section `Risk Aversion’

Chapter 4: Section `Methods for Reducing Risk and
Section 4.2 (you do not need to study this section
55 Uncertainty’ (you do not need to study this section
beyond diversification)
beyond diversification)
58 Chapter 5 Same

69 Section 5.7 Chapter 5: Section `Continuous Actions’

Chapters 6,7; Chapter 8: Sections `The Nature of Firms,’
`Profit Maximization’; Chapter 13: Sections `Marginal
94 Chapters 6,7; Sections 8.1,8.2; Sections 13.1, 13.2
Productivity Theory of Input Demand,’ `Responses to
Changes in Input Prices’
Chapter 7: Section `Cost Curves’ through to section `A
100 Sections 7.3–7.7
Numerical Example’ (pp.250–69)
106 Chapter 8 Same
Chapter 8: Section `Supply Decisions of a Price-Taking
112 Section 8.5 and Chapter 9
Firm’ and Chapter 9
Chapter 9: Section `Timing of a Supply Response’
117 Sections 9.1–9.8 through to section `Shape of the Long-Run Supply
Curve’ (pp.303–23)
119 Section 9.9 Chapter 9: Section `Consumer and Producer Surplus’

119 Section 9.10 Chapter 9: Section `Some Supply-Demand Applications’

Chapter 10: Section `A Perfectly Competitive Price
134 Chapter 10: Sections 10.1–10.7 System’ through to section `The Edgeworth Box
Diagram for Exchange’ (pp.345–65)

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Chapter 10: Section `The Edgeworth Box Diagram for
135 Section 10.7
Exchange’
Chapter 10: Sections `A Simple General Equilibrium
150 Sections 10.3 and 10.4
Model’ and `The Efficiency of Perfect Competition’
Chapter 8: Sections `Marginal Revenue’ and `Marginal
158 Sections 8.3 and 8.4, Chapter 11
Revenue Curve,’ Chapter 11
162 Section 11.4 Chapter 11: Section `Price Discrimination’
Chapter 12: Section `Overview: Pricing of Homogeneous
Goods’ through to section `Entry and Exit.’ In the
Chapter 12: Sections 12.1–12.5. In 12.2 you can
section `Cournot Model’ you can ignore the subpart on
ignore the subpart on ‘Capacity Choice and Cournot
‘Capacity Choice and Cournot Equilibrium.’ In section
Equilibrium.’ In 12.3 you mainly need to read the
`Product Differentiation’ you mainly need to read
168 subpart on ‘Bertrand Model with Differentiated
the subpart on ‘Bertrand Model with Differentiated
Products.’ In 12.5 you mainly need to read the subpart
Products.’ In the section `Entry and Exit’ you mainly
on ‘First-Mover Advantages.’ A cursory reading of other
need to read the subpart on ‘First-Mover Advantages.’
subparts of 12.3 and 12.5 will suffice.
A cursory reading of other subparts of `Product
Differentiation’ and `Entry and Exit’ will suffice.
169 Section 12.2 Chapter 12: Section `Cournot Model’
For Stackelberg leadership, see the subpart on ‘First- For Stackelberg leadership, see the subpart on `First-
169
Mover Advantages’ in 12.5. Mover Advantages’ in section `Entry and Exit’
Chapter 12: Section `Cournot Model’
175 Section 12.2

175 Section 12.3 Chapter 12: Section `Product Differentiation’

Sections 15.3–15.5. In 15.4, exclude the first two
topics `Moral hazard with several agents’ and
`Auctions.’ From 15.4 you only need to study the last
topic `The market for lemons.’ Study also Applications
15.4 and 15.5. In this guide we develop an example
of a market for lemons with two qualities. We also
183 develop a formal model of the price discrimination
problem, a variant of which is studied informally
in section 15.3. You should read the textbook
presentation of the model in 15.3 to develop intuition
about adverse selection problems, but you should study
all formal details of the price discrimination model
developed in this guide
192 Section 15.5
198 Chapter 15: Sections 15.1–15.2
199 Sections 15.1–15.2
In the note below we use the abbreviation `AS’ for
`Adverse Selection: Consumer’s Private Information
about Valuation’
Chapter 15: Section `AS’ through to section `Signaling’
(pp 540-561). In section `Asymmetric Information in
Competitive Markets,’ exclude the first two topics
`Moral hazard with several agents’ and `Auctions
and Adverse Selection.’ From this section you only
need to study the last topic `The Market for Lemons.’
Study also Applications 15.4 and 15.5. In this guide
we develop an example of a market for lemons with
two qualities. We also develop a formal model of the
price discrimination problem, a variant of which is
studied informally in section `AS.’ You should read the
textbook presentation of the model in section `AS’ to
develop intuition about adverse selection problems,
but you should study all formal details of the price
discrimination model developed in this guide
Chapter 15: Section `Signaling’
Chapter 15: Sections `Principal-Agent Model’ and
`Moral Hazard: Manager’s Private Information about
Effort’
Chapter 15: Sections `Principal-Agent Model’ and
`Moral Hazard: Manager’s Private Information about
Effort’

3
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Chapter 16: Section `Defining Externalities’ through to
section `Public Goods and Market Failure’ (pp.566–87).
213 Chapter 16: Sections 16.1–16.6. See also Section 5.7 See also Chapter 5: Section `Continuous Actions’

220 Application 16.4 Same

Chapter 16: Sections `Public Goods’ and `Public Goods
223 Sections 16.5 and 16.6
and Market Failure’
227 Section 5.7 Chapter 5: Section `Continuous Actions’