Economics 2952301: Microeconomic Theory I

Syllabus/Course Outline

Course Outline
This is an intermediate level course in the modern theory of microeconomics, designed primarily with the needs
of economics/'inance majors in mind. Topics that will be covered include consumer choice, theory of the 'irm,
market structure, and uncertainty.

Course Objective
The course will provide a comprehensive foundation in modern microeconomic analysis. Students will develop
the tools and technical skills necessary to rigorously analyze fundamental problems of choice, resource
allocation, and market structure. The primary objective is to master the fundamental concepts of economic
models of choice and the methods used to analyze those models. Students completing this course should be
well-prepared for further study in advanced 'ield courses in economics.

Program Relationships
Prerequisite Courses: 2952101 Principles of Economics, 2952351 Mathematics for Economists I

Requisite Knowledge
Familiarity with the basic tools of microeconomics will be assumed. Students must be comfortable with algebra
and calculus.

Recommended Textbook
Hal R. Varian, Intermediate Microeconomics: A Modern Approach. The 9th edition is the most recent but earlier
editions are 'ine.

Topic Outline

Module 1: Introduction to the course. Reading: Varian, Chapter 1 (“The Market”); Mathematical Appendix (at
the end of the book).

Demand, supply, market equilibrium, ef'iciency. Functions, equations, derivatives, optimization.

Module 2: Budget constraint, preferences, utility. Reading: Varian, Chapters 2-4.

Budget constraint, budget set; taxes, subsidies, rationing; consumer preferences; substitutes and complements;
marginal rate of substitution (MRS); utility functions; indifference curves.

Module 3: Choice and demand. Reading: Varian, Chapters 5-6.

Optimal choice; consumer demand; MRS revisited; normal and inferior goods; Engel curves; inverse demand
functions.

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Module 4: Revealed preference, income and substitution effects, market demand and equilibrium. Reading:
Varian, Chapters 7-9, 15 and 16 (“Revealed Preference” through “Buying and Selling”, “Market Demand”,
“Equilibrium”).

Weak and Strong Axioms of Revealed Preference; Slutsky equation; income and substitution effects; extending
the basic model; inverse demand function; elasticity and revenue; supply and market equilibrium.

Module 5: Choice under uncertainty. Reading: Varian, Chapters 10 and 12 (“Intertemporal Choice”,
“Uncertainty”).

Budget constraint and Slutsky equation revisited; present value; expected utility; risk aversion.

Module 6: The theory of the 'irm. Reading: Varian, Chapters 19-22 (“Technology” through “Cost Curves”).

Inputs and outputs; production functions; pro'it maximization; returns to scale; cost function; sunk costs;
average and marginal costs.

Module 7: Firm and industry supply. Reading: Varian, Chapters 23-24 and 16 revisited (“Firm supply”, “Industry
Supply”, “Equilibrium”).

Market environments; pure competition; long-run supply curves; short-run industry supply and equilibrium;
long-run equilibrium.

Module 8: Monopoly and oligopoly. Reading: Varian, Chapters 25-28 (“Monopoly” through “Oligopoly”).

Pro'it maximization revisited; price discrimination; product differentiation; monopoly, monopsony, oligopoly;
Cournot equilibrium. Introduction to game theory; Nash equilibrium.

Evaluation
Take-Home Assignments: 4 short assignments worth 5 points each (total 20 points). Assignments will
normally be set on Thursday and will be due the following Tuesday. Assignments will not be due in either the
week of the midterm exam or the week of the 'inal exam.

Midterm: 1 midterm examination worth 40 points. The midterm will cover material from the 'irst half of the
course.

Final: 1 'inal examination worth 40 points. The 'inal will cover material from the second half of the course.