Introduction to Microeconomics
- At the conclusion of the course, students should be able to: Explain how microeconomic models can be used to understand economic decisions of consumers and firms.
- Able to identify the scientific nature of the problems in the professional field.
- Able to critically evaluate and rethink the accumulated experience (own and others'), to reflect on professional and social activities.
- Able to analyze socially significant problems and processes occurring in society, and predict their possible development in the future.
- Explain the role of scarcity, specialization, opportunity cost and cost/benefit analysis in economic decision-making. Ability to use theoretical concepts of Scarcity, trade-offs, find Opportunity cost, and apply Marginal analysis
- Identify the benefits of free trade using the concept of comparative advantage. Ability to use theoretical notions, concepts of Absolute and Comparative advantage and interpret results.
- Identify the determinants of supply and demand; demonstrate the impact of shifts in both market supply and demand curves on equilibrium price and output, define equilibrium, solve equations.
- Calculate supply and demand elasticities, identify the determinants of price elasticity of demand and supply, and demonstrate the relationship between elasticity and total revenue. Ability to find and interpret price Elasticity of Demand, define Determinants of Elasticity, Total Revenue, Income Elasticity, Cross-Price Elasticity of Demand, Elasticity of Supply.
- Summarize the law of diminishing marginal utility; describe the process of utility maximization. Construct Budget Constraint and Utility, Total and Marginal Utility, define Unconstrained Choice, Law of Diminishing Marginal Utility, Constrained Choice, Utility Maximizing Rule.
- Describe the production function and the Law of Diminishing Marginal Productivity; calculate and graph short-run and long-run costs of production, Accounting and Economic Profit, define Explicit and Implicit Costs. Calculate and graph short-run and long-run costs of production.
- Identify the four market structures by characteristics; calculate and graph the profit maximizing price and quantity in the output markets by use of marginal analysis. Ability to define structural characteristics of Perfect competition, Demand, Profit Maximization, Short-Run Profits, Decision to Shut Down, Long-Run Adjustment.
- Determine structural characteristics of Monopoly and Monopolistic competition, Monopoly Demand, Profit Maximization, Efficiency Analysis, solve problems on Price Discrimination.
- Determine structural characteristics of Oligopoly, Industry Concentration, Prisoners’ Dilemma, Collusion.
- Determine the profit maximizing price and quantity of resources in factor markets under perfect and imperfect competition by use of marginal analysis. Define structural characteristics of competitive markets, Marginal Revenue Product, Profit Maximizing Employment, Derived Demand, Determinants of Resource Demand.
- Describe governmental efforts to address market failure such as monopoly power, externalities, and public goods. Ability to define Private and Public Goods, Spillover Benefits and Positive Externalities.
- Introduction to EconomicsDefinition of Economics. Economic goods. Scarcity and choice. Opportunity costs and sunk costs. Economic Models. Microeconomics and Macroeconomics. Positive and normative economics
- Comparative Advantage and Exchange Comparative advantageProduction possibility frontier. Factors shifting the production possibility frontier. Specialization and exchange of goods. Comparative advantage and international trade. Economic systems: market economy, command economy, mixed economy.
- Supply and DemandMarket. Demand curve and its determinants. Supply curve and its determinants. Equilibrium. Producer surplus and consumer surplus. Deficit and surplus. Free market and price control.
- ElasticityPrice elasticity of demand. Point and arch elasticity. Elasticity of Demand and Total Revenue of the firm. Cross-Price Elasticity. Price and Income. Elasticity of Demand. Application of elasticity theory. Taxation.
- Consumer ChoicePreferences. Indifference curves. Marginal rate of substitution. Budget constraint. Consumer choice. Total and marginal utility. Adjustment to price and income changes: income effect and substitution effect. Normal and inferior goods. Substitutes and complements. In-kind and money subsidies
- Producer Theory: Revenues and CostsThe firm’s production decisions. Revenues, costs and profits. Total, average and marginal revenues. Short run and long run. Fixed and variable costs. Total, average and marginal costs. Profit maximization
- Short-Run and Long-Run. Perfect competitionCosts in short run and in long run. Firm’s short run and long run output decisions. Economies and diseconomies of scale. Firm’s supply and industry supply. Perfect competition. Its advantages and disadvantages
- Monopoly and Monopolistic CompetitionTypes of market structures. Features of monopoly. Profit maximization under monopoly. Comparison with perfect competition: output and price. Social cost of a monopoly. Dead-weight loss. Regulation of monopoly. Natural Monopoly. Regulation of natural monopoly. Price discrimination. Industrial policy. Features of monopolistic competition. Comparison with perfect competition: output and price. Advertising.
- OligopolyFeatures of oligopoly. Price wars and collusion. Game theory and interdependence. Prisoner’s dilemma. Cartels. Barriers to entry. Other forms of imperfect competition.
- Factor Markets: Labor MarketFactors (inputs) of production. Derived demand for factors. Demand and supply of labor. Equilibrium in labor market. Trade unions. Minimum wages and unemployment. Differences in wages, economic rent. Human capital. Investments in human capital: costs and revenues. Signaling. Discrimination in the labor market.
- Market Failures. Externalities and Public GoodsIncome distribution. Market failure. Externalities. Public goods. Free-rider problem. Scope for government intervention. Government failure.
- Interim assessment (2 module)0.51 * final exam + 0.1 * class performance + 0.1 * homework assignments + 0.29 * midterm test