Intermediate Microeconomics. Spring 2015 Jonas Vlachos A772,

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1 Intermediate Microeconomics Spring 2015 Jonas Vlachos A772,

2 What is this course about? Microeconomics a toolbox Price theory Game theory

3 Price theory Price theory helps us understand some important mechanisms that determine the behavior of economic agents Consumers Firms The invisble hand

4 Market failures The market will not always produce desirable outcomes Market power Externalities and public goods Informational problems

5 Game theory Analyzes strategic interaction between economic agents. Oligopolies and cartels. Design of contracts. Analysis of conflicts.

6 Purpose of this course To show how these tools can explain why different economic structures function and how they can be designed to achieve specific goals To introduce a more mathematical approach to economics Give you an idea of how applied micro research is conducted

7 Science use models Both pictures show my neigborhood Models simplify in order to highlight what is important Mathematics can be part of modelling But we always use models of some kind

8 Intended learning outcomes I Describe and explain the basic tools and concepts of microeconomic theory Apply these tools to various economic situations to analyze economic problems Hypothesize and theorize regarding the consequences of changes in the economic environment

9 Intended learning outcomes II Present the fundamental assumptions and critically discuss their strengths and weaknesses Relate simplifying assumptions to the problems being analysed and demonstrate how the can affect the conclusions Demonstrate a grasp of both formal and informal theoretical reasoning

10 Course Outline Lectures Mathematical introduction Microeconomics: 10 lectures Exercises: 5 assignments Exam

11 Lectures Do attend the mathematical intro lectures Unless you are very confident using math Be prepared prior to lectures More rewarding if you have an idea of the concepts Try to participate, comment and ask questions Make use of MyEconLab! Instructions on Mondo

12 Perloff Microeconomics with Calculus 3 rd Available from Akademibokhandeln Frescati and also the internet bookstores. ISBN Interested in extra online exercises and the e-book? Search for isbn which is a pack with the book and MyEconLab. Register at with the access code from the pack and CourseID: XL1R-D1WP MZ2

13 Exercises 5 assignments in total, ~5 questions Hand in the one marked (*) But try to do them all! Work in groups of 2-3 Write name of all group members on hand ins (indicate who you are) Handed in problems are corrected Need 40% correct (combined on all 5 problems) to take exam

14 Time use assigment Write down how many hours you spend working on this course (including lectures and seminars) At the exam, you will be asked to fill this in Correlations between hours spent and exam results will be distributed Please: remember this and be honest!

15 Study advice Laptops and tablets are distracting Better not to use them during class Notetaking by hand more effective

16 Literature/readings Main text: Jeffrey M. Perloff Microeconomics with calculus, 3 rd edition, Pearson International Make use of the resource MyEconLab (information on Mondo) Two empirical academic articles (uploaded to Mondo/Resources/Teadings) Jensen and Nolan (2008) on Giffen Goods Oster et al (2010) on Adverse Selection in health insurance Newspaper articles for some lectures (Mondo/Resources/Readings) Check the course description on Mondo!

17 Literature/readings Non-compulsory readings on behavioural economics (uploaded to Mondo/Resources/Readings) Östling (in Swedish) Rabin Other interesting and fun books, blogs and podcasts Tim Harford: The Undercover Economist and The Logic of Life. Steven Levitt and Stephen Dubner Freakonomics. Also a blog and podcast, John McMillan Reinventing the bazaar Econtalk podcast (mainly macor) Swedish econ blog Ekonomistas.se and the links found there

18 Online help Mathematics provides brief lectures/courses on algebra, calculus, probability & statistics Also some resources on economics (mainly finance) A mixed bag of things Probably lots of other resources Please let me know if you find anything useful

19 Some practicalities Teaching assistants Roza Khoban (groups 1 & 2) Ricardo Lima (groups 3 & 4) Wei Si (groups 5 & 6) Course admin: Lorenz Pirus Under Resources on Mondo, I hope you will find the course information you need Let me know otherwise But check the course description first!

20 Recap This course is mathematical Refresh your mathematical skills! Check out the relevant chapters before each lecture Do not procrastinate...

21 Main course outline The market Demand and utility maximization Supply: profit maximization and and cost minimization General equilibrium and welfare Market power and game theory Externalities and public goods Information economics

22 Course plan (not including math intro) Content Readings 1 The market (supply and demand). Consumer 1-3 theory 2 Individual demand 4, Jensen & Nolan (2008) 3 Consumer welfare 5 4 Uncertainty and behavior 16 + Lewis Nature s casino 5 Firms and production 6, 7 + Podcast 6 Competition and profit maximization 8, 9 7 General equilibrium and welfare 9, 10 + Biofuels-NYT 8 Market power and game theory 11, , , , Natural monopoly 9 Externalities and public goods 17 + Should we tax people for being annoying? 10 Information economics and asymmetric information 18, 19 + Oster etal (2010)

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