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Microeconomic Theory I
CEU – Economics Department – Fall 2009
5 CEU Credits (10 ECTS)
Instructor: Juan Manuel Puerta
Email: [email protected]
Office: Nador 11, #406
Office hours: by appointment
Teaching assistant: Péter Vargha
Course webpage: http://www.personal.ceu.hu/staff/Juan_Manuel_Puerta/
Course Description and Objectives
Microeconomic Theory 1 is the first half of the two-semester core microeconomics sequence in the
MA program. The course aims at introducing you to graduate-level microeconomic theory. Topics
discussed include producer and consumer theory, competitive markets, monopoly, and general
equilibrium. Microeconomics I will give you the intuition of how competitive markets work and, also,
the conditions under which they fail to produce an optimal outcome.
Learning Outcomes
At the end of the course, you should:
(i) posses a critical understanding of selected topics in modern microeconomic theory at the
introductory graduate-level of difficulty
(ii) understand how mathematical methods and rigorous analysis are used to formalize economic
concepts and ideas
(iii) be able to set up and solve mathematical models describing specific economic problems at the
introductory graduate-level of difficulty.
Course Prerequisites
Knowledge of basic calculus is needed. An undergraduate-level course in Microeconomics is also
desirable.
Course Readings
The course will be based on:
• Varian, Hal R. Microeconomic Analysis, Third Edition, W.W. Norton, 1992. (V-MA)
Although we will follow (V-MA), the lectures will sometimes deviate from the text. The relevant
chapters from (V-MA) have been collected in the class reader, a copy of which you should acquire. If
you feel you are rusty on microeconomics or you have never taken a microeconomics course before, I
suggest you also make use of one of the more recent editions of
• Varian, Hal R. Intermediate Microeconomics: A Modern Approach, W.W. Norton. (V-IM)
The chapters from (V-MA) have their counterparts in (V-IM). The treatment of the topics is both
more intuitive and superficial in the intermediate text. So, while (V-IM) is useful to get the ideas, it
will not be enough to be successful in the course.
Attending the lectures and reading the corresponding chapters from the textbook will help you gain
understanding of the concepts. Working on the homework assignments (see Course Requirements
below) will help you make the crucial step from understanding the concepts toward being able to
solve problems. Learning to solve problems is the key to doing well in this course.
Finally, for the last part of the course on General Equilibrium, I will probably follow the following
textbook.
• Starr, Ross M. General Equilibrium: An Introduction, Cambridge University Press (Starr)
This book covers more material than what is needed for the course but would give a good foundation
on general equilibrium for those who want to continue further into more advanced microeconomic
theory.
Course Requirements and Assessment
There will be five homework assignments, a mid-term and a final exam.
Homework assignments will be available on the course webpage and will consist of problems that will
help you to solve the final exam. You are expected to try to solve homeworks on your own and to
submit your own original copy of each homework. The principal criterion for grading the homeworks
will be the amount of individual effort put into solving it. However, I encourage you to talk to other
students about the problem sets. Solutions will be presented during the seminars.
The final exam will cover material of the entire course. The final exam has been scheduled for Friday
November 27th. The course grade will be determined as a weighted average of homework scores
(20%), midterm score (20%) and final exam score (60%). The final exam will be comprehensive, that
is, it will include all the topics of the syllabus.
Course Outline
The following is a brief outline of topics and relevant chapters from (V-MA) and Starr. For the
economic intuition, refer to the corresponding chapter in (V-IM).
Weeks 1-3: Producer Theory
Technology (Ch. 1), Profit maximization (Ch. 2.1-2.4), Profit function (Ch. 3), Cost minimization
(Ch. 4.1-4.4), Cost function (Ch. 5)
Weeks 4-6: Consumer Theory
Utility maximization (Ch. 7), Consumer demand: comparative statics (Ch. 8.1-8.4), Aggregate
demand (Ch. 9.4), Evaluating welfare change (Ch. 10.1-10.6), Choice under uncertainty (Ch.
11.1-11.7)
Weeks 7-8: Market Structure
Competitive markets (Ch. 13) (Starr, Ch. 4-7), Monopoly without and with price discrimination (Ch.
14)
Week 9: General Equilibrium
Exchange economy: Walrasian equilibrium, first and second welfare theorem (Ch. 17.1-17.7) (Starr
Ch. 12)
Week 10: Final Exam
Review (Monday and Wednesday) and Final Exam (Friday)
NB. This syllabus may be updated. You are advised to check for the most recent version in the
course website.