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EAST WEST UNIVERSITY Department of Economics Course Outlines; Spring Semester - 2017 Course Title: Intermediate Microeconomics Theory-I Course Code: ECO-301; Credits: 3 (Three) Section: 1 Instructor: Dr. Basanta Kumar Barmon Associate Professor Contact Address: 3rd Floor, Room No.:344 Email: [email protected], Phone: 9882308-Ext 143 Section 1 Sunday 10:00-11:30 2:00-3:00 Days ST Monday 10:00-11:30 2:00-4:40 Class Time: Time 11.50 - 01.20 Office Hour: Tuesday 10:00-11:30 2:00-3:00 Room Number 352 Wednesday 10:00-11:30 2:00-4:40 Thursday 09:00-2:00 Brief Description of the Course: This course is an intermediate level study of microeconomics which mainly concentrates on the analysis of individual prices and markets and the allocation of specific resources to particular uses. The theories of individual consumer behavior in a perfectly competitive economy mainly discuss the consumer’s preference and tastes based on their constrained income. The basic tools of analysis and the nature of the utility functions and determination of optimum consumption levels are discussed in this regard. It explains the consumer behavior theory and individual demand, and income level. This course also discusses the production behavior of short-run and long-run, and the optimum uses of inputs in the production process. This course also discusses the characteristics and nature of perfectly competitive market and imperfectly competitive market (monopoly, oligopoly and monopolistic competitive market) and the equilibrium that determine the profit maximizing level of output and price. General equilibrium and welfare economics that explain the general equilibrium of exchange, general equilibrium of production and general equilibrium of production and exchange and Pareto Optimality are briefly explain in this course. This course also covers the basic concept of game theory. Course Objectives: The Intermediate Microeconomics Theory-I course provides the students an understanding of the intermediate tools and applications of microeconomics analysis. Students would be able to conceptualize the concepts on theory of choice and its application to consumers and producer behavior, theory of production and cost, output and input markets and their structure, equilibrium and efficiency, introduction to general equilibrium analysis. Teaching Method: This course will be delivered in a 90-minute class which is divided into two parts. In the first part, the topic will be introduced. In the second part, the topic will be addressed and analyzed by students facilitated by the instructor. A number of assignments will be given to the student individually or group wise regarding the different concepts of microeconomic theories. In the assignment, students are expected to apply the theoretical framework of microeconomics developed in the course to the analysis of the workings of a specific market. The aim is to develop students’ literacy and problem-solving 1 skills especially as these apply to economics. Learning Outcomes (LO): At end of the course the students would be able to: (i) Generalize and make predictions about the behavior of consumers and producers. (ii) Explain consumers’ and firms’ behavior using mathematical tools. (iii) Understand the different concepts of costs of production functions in short-run and long-run. (iv) Learn the partial equilibrium of perfectly competitive market, monopoly market and oligopoly and general equilibrium and welfare economics. Course Schedule /Synopsis of Contents: Week Topic Consumer Preference and Choice/Behavior: Definition of utility, types of Day 1 measuring utility, definition and differences of cardinal and ordinal utility Cardinal utility: Assumption of cardinal utility, total and marginal utility, law of Day 2 diminishing marginal utility, numerical and graphical presentation of total and marginal utility, Consumer’s equilibrium: A single commodity, n-commodity, derivation of Marshallian demand curve from cardinal utility. Ordinal Utility: Assumptions of ordinal utility approach, definition of indifference curve (IC), characteristics of IC, IC map, Marginal rate of substitution (MRS) Day 3 (perfectly substitute and complementary good), goods, bads, and neuters, some special types of IC based on goods, bads and neuters. The consumer’s Income and price constraints: The budget line; changes in income and prices and the budget line, Consumer’s choice: utility maximization; corner Day 4 solutions Consumer’s behavior and individual demand: Change in income and the Engel curve: Income-consumption curve (ICC) and Engel curve, ICC and Engel curve for Day 5 normal and inferior goods, Changes in income and the individual demand curve: ICC and the individual demand curve, Substitution effect and income effect, Substitution effect and income Day 6 effect for normal good, inferior good and giffen good, difference between Hicksian and Marshallian demand curve. Market demand and elasticity: Market demand for a commodity, price elasticity Day 7 and total expenditure, income elasticity of demand and Engel curve, relationship among price elasticity of demand, marginal revenue (MR) and average revenue (AR). Day 8 Mid-1 Examination Theory of production cost of production: Definition of production function in shortDay 9 run and long-run, three stages of production function, elasticity of production, Iso-quant curve, characteristics of Isoquant curve, derivation of isoquant curves Day 10 from the isoquant map, marginal rate of technical substation (MRTS), Economic region of production, returns to scale Fixed proportion production function, return to scale: constant, increasing and Day 11 decreasing return to scale, Empirical examples of Cobb-Douglas production function Cost of Production: Different types of cost, relationship between MP and MC, Day 12 AVC and AP, isocost/price line, Least-cost input combination, Empirical examples Day 13 Expansion path and the long-rung cost curves, Economies of scale, Learning curve. Day 14 2 Day 15 Day 16 Day 17 Day 18 Day 18 Day 19 Day 20 Day 21 Day 22 Day 23 Day 24 Perfectly competition market: characteristics of perfectly competitive market, Short-run equilibrium (total approach and marginal approach) of the firm, Long-run equilibrium of the firm and industry. Mid-2 Examination Imperfectly Competitive Market: Monopoly market-pure and natural monopoly, short-run equilibrium price and output (marginal and total approach), Long-run equilibrium price and output, Price discrimination-first degree, second-degree and third-degree price discrimination of monopoly market; Empirical examples Monopolistic competition market-characteristics, short-run and long-run analysis, Oligopoly market-characteristics, interdependence among the few producers in the industry, Cournot and Kinked-demand curve model General equilibrium and Welfare Economics: Partial versus general equilibrium analysis, General equilibrium of exchange and production, General equilibrium of exchange and production and Pareto Optimality, Perfect competition, economic efficiency and equity. Game theory and its application, input and employment under perfectly competition market Empirical examples Final Examination Assessment and Marks Distribution: Students will be assessed on the basis of the overall performance in all the exams, assignments, presentation and class participation. Final numeric reward will be the compilation of: Marks Distributions: Class participation Class quizzes Assignment Mid Term-I Mid Term-II Final Exam Total 5% 10 % 10 % 25 % 25 % 25 % 100% Grading Policy: University grading and performance evaluation policy would be followed. % of Marks 97-100 87-89 80-82 73-76 67-69 60-62 Grade A+ AB C+ CD % of Marks 90-96 83-86 77-79 70-72 63-66 Below 60 3 Grade A B+ BC D+ F Examination Schedule: Exam Term-I Term-II Final Date Sunday, 12 February 2017 Sunday, 12 March 2017 Sunday, 16 April 2017 Make-up Policy: In general no make-up examination will be given except for compelling reason by special arrangement in advance. Special Note: There is zero tolerance for cheating at EWU. Students caught with cheat sheets in their possession, whether used or not used, and/or copying from cheat sheets, writings on the palm of hand, back of calculators, chair of nearby walls, etc would be treated as cheating in the exam hall. The only penalty for cheating is expulsion from EWU. Class participation is highly desirable since there is grading on class participation Students with less than 80% of attendance will not be allowed to take the final exam Students are encouraged to ask questions and take notes in the class No comprehensive exams. Each exam/assessment will consist of its own respective part Students must meet the prerequisite for this course Students are advised not to use cellular phones during class hours. Cellular phones must be put in ‘off’ or ‘silent mode’ mode Students are not allowed to use cellular phone as calculator in exams. Students are urged to bring own calculator in the exam room Students are not allowed to leave exam room during examination Text Book: 1. Hal R Varian: Intermediate Microeconomics, Six Edition. 2. Dominick Salvatore: Microeconomics-Theory and Application, 4th edition 3. James M. Henson and Richard E. Quandt: Microeconomic Theory-3rd Edition 4