Download Course Outline EE311 Microeconomics Theory

Course Outline
EE311 Microeconomics Theory (4-0-8)
Semester 1 Academic Year 2015
----------------------Instructor:
Dr Supruet Thavornyutikarn (Office: Room 223 Duen Bunnag Bldg)
Email: [email protected]
Class Schedule and Venue: Every Tuesday and Thursday, 11.00-13.00 hrs. at Room วจ.215
Prerequisites:
EE 211 and MA 216
Course Description: Demand and supply analysis, consumer behavior and demand theory,
production and cost of production, different types of product market structures, price
determination in factor markets, decision-making over time, general equilibrium analysis, and
introductory welfare economics and public policy.
Method of Instruction: This course is lecture-based, consisting of 60 hours in total, divided
into 15 4-hours-per-week section. It is strongly advised that students shall be prepared
beforehand since this course outline provides an extensive schedule and topics. Students must
be reminded of their responsibilities on self-studying which require the attention of 8 hours per
week in order to achieve this course successfully. Materials, off- and on-line, are available,
including exercises.
Evaluation:
1. Midterm Examination: Friday 9 October 2015, 09.00-11.00 hrs (40 percent)
2. Final Examination: Tuesday 15 December 2015, 09.00-12.00 hrs (60 percent)
Important Dates within this Semester
Semester starts
First lecturer
Add-Drop Period (without recording W)
Midterm Examination
Withdrawal Period (W recorded)
Last day of the Semester
Final Examination
Monday 17 August 2015
Tuesday 18 August 2015
Wed 26 – Mon 31 Aug 2015
Fri 9 October 2015 (09.00 - 11.00 hrs)
Mon 19 – Mon 26 October 2015
Fri 4 December 2015
Tue 15 December 2015 (09.00-12.00 hrs)
Textbooks and Reading Materials
1. Pindyck, Robert S., and Daniel L. Rubinfeld. 2013. Microeconomics, (8th ed). New
Jersey: Pearson Education [PR]
2. Besanko, David, and Ronald Braeutigam. 2013. Microeconomics, (5th ed). New York:
John Wiley & Sons. [BB]
3. Perloff, Jeffery M. 2012. Microeconomics, (6th ed.). Boston: Addison–Wesley, 2012. [P]
4. Goolsbee, Austan, Steven Levitt, and Chad Syverson. 2013. Microeconomics. New
York: Worth. [GLS]
5. Kreps, David M. 1990. A Course in Microeconomic Theory. New Jersey: Princeton
University Press. [K]
6. Salvatore, Dominick. Schaum’s Outline of Microeconomics, (4th ed). New York:
McGraw-Hill. [S] This is recommended for self-learning exercises.
1
Interactive Excel
This Microsoft Excel’s workbook files – 12 in total – are developed by Assoc. Prof. Dr.
Chayun Tantivasadakarn. Each exercise contains a mathematical model in which the user can
change some parameters that determine the behavior of model to change the equilibrium results
and answer accompanies questions. Each exercise also includes a short explanation worksheet
to help the user to understand the underlying theory related to the exercise. Where available,
the name of the relevant interactive excel exercise will be given in “boxes” under “Teaching
Plan.” They are downloadable at: http://econ.tu.ac.th/class/archan/CHAYUNT/EC311/
Teaching Plan
1. Introduction [PR, Ch.1-2; BB, Ch. 1-2; GLS, Ch. 1-3; K, Ch. 1; S, Ch. 1-3]
- Significance of Microeconomics in analysing economic problems
- Revision of Microeconomics for intermediate level
2. Consumer Behaviour and Demand Theory
Reviewing
Indifference curve and its applications, including assumptions, properties of
indifference curve and budget line, consumer’s equilibrium and derivation of demand curve –
individual and market.
2.1 Analysis using Indifference Curve
- Goods classification: Goods, Bads, and Neuters
- Consumption equilibrium with Interior Solution and Corner Solution
2.2 Changes in Consumption Equilibrium
- Duality and Changes in income and price
- Income and Substitution Effects and Goods Classification (normal, inferior, and
Giffen)
- Derivation of Uncompensated and Compensated Demand Curve
[PR, Ch.3.1-3.3; BB, Ch. 3-4; P, Ch. 4; GLS, Ch. 4.1-4.4, 5; K, Ch. 2; S, Ch. 4-5]
2.3 Applications of Indifference Curve
- Effects of tax in different schemes on preference
- Voucher vs Income transfer; gift vs donation
- Individual labour supply
- Revealed Preference, Indices, and Measurement of welfare
[PR, Ch 3.4-3.6, BB, Ch. 3-4; P, Ch. 5; GLS, Ch. 4; K, Ch. 2; S, Ch. 5]
2.4 Intertemporal Consumption
- Assumptions and its implication
- Intertemporal indifference curve and budget line
- Intertemporal consumption equilibrium with and without investment
- Consumption of durables goods
[PR, Ch.15; K, Ch. 4]
2.5 Choice under Uncertainty
- Risk vs Uncertainty and their measurements
- Preference toward risk
- Choice under uncertainty
- Risk management
- Demand for risky assets and the equilibrium
[PR, Ch. 5; BB, Ch. 15; P, Ch. 17; GLS, Ch. 13; K, Ch. 3; S, Ch. 1-3]
3. Cost and Production (emphasis on Long-run cost and production)
Reviewing
Basic understanding of opportunity cost; definitions and duality of production and cost;
derivation of cost/production curves such as total product (TP), marginal product (MP), average product
(AP), total cost (TC), marginal cost (MC), and average cost (AC); firm and its existence; cost and
production function in short- and long-run.
3.1 Production
- Production functions: Cobb-Douglas production function, homogeneous function
- Changes in factors of production and effects on production function: diminishing marginal
returns, returns to scale, elasticity of substitution.
3.2 Cost
- Sources of decreasing average cost such as economies of scale, learning curve, economies of
scope
[PR, Ch. 6-7; BB, Ch. 6-8; P, Ch. 6-7; GLS, Ch. 6-7; K, Ch. 7, 19; S, Ch. 7]
4. Product Market
Reviewing
Perfect competitive market and monopoly: definitions and assumptions; profit
maximisation (firm and industry); sources of monopoly power; short- and long-run equilibrium in
perfect competitive market and monopoly.
4.1 Perfect Competitive Market
- Adjustment towards long-run equilibrium of the firm
- Long-run industry supply curve
- Applications of supply and demand analysis (emphasis on social welfare)
- Tax and subsidy
- International trade policy
[PR, Ch. 2, 8-9; BB, Ch. 9-10; P, Ch 8; GLS, Ch. 8; K, Ch. 8; S, Ch. 8]
4.2 Monopoly
- Consequence on resource allocation
- Multi-plant monopolist
- Price discrimination
- Pricing strategies including peak load pricing, two-part tariff, bundling
[PR, Ch. 10-11; BB, Ch. 11-12; P, Ch. 11-12; GLS, Ch. 9-10; K, Ch. 9; S, Ch. 9, 11.3-11.6]
4.3 Monopolistic Competition
- Properties and structure
- Firm’s perceived demand
- Short- and long-run equilibrium
- Excess capacity
[PR, Ch. 12; BB, Ch. 13.5; P Ch 13; GLS, Ch. 11.7; S, Ch. 10.1-10.3]
4.4 Oligopoly
- Definition, Properties, and Structure
- Models of Oligopoly: Cournot Model, Stackelberg Model, Bertrand Model, Price
Leadership, and Collusion and Cartel
[PR, Ch. 12; BB, Ch. 13.1-13.4; P, Ch. 13; GLS, Ch. 11.1-11.6; K, Ch. 10; S, Ch. 10.4-10.12]
4.5 Introductory Game Theory and its applications to oligopoly
- Game: Definition, Components, and Structure
- Equilibrium: Dominant Strategy, Nash Equilibrium, Maximin and Minimax, and Mixed
Strategy
- Prisoners' Dilemma
- Sequential Games
- Repeated Games
[PR, Ch. 13; BB, Ch. 14; P, Ch. 14; GLS, Ch. 12; K, Ch. 11-12, 14; S, Ch. 12]
5. Factor Market
Reviewing
Duality of production and cost which would be a foundation of duality of product
and factor markets
5.1 Supply of and Demand for Factors
- Derived demand
- Determination of price and quantity in factor markets under various product and factor
market structures, exploitation, and economic rent
- Derivations of factor demand
- Supply of factors
- Labour supply (individual labour supply: applied from IC analysis)
[PR, Ch. 14; P, Ch. 11-12; S, Ch. 13]
5.2 Equilibrium in Factor Market
- Determination of equilibrium and changes of equilibrium
- Applications
- Minimum wages
- Bilateral Monopoly
- Inter-industry and inter-regional wage adjustment
[PR, Ch. 14; P, Ch. 15; S, Ch. 13]
6. General Equilibrium and Economic Efficiency
Reviewing
All previous topics
6.1 General equilibrium analysis: Edgeworth’s Box; comparison with partial equilibrium;
welfare criteria
6.2 Pareto efficiency, Pareto improvement, and Pareto optimality
- Exchange Efficiency
- Production Efficiency
- Output Efficiency
- Efficiency and Equity
6.3 Social Welfare
[PR Ch 16; BB, Ch. 16; P, Ch. 10; GLS, Ch. 14; K, Ch. 5-6; S, Ch. 14]
7. Market Failure
Sources of market failure and respective solutions:
- Market power
- Public Goods
- Externalities
- Asymmetric information
[PR, Ch. 17-18; BB, Ch. 17; P, Ch. 18-20; GLS, Ch. 15-16; K, Ch. 13; S, Ch. 15]
Class Schedule
Lecture
1
2
3
4
5
6
7
8
9
10
11
12
13
14-15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Date
Topic
Tue 18 Aug
Introduction and Indifference Curve Analysis
Thu 20 Aug
Consumption equilibrium and its changes
Tue 25 Aug
Revealed preference and indices
Thu 27 Aug
Application of indifference curve
Tue 1 Sep
Application of indifference curve (cont’d)
Thu 3 Sep
Intertemporal Consumption
Tue 8 Sep
Intertemporal Consumption (cont’d)
Thu 10 Sep
Choice under uncertainty
Tue 15 Sep
Choice under uncertainty (cont’d)
Tue 22 Sep
Cost and production
Thu 24 Sep
Cost and production (cont’d)
Tue 29 Sep
Perfect competitive market
Thu 1 Oct
Applications of perfect competitive market
Midterm Week [Midterm exam: Fri 9 Oct 2015 09.00-11.00 hrs]
Thu 15 Oct
Monopoly
Tue 20 Oct
Price discrimination
Thu 22 Oct
Price discrimination (cont’d) and pricing strategies
Tue 27 Oct
Monopolistic Competition/Oligopoly
Thu 29 Oct
Oligopoly
Tue 3 Nov
Oligopoly (cont’d)
Thu 5 Nov
Game Theory
Tue 10 Nov
Game Theory (cont’d)
Thu 12 Nov
Factor Market
Tue 17 Nov
Factor Market (cont’d)
Thu 19 Nov
General equilibrium and economic efficiency
Tue 24 Nov
General equilibrium and economic efficiency (cont’d)
Thu 26 Nov
General equilibrium and economic efficiency (cont’d)
Tue 1 Dec
Market failure
Thu 3 Dec
Market failure (cont’d)
Final Examination: Tuesday 15 December 2015 09.00-12.00 hrs