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r ECONOMICS 307 0 section 1 Fall 1989 INTERMEDIATE MICROECONOMIC THEORY PROFESSOR J. KRUSE Office: Econ 11 Office Hours: 11:00-12.00 MTWF Phone : 492-8736 Time: 12:00-12:50 MW F Place: Econ 117 Required text: Prerequisite: Math 107, 108 or equivalent Intermediate Microeconomics, A Modern Approach by Hal R. Varian Grading Policy: Each student's course grade for Economics 3070 will be determined by the following basis: Midterm 1 Midterm 2 Midterm 3 Final(Comprehensive) Class activity 100 100 100 100 50 points points points points points Minimum Percentage for each letter grade: The following table lists the minimum percentage. score necessary to achieve each letter grade. I will not raise the minimum, but do reserve the right to lower the minimum requirements. Grade A AB+ B Bc+ c cD Minimum Percentage 90 88 86 76 74 72 62 60 50 Class activity includes announced quizzes(worth 10 points each), unannounced i n-class markets(worth 10 points each) and a research grant proposal(worth 10 points and due December 3). The 'five highest scores from this body of work comprise the class activity score. Optional Final: You may choose to count 3 of the 4 exams that will be given to calculate your percentage . This means that if you take midterms I, II, a nd III and are satisfied with your percentage, you may choos e not to take the final . You must notify me of your intentions one wee k prior to the scheduled final e x am. Make-up Exams: Each student is expected to take all of the exams a nd quizzes at the d es ignated time and place. Students who miss any exam without a university accepted excuse will receive a grade of zero for the missed exam. MAKE UP EXAMS WILL NOT BE GIVEN. You will count the exams you do take and the final for calculation of your grade. If you miss more than one exam the final exam will assume the total point of the missed exam that cannot be dropped. A make-up exam will be given to those students who miss the final exam and do have a university-accepted excuse. Students who miss an exam must provide a signed written statement explaining the reason why they missed the exam within one week of the exam. Otherwise, a zero will be awarded .- -· Important dates :9-11-89 First quiz 9-29-89 Midterm I 11-3-89 Midterm II 12-8-89 Midterm II 12-11-89 Research grant proposals due (optional) 12-13-88 Last day of classes 12-20-88 8 : 30a.m .-10:30a . m. Final Exam(Comprehensive) Schedule: Week 1 Overview, Rewiew Week 2 Demand, Supply & Equilibrium Week 3 Consumer Theory, Preferences Week 4 Consumer Theory, Consumer Choice Week 5 Consumer Theory, Slutscky Equation Week 6 Review, Exam I Week 7 General Equilibrium Week 8 Labor Supply, Intertemporal Choice Week 9 Consumer Surplus, Market Demand Week 10 Theory of the Firm, Technology Week 11 Costs and Firm Supply Week 12 Review, Exam II Week 13 Market structure Competitive Model Week 14 Monopoly Week 15 Oligopoly Chapt. Chapt. Chapt. Chapt. Chapt. 1 2 3,4 5,6 8,9 Chapt. Chapt . Chapt . Chapt. Chapt. 28 10,11 15,16,17 18.19,20* 21,22* Chapt. 23 Chapt. 25 Chapt . 26 *Supplimental assignments will be made from other books . This schedule is tentative. Announcements made by the instructor in class preempts this schedule. .. ( Econ 3070 Review Questions #1 1. Explain why the point of intersection between a supply and demand curve identifies the equilibrium price and quantity. 2. The demand for good 1 is given by the following equation. Given present consumer tastes for good 1, q 1 = I - . 1 P 2 + . 2P3 - 2 P 1 Presently: !:consumer income=lOO P2 :price of good 2=10 P 3 :price of good 3= 5 a) b) c) d) e) Plot the demand curve in P 1 , q 1 space. Is good 2 a substitute or complement? Is good 3 a substitute or complement? Find the inverse demand for good 1 . What will happen if income changes to 200? 3. Given the present technology of production, the supply of good 1 is gven by the following equation: q i= Pi - . 5 ( w + r ) Presently: w:wage rate= 10 r : rental rate on capital equipment= 6 a)Plot the supply curve in P1 , q i space. b) Find the inverse supply for good 1. c) What will happen if w goes up to 16? 4. Calculate the equilibrium price and quantity for the initial supply and demand curves given in 2 and 3. Calculate equilibrium price and quantity using the inverse demand and inverse supply curves. 5. Calculate the new equilibrium when 2e occurs. Describe the adjustment process to the new equilibrium. Repeat this exercise for Jc . 6. Define budget set. Define Budget line. What does each axis measure? What do its verticle intercept, horizontal intercept and its slope measure? 7. A consumer spends her entire income on pizza and record albums. Draw the budget line for each of the followi ng situations, identifying the intercepts and the slope in each case. (Measure pizza consumption horizontally) a) Monthly income is 1000, the price of pizza is 8 and the price · of record albums i s 10. b) Same conditions as in a, except that income is 500. c) same conditions as in a, except that income is 2000 and pizza i s 16 d) Same conditions as in a , except that record albums cost 5 . e) Compare the budget lines inc and d. 8. A consumer has income of 100. The price of food is 10 per unit. Using the case of a composite good and food, graphically analyze the effect of the following taxes and subsidies: a) A quantity subsidy of 5 is placed on food. b) An ad valorem tax of 20% is placed on food. c) Consumers face a lumpsum tax of 30. d) Consumers are not allowed to purchase more than 8 units of food. \ Economics 3070 - Fall 1989 Course Outline Week of: Topk Exam Ocl /fl (kl 17 ()cl, 2·l Oct JI # Te:xt 1 Production theory: technology, production, profit maximization. Ch. 18 & 19 Production and cost theory: cost functions , economies of scale. Choice of inputs. Supply curves. Ch. 20, 21 & 22 Distribution theory: derived demand economic rent, Euler 's theorem of Ch. 23 factor exhaustion. Distribution theory continued. Linear programming and duality. Labor markets: determination of the supply curve for labor. Capital markets and investment choices. .¥ov.: J.f JV(JJ,: 21 Ch 10 & 14 Exam #2 Market theory: study of pure competition, monopoly and regulation, Ch. 24 & 25 price discrimination. Market theory continued: monopolistic competition, industrial organization, oligopoly and duopoly. game theory. Ch. 26 & 27 flee _5 Exchange theory: the Edgeworth box. welfare economics. Ch. 28. 29 & 30 Dec. 12 Review session ( last day of c/asi, n:3r ......... Final Exam (7:30 - 10:30 am) ~,· -?/1...· UNIVERSITY OF COLORAuJ Department of Economics lntermediate Microeconomic Theory Course Outline Economics 3070 Section COO.:L Fall Semester 1989 Instructor: Douglas A. Ruby (Office: Economics 309c) Course Description: A market economy is dependent on the price system to guide in decisions on what to produce, how to produce. and who receives what is producedin that economy. This course will study theories of value and distribution under conditions of varying mark.et structures. with special reference to the contributions of modern economic theorists. This course will be taught with equal emphisis on theory and applied tools. Text: Varian. Hal R.. Intermediate Microeconomics-A Modern Approach. W.W. Norton & Company, 1987. Course Grade: Your grade will be based on your performance on two midterm exams, a final exam, and several worksheets distributed throughout. the semester. Week of: Topic Aug .JJ Introduction, 5'ept _5 Overview of the market economy and the price sytem. Review of supply and demand. A look at the principles of Ch. 1 & 17 equilibrium and optimization. 5'ept 12 Consumer theory: concepts of utility, preferences. and consumer equilibrium. 5'ept 1.9 Text Ch, 1 Ch. 2.3.4 Demand curve derivation. Types of demand curves and measures of elasticity. Price and income effects. ..'. ept . 26 Ch. 5. 6 & 8 Topics in consumer theory: consumer 's surplus, uncertainty, expenditure functions, intertemporal choice. Ch. 11. 13 & 15