Course Outline
EE311 Microeconomics Theory(4-0-8)
Semester1Academic Year2015
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Instructor: Dr Supruet Thavornyutikarn (Office: Room 223 Duen Bunnag Bldg)
Email:
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:Friday9 October2015, 09.00-11.00 hrs(40 percent)
2. Final Examination:Tuesday 15December2015, 09.00-12.00 hrs(60 percent)
Important Dates within this Semester
Semester startsMonday 17August 2015
First lecturerTuesday18August 2015
Add-Drop Period(withoutrecordingW)Wed26–Mon31Aug 2015
Midterm ExaminationFri9October2015(09.00 - 11.00 hrs)
Withdrawal Period(W recorded) Mon19–Mon 26October2015
Last day of the SemesterFri 4 December 2015
Final ExaminationTue15 December2015 (09.00-12.00hrs)
Textbooks and Reading Materials
- Pindyck, Robert S., and Daniel L. Rubinfeld. 2013.Microeconomics, (8thed). New Jersey: Pearson Education [PR]
- Besanko, David, and Ronald Braeutigam. 2013.Microeconomics, (5th ed). New York: John Wiley & Sons. [BB]
- Perloff, Jeffery M. 2012.Microeconomics, (6th ed.). Boston: Addison–Wesley, 2012. [P]
- Goolsbee, Austan, Steven Levitt, and Chad Syverson. 2013. Microeconomics. New York: Worth. [GLS]
- Kreps, David M. 1990. A Course in Microeconomic Theory. New Jersey: Princeton University Press. [K]
- Salvatore, Dominick. Schaum’s Outline of Microeconomics, (4th ed). New York: McGraw-Hill. [S]This is recommended for self-learning exercises.
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:
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 DemandTheory
ReviewingIndifference 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 SolutionandCorner 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 Measurementof welfare
[PR, Ch3.4-3.6, BB, Ch. 3-4; P, Ch. 5; GLS, Ch.4; K, Ch. 2; S, Ch. 5]
2.4Intertemporal 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]
2.5Choice 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)
ReviewingBasic understanding of opportunity cost; definitions and duality of production and cost; derivation of cost/production curves such astotal 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 includingpeak 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
ReviewingDuality 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]
- General Equilibrium and EconomicEfficiency
ReviewingAll 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 Ch16; 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 / Date / Topic1 / Tue18Aug / Introduction and Indifference Curve Analysis
2 / Thu20Aug / Consumption equilibrium and its changes
3 / Tue 25Aug / Revealed preference and indices
4 / Thu 27Aug / Application of indifference curve
5 / Tue 1Sep / Application of indifference curve (cont’d)
6 / Thu 3Sep / Intertemporal Consumption
7 / Tue 8Sep / Intertemporal Consumption (cont’d)
8 / Thu 10 Sep / Choice under uncertainty
9 / Tue 15 Sep / Choice under uncertainty (cont’d)
10 / Tue 22Sep / Cost and production
11 / Thu 24 Sep / Cost and production(cont’d)
12 / Tue 29Sep / Perfect competitive market
13 / Thu 1Oct / Applications of perfect competitive market
14-15 / Midterm Week [Midterm exam:Fri 9Oct2015 09.00-11.00hrs]
16 / Thu15Oct / Monopoly
17 / Tue20Oct / Price discrimination
18 / Thu22Oct / Price discrimination (cont’d) and pricing strategies
19 / Tue 27Oct / Monopolistic Competition/Oligopoly
20 / Thu 29Oct / Oligopoly
21 / Tue 3 Nov / Oligopoly (cont’d)
22 / Thu5Nov / Game Theory
23 / Tue10 Nov / Game Theory(cont’d)
24 / Thu 12Nov / Factor Market
25 / Tue17Nov / Factor Market (cont’d)
26 / Thu 19Nov / General equilibrium and economic efficiency
27 / Tue 24Nov / General equilibrium and economic efficiency(cont’d)
28 / Thu 26Nov / General equilibrium and economic efficiency(cont’d)
29 / Tue1 Dec / Market failure
30 / Thu3Dec / Market failure(cont’d)
Final Examination: Tuesday 15 December2015 09.00-12.00 hrs