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Econ 305:
Intermediate Microeconomics
Syllabus below (pdf version)
Handouts
#1:
Microeconomics As A Scientific Theory
(download
PDF
or WORD
document)
#2: How Rational People Make Decision
(download PDF
or WORD
document)
#3: Indifference Curve Analysis
(download PDF
or WORD
document)
#4: A Formal Explanation to the Law of
Demand and the Giffen Paradox
(download PDF
or WORD
document)
#5: Relationships of Changes in Price,
Price Elasticity and Total Revenue
(download PDF
or WORD
document)
#6: The Theory Of Consumer Choice: The
Supply of Labor
(download PDF
or WORD
document)
#7: The Theory Of Consumer Choice: The
Supply of Savings
(download PDF
or WORD
document)
#8: The Theory of the Firm
(download PDF
or WORD
document)
#9: Derivation of the Long-Run Cost
(download PDF
or WORD
document)
#10:How Price is Influenced by Market
Structure
(download PDF
or WORD
document)
Study Guides
#1: Part I: The Theory of Consumer Choice
(download PDF
or WORD
document)
#2: Part II: The Theory of the
Firm
(download PDF
or WORD
document)
#3: Study Guide:
Intermediate Microeconomics Final
(download
PDF
or WORD
document)
Syllabus (note: figures missing)
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ECONOMICS 305: INTERMEDIATE MICROECONOMICS
(Fall 2003)
Instructor: Ahmed M. Hussen
Office: Dewing 306A, Phone #: 7025
Office Hours:
COURSE DESCRIPTION:
You recall learning the basics of demand and supply
in your first course in microeconomics. In this some
course, in addition to demand and supply analysis, you were also
exposed to some highly specialized key economic concepts, such as
elasticities of demand and supply, the law of diminishing marginal
utility, production and cost functions, the basic rules for utility and
profit maximization, economies and diseconomies of scale, perfect
competition, monopoly, oligopoly, consumer and producer surpluses,
price ceiling, price floor, dead weight-loss, and so on.
In Intermediate Microeconomics, you will be probably
disappointed to hear that you will learn only a few genuinely new
additional microeconomic concepts. Thus, basically, Intermediate
Microeconomics is an advance treatment of the concepts that you have
already been exposed to in your first course in economics.
It is predominantly a theory oriented course and as such tends to be
highly abstract and technical. To the extent application
exercises are used, they are mainly aimed at reinforcing understanding
of a specific microeconomics theory rather than to actually shade
lights on a real word problem(s). It is a course designed
primarily to economic majors with the sole intent of teaching them the
“neoclassical economics way of thinking” in a rigorous and
comprehensive manner. More specifically, this is a course
where you actually, through repeated exercises, learn the broad and
wider applications of that analytical approaches that are so profoundly
unique to modern economic science—marginal and partial equilibrium
analysis.
This course assumes that students have taken a
course in calculus. Prerequisites: Eco 105 and Eco
205 or Math 112.
REQUIRED READINGS:
Pindyck, Robert and Rubinfeld, Daniel, Microeconomics, 5th edition,
Prentice Hall, 2001.
Additional readings will be placed on reserve in the Library as needed.
LECTURE OUTLINE:
PART I
THE THEORY OF CONSUMER CHOICE:
Output Demand and Input Supply
The Theory of Consumer Choice: A Schematic View
Part I, the theory of consumer choice, deals with
every day decisions a rational and well-informed consumer makes, such
as on how much of her/his monthly income to spend for buying food or
other consumption goods and services; how much time to spend working or
relaxing; and how much to save. These decisions, as implied
by the above diagram, are done after careful consideration of the
preference function, budget constraint and utility maximizing behavior
of the individual consumer. As implied by the entries in
the last box of the above diagram, it is also out of this intellectual
exercises that generalized theories of consumer demand for final goods
and services and supply for a factor of production, such as labor are
derived.
Week 1: Chapter 3 ( pp. 51 – 84; 89-91)
∑ The Economic World: Basic Assumptions
∑ Utility and Choice
∑ The Equi-marginal Condition for Utility Maximizing Consumption Choice
∑ Applications
Week 2 : Chapter 4 (pp. 101-126; 131-135), Appendix
to Chapter 4 (pp.139-147)
∑ Changes in Income and Consumer’s Choice: Engel’s Law
∑ Changes in Price and Consumer’s Choice: Derivation of Individual
Demand Curve
∑ From the Individual to Market Demand
∑ Market Demand and Elasticity
∑ Consumer Surplus
∑ Applications
Week 3: Chapter 14 (pp. 509-513)
∑ The Consumption-Leisure Choice
∑ Derivation of the Labor Supply Curve
∑ Consumer’s Time Preference
∑ The Optimal Saving
∑ Mid-term Exam I
End of Part I
PART II:
THE THEORY OF THE FIRM:
Output Supply and Input Demand
The Theory of the Firm
Part II, the theory of the firm, deals with how a
business entity with a singular objective to maximize profit makes
decisions, such as on how many units of output to produce and workers
or some other factor of productions to use in its daily business
dealings. This is done, as indicated in the diagram above
after careful considerations of the firm’s technological options (which
determines the structure of the cost of production), budget constraint
and profit maximizing behavior. This basic theory of the
firm is the cornerstone for the neoclassical theories of supply for
final goods and services and the demand for factors of production (see
the last box in the above diagram).
Week 4: Chapter 6 (pp. 177-201)
∑ The Firm and Its Objectives
∑ The Production Technology of the Firm: Production Functions
∑ The Law of Diminishing Marginal Productivity
∑ The Concept of an Isoquant and Input Substitution
∑ Returns to Scale
∑ Technical Progress versus Input Substitution
∑ The Cobb-Douglas Type Production Functions and their Properties
∑ Applications
Week 5: Chapter 7 (pp. 203-208; 215-224)
∑ Basic Concepts of Costs
∑ Short-run versus Long-run
∑ The Equi-Marginal Condition for Cost Minimization—Optimal Input Choice
∑ The Expansion Path of a Competitive Firm
Week 6: Chapter 7 (pp. 224-229; 208-215), Appendix to
Chapter 7 (pp. 246-250)
∑ Derivation of the Long-run Cost Curve of a Firm
∑ General Features of Long-run Cost Functions and their Explanations
∑ The Link Between Short-run and Long-run Cost Functions
∑ The Conventional Short-run Cost Function
∑ The Basic Features of Short-run Cost Curves and their Properties
Week 7: Chapter 8 (pp. 251-271)
∑ The Nature of the Firm’s Marginal Revenue Function
∑ The Equi-Marginal Condition for Profit Maximizing Output Choice
∑ The Short-Run Supply Curve of a Competitive Firm
∑ The Short-Run Market Supply Curve
∑ Factors Affecting the Short-Run Supply Curve
∑ Short-run Price Determination
Week 8: Chapter 14 (pp. 501-509; 514-518)
∑ Profit-Maximizing Behavior and the Hiring of Inputs
∑ The Demand for Labor: A single Variable Input Case
∑ Two Variable Input Case
∑ Factors Affecting the Demand for Labor
∑ Equilibrium in the Labor Market
∑ Mid-term Exam II
PART III
PRICING AND OUTPUT DECISION UNDER ALTERNATIVE
MARKET STRUCTURES
Parts I and II together thoroughly and
systematically examined the neoclassical theories of demand and supply
(for both the product and factor markets). This investigation was
done assuming a perfectly competitive market structure. Part III,
which in some respect is an extension of Parts I and II, deals with two
pertinent issues. It starts with a comprehensive evaluation
of the performance of a perfectly competitive market system in the
long-run—the so-called Adam Smith’s Invisible Hand Theorem. The
second issue deals with the effects of market imperfections on the
pricing, production and employment decisions of a firm and what these
outcomes might suggest to the efficiency by which resources allocated
for society at large.
Week 9: Chapter 8 (pp. 271-277), Chapter 16 (pp. 590-593),
Chapter 10 (pp. 327-351; 359-362),
Chapter 11 (369-381)
∑ The Competitive Market: the Best of all Worlds!
∑ Monopoly Power
∑ Pricing and Output Decision of a Monopoly
∑ Efficiency Loss and Income Redistribution Effects of Monopoly Pricing
∑ Price discrimination and for what purpose!
∑ Alternative Public Policy to Regulate Monopoly Pricing Practices
∑ A Natural Monopoly and its Regulations
Week 10: Chapter 12 (pp. 323-330; 442-448), Chapter 13 (pp.
461467)
∑ Pricing and Output Decision Under Monopolistic Competition
∑ Oligopolistic Market Structure
∑ Strategy and Game Theory
∑ Concluding Remark
GRADING:
Two Mid-term
Exams................... 60%
Final
Exam......................... 30%
Quiz and Other Class Assignments
10%
IMPORTANT NOTE: Any student with a disability who needs an
accommodation or other assistance in this course should make an
appointment to speak with me as soon as possible.
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