Aims

To equip students at an intermediate-level with knowledge of core microeconomic concepts and develop their problem-solving ability. In particular, an understanding of consumer theory, producer theory, choice under uncertainty, theory of the firm and theory of the industry, general equilibrium theory and welfare economics, including market failure, and their application to the analysis of economic issues within each of these core areas.

Outline Of Syllabus

1. INTRODUCTION
•       Aims and approach of course.
•       Mathematical notation and properties.
•       Constrained optimisation.
•       Existence and uniqueness theorems.

2. CONSUMER THEORY
•       Neoclassical consumer theory: Preference relations and indifference curves.
•       Utility function.
•       Demand analysis. Marshallian and compensated demand functions and curves.
•       Revealed preference theory and price indices.

3. THEORY OF THE INDUSTRY
•       Oligopoly: Cournot and Stackelberg models, Bertrand model and efficiency.
•       Collusive oligopoly: joint-profit maximization, stability of cartels and market sharing.
•       Monopoly: price and output determination.
•       Price discrimination and efficiency.

4. PRODUCER THEORY
•       Production function: linear programming and neoclassical approaches.
•       Isoquants and production functions.
•       Cost minimization.
•       Homogeneous production functions, including Cobb-Douglas.

5. THEORIES OF THE FIRM
•       Owner-managed, profit-maximising assumption.
•       Managerial discretion and principal-agent problem.
•       Sales revenue model and expense preference model.
•       Alternative approaches.

6. CHOICE UNDER UNCERTAINTY
•       Decision rules for state-contingent outcomes.
•       Expected values, expected utility theorem, ex-post utility function and risk.
•       Applications to insurance.
•       Criticisms of expected utility theory.

7. PRODUCTION AND CONSUMPTION
•       Robinson-Crusoe and Man Friday economy.
•       Edgeworth-Bowley box and the production possibility curve.
•       Application to international trade.

8. GENERAL EQUILIBRIUM THEORY
•       The 2 x 2 x 2 model and Walrasian general equilibrium.
•       General equilibrium: diagrammatic treatment.
•       Properties of equilibrium: Walras Law, and existence, uniqueness and stability.

9. WELFARE ECONOMICS
•       Value judgements, inter-personal utility comparisons and ethical judgements
•       Pareto criteria: Pareto improvements, efficiency and welfare maximisation.
•       Fundamental theorems of welfare economics.
•       Criticisms of Pareto: alternative welfare systems, utilitarianism and Rawls.

10. MARKET FAILURE
•       Introduction, market failure and the nature of government intervention.
•       Pure public goods, and solutions.
•       Externalities, Coase theorem and solutions.

Teaching Rationale And Relationship

Lectures provide a treatment of the core course material. Seminars facilitate small group interaction with the seminar leader and to practice problem-solving exercises to reinforce learning. Drop-in surgery to deal with specific problems experienced by students and pre- and post-assessment classes, including generic feedback on the assessed essay. Private study facilitates review and understanding of lecture material and problem sets.

Assessment Rationale And Relationship

The written examination is designed to encourage study and test understanding across the range of microeconomic topics. The 1500-word assessed essay enables students to explore a topic in-depth and provides an opportunity for formative feedback.