• Offered for Year: 2025/26

• Module Leader(s): Professor John Sessions

• Owning School: Newcastle University Business School
• Teaching Location: Newcastle City Campus

Semesters

Your programme is made up of credits, the total differs on programme to programme.

Aims

ECO2101 is a course in intermediate microeconomics that focuses on how economic models of market and human behaviour are developed and used to explain the pricing of goods and services. The goal of the course is to provide students with a strong foundation for their later work in theoretical and applied economics.

While the ECO1100 Economic Analysis course will have taught you how economists think about phenomena in the world (and has therefore largely developed your economic intuition), this class is more rigorous: it is an introduction to the use of some simple but fundamental mathematical tools in economic analysis. The material builds on microeconomic principles that is covered at Stage1, but it demands a higher degree of conceptualisation, a greater reliance on analysis and on the use of mathematical training that is undertaken at Stage 1.
The focus on a mathematical approach has advantages: First, it generalizes the methods used in Introductory Economics; we are now able to look at a much broader class of problems. Second, using mathematics can make the analysis easier. We can describe indifference curves and their properties, for example, in a more straightforward way.

We are still interested in rational maximising behaviour subject to constraints and the market equilibrium (or disequilbria) that ensue. The central players remain the consumer, the firm, and the government and the course is divided into three parts to reflect this: The first part (Topics 1-2) focuses on household behaviour and demand. Our household optimum still involves budget lines and indifference curves, yet when analysing substitution and income effects, for example, we now use the Slutsky concept (Varian, Shapter 8), both mathematically and graphically. This concept offers a more intuitive explanation of the substitution effect as compared to the Hicks concept used in Economics 01. We also extend our treatment of individual household decisions by considering issues such as intertemporal choice and choice under uncertainty. The second part (Topics 3-5) of the course focuses on firm behaviour and supply. We are interested here in how firms optimise, and how different types of market structure affect the supply of output. The final part of the course (Topic 6) examines issues in welfare, why the market mechanism may fail to deliver a socially optimal outcome and what role Governments might play in alleviating such failure.

By the end of the course, you should understand the way in which economic agents (individual, firms, the government) make choices by optimising their utility subject to constraints. You should also understand how economic welfare might be affected by market structure, market imperfections, and policy

Outline Of Syllabus

PART ONE: HOUSEHOLD BEHAVIOUR

1. INTRODUCTION AND REVIEW
Demand and Supply
Unit Tax and Unit Subsidy


2. CONSUMER THEORY
Budget Constraint and Preferences
Utility function
Choice and Demand
Demand analysis. Marshallian and compensated demand functions and curves.
The Slutsky Equation
Labour Supply
Buying and Selling
Intertemporal Choice
Revealed preference theory and price indices.

3. 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.


PART TWO: THE THEORY OF THE FIRM

3. PRODUCTION COSTS
Production and Technology
Cost Functions


4. SUPPLY
Perfect Competition
Monopoly
Monopolistic Competition, Oligopoly, and Game theory

5. Factor Markets
Monosony
Minimum Wages and Discrimination

PART THREE: GENERAL EQUILIBRIUM AND WELFARE

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

7. 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.

8. 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.

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

Teaching Methods

Teaching Activities

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 Methods

The format of resits will be determined by the Board of Examiners

Exams

Formative Assessments

Formative Assessment is an assessment which develops your skills in being assessed, allows for you to receive feedback, and prepares you for being assessed. However, it does not count to your final mark.

Assessment Rationale And Relationship

The unseen written examinations are designed to encourage study and test understanding across the range of microeconomic topics. Being in person, they will reduce/eliminate the use of AI, plagiarism, and collusion.

Student learning and development of analytical skills tends to build and mature over time. End of session summative assessment should give learners maximum opportunity to develop their analytical skills before being formally assessed – and will test their understanding on exit from the programme of learning. The exam tests student's problem solving ability, their knowledge of terminology and their technical ability. The exam also tests students' ability to apply complex models to real life examples and their understanding of the way in which openness affects an economy.

The formative assessment is directly linked to the exams. Students are provided with a set of problems to solve before the seminar. During the seminar they share their answers with the rest of the class and receive feedback from the seminar leader and other students. Seminars are also an opportunity to improve students' confidence in their learning strategies by working through preset questions before the seminar.

RESIT INFORMATION: If students are eligible to a second attempt resit will be an exam and the resit calculation will be based 100% on the completed exam.

Reading Lists

• ECO2101's Reading List

Timetable

• Timetable Website: www.ncl.ac.uk/timetable/
• ECO2101's Timetable