ECON 3070-001 Intermediate Microeconomic Theory
INTERMEDIATE MICROECONOMICS, Econ 3070-001 University of Colorado at Boulder, Fall 2005 Lectures: MWF 10:00 a.m. to 10:50 a.m. @Econ 119 Instructor: Vijaya R. Sharma, Ph.D. Office Hours: MWF 10:30 a.m. to 12:00 noon @Econ 4A Phone: 303-492-3021 E-mail: [email protected] Website: http://spot.colorado.edu/~sharmav/ Textbook Microeconomics: Theory and Applications, by Edwin Mansfield and Gary Yohe, 11th edition, W.W. Norton Company Course Description This is an intermediate course open to students who have successfully completed an introductory (Econ 1000) or principles course in microeconomics (Econ 2010) and have also completed a mathematics course for economists (Econ 1078) or a mathematics module course (like Econ 1050, 1080, 1100). It is essential that the students have knowledge of basic calculus. This course discusses economic choice behavior of consumers, producers, and such other economic agents to understand functions, successes and failures of markets. The course also analyzes interrelations among different types of economic agents and markets. Tentative Schedule Introduction, Demand and Supply (Chapter 1): Aug 22, 24 Market demand curve: time period, consumer tastes, incomes, and other prices; Market supply curve: technology, input prices; Solving for equilibrium price and quantity, comparative static Homework #1 due Aug 26 (Question # 9, 11, and 12: Pages 27-28) Consumer Preferences and Choice (Chapter 2): Aug 26, 29, 31, and Sept 2 Consumer budget line: equation, slope, shift and rotation; Nature and determinants of preferences, Indifference curves: shapes and slopes; Utility and marginal rate of substitution; Consumer equilibrium: graphical and mathematical solutions, and interpretations Homework #2 due Sep 7 (Question # 1, 2, 4, and 7: Pages 63-65; also the two consumer equilibrium problems assigned in the class) Individual Demand (Chapter 3): Sep 7, 9 Income-Consumption Curve, Engle Curve, Price-Consumption Curve, Substitution and Income Effects, Normal/Inferior/Giffen Goods, Consumer Surplus and Measurement of Benefits to Consumers Homework #3 due Sep 14 (Question # 1, 3, and 6: Pages 109-111) Market Demand, Firm and Industry Demand Curves (Chapter 4): Sep 12, 14, 16 Horizontal summation of individual demand curves, Price elasticity of demand: formula, determinants, relation with expenditures; income and cross price elasticity; Individual firm’s demand curve: shape, interpretation, marginal revenue and total revenue under perfect competition and under monopoly Homework #4 due Sep 19 (Question # 2, 7, 9, 10, and 11: Pages 146-148) Choices Involving Risk (Chapter 5): Sep 19, 21, 23 Expected monetary value, expected value of perfect information, expected utility, von Neumann-Morgenstern utility function, and preferences regarding risk Homework #5 due Sep 23 (Question # 3, 4, 5, and 7: Pages 190-191) Exam 1 on the above materials on Sep 26, Monday Production Function and Isoquants (Chapter 6): Sep 28, 30, and Oct 3 Short run and Long run, Production function, Total, Average and Marginal products and their geometry; Isoquants: shape, slope, marginal rate of technical substitution and ratio of marginal products; Cobb-Douglas production function and Returns to scale Homework #6 due Oct 5 (Question # 1, 2, 3, 4, 9: Pages 231-232) Cost Function and Choice of Inputs (Chapter 7): Oct 5, 7, 10 Isocost curve: equation, slope, shift, and rotation; Optimum input combination: tangency rule and formula; Short run cost function: fixed and variable costs; Average and Marginal cost, Geometry of cost curves; Long run Average Cost Function Homework #7 due Oct 12 (Question # 2, 3, 4, and 7: Pages 274-275) Perfect Competition (Chapters 8 and 9): Oct 12, 17, 19, 21 Characteristics of perfect competition, Derivation of Profit Maximizing Condition, Rule for optimal level of output, Market price and profit/loss situations, Shut-off situation, Firm’s supply curve, Industry supply curve (horizontal summation), Price elasticity of supply, Short run and Long run equilibrium of perfectly competitive firms, Effect of industry expansion on input prices and long run industry supply curve (constant cost, increasing cost, and decreasing cost cases), Producer surplus, Total surplus, Maximization of total surplus, Effect of price ceiling, price floor, tariffs, quotas, and excise taxes Homework #8 due Oct 24 (Question # 1, 10, 13: Pages 317-321, and Question # 1 and 10: Pages 351 and 354) Monopoly and Monopolistic Competition (Chapters 10 and 11): Oct 24, 26, 28, 31 Characteristics of Monopoly Market, Monopoly’s demand curve and short run cost curves; Price and Marginal Revenue, Marginal Revenue Function for Linear Demand Function, Condition for Profit Maximization, Short run and Long run Equilibrium, Multiplant Monopoly, Deadweight Loss, Monopoly Power, Price Discrimination, Monopolistic practices, Regulation of Monopoly Characteristics of Monopolistic Competition, Chamberlin’s Theory of Monopolistic Competition, SR and LR Equilibrium, Excess Capacity and Product Diversity, Mark-up Pricing Homework #9 due Oct 31 (Question # 2, 3, 4, 6, 9, 10, and 11: Pages 396-398) Exam 2 on the post-Exam-1 materials: Nov 2, Wednesday Oligopoly, Game Theory, and Strategic Behavior (Chapters 12 and 13): Nov 4, 7, 9, 11 Characteristics of Oligopoly, Nash Equilibrium, Cournot Model, Cartel, Stackelberg Model, Bertrand Model, Price Leadership Model, Game Theory: Nash Equilibrium and Cooperative Equilibrium, Contestable Market and Limit Pricing Homework #10 due Nov 14 (Question # 1 (a, b), 5, 6, and 8: Pages 454-456 and Question #5: Page 486) Input Markets (Chapter 14): Nov 14, 16, 18 Profit Maximization and Optimal Input Combination, Marginal Revenue Product Curve, Several Variable Inputs and Input Demand Curve, Price elasticity of demand for input; Input Supply Curves: General Supply curve, Backwardbending labor supply, Fixed Land Supply; Monopsony buyer of input, Monopsonist’s Optimal Choice of Input Homework #11 due Nov 21 (Question # 3, 4, 5, and 7: Pages 536-537) Resource Allocation (Chapter 16): Nov 21, 23, 28, 30 Edgeworth Box of Exchange and Contract Curve, Edgeworth Box of Production and Contract Curve, Derivation of PPC, Production and Exchange, Three Conditions of Economic Efficiency, Pareto criterion, Perfect Competition and Economic Efficiency, Utility Possibilities Curve, Equity considerations: Egalitarian View, Competitive Market View, Social Welfare Function, John Rawls’ Theory Homework #12 due Dec 2 (Question # 4, 7, 8, 9, 11, and 12: Pages 624-625) Public Goods and Externalities (Chapter 18): Dec 2, 5, 7 Characteristics of Public Goods, Efficient output of public good, Vertical summation of demand curves, Free Riders, Provision of Public Goods; Positive and Negative Externalities, Optimal Pollution Level and Methods of Pollution Control (Regulation, Effluent Fees, Marketable Permits, Coase Theorem) Exam 3 on the post-Exam-2 materials: Dec 13, Tuesday, 10:30 a.m. Course Grading Course grade shall be determined from performances in three examinations and the best 10 of 12 homeworks: two best exams 40% each, the worst exam 10%, and homeworks 10%. Homework schedules may be changed by the instructor if necessary, but exam dates are firm. Accommodations for Students with Documented Disability If you qualify for accommodations because of a disability, please submit to the instructor a letter from Disability Services in a timely manner so that your needs may be addressed. Disability Services determines accommodations based on documented disabilities. Contact: 303-492-8671, Willard 322, and www.Colorado.EDU/disabilityservices. Absences due to Religious Observances Campus policy regarding religious observances requires that faculty make every effort to reasonably and fairly deal with all students who, because of religious obligations, have conflicts with scheduled exams, assignments or required attendance. In this class if you have any such conflict, please inform the instructor at least two weeks in advance to make a reasonable arrangement or adjustment according to the University policy, which can be seen at http://www.colorado.edu/policies/fac_relig.html. Classroom Behavior Policy Students and faculty each have responsibility for maintaining an appropriate learning environment. Students who fail to adhere to such behavioral standards may be subject to discipline. Faculty has the professional responsibility to treat all students with understanding, dignity and respect, to guide classroom discussion and to set reasonable limits on the manner in which they and their students express opinions. Professional courtesy and sensitivity are especially important with respect to individuals and topics dealing with differences of race, culture, religion, politics, sexual orientation, gender variance, and nationalities. Class rosters are provided to the instructor with the student's legal name. I will gladly honor your request to address you by an alternate name or gender pronoun. Please advise me of this preference early in the semester so that I may make appropriate changes to my records. See polices at http://www.colorado.edu/policies/classbehavior.html and at http://www.colorado.edu/studentaffairs/judicialaffairs/code.html#student_code. Discrimination and Harassment Policy The University of Colorado at Boulder policy on Discrimination and Harassment (http://www.colorado.edu/policies/discrimination.html), the University of Colorado policy on Sexual Harassment and the University of Colorado policy on Amorous Relationships applies to all students, staff and faculty. Any student, staff or faculty member who believes s/he has been the subject of discrimination or harassment based upon race, color, national origin, sex, age, disability, religion, sexual orientation, or veteran status should contact the Office of Discrimination and Harassment (ODH) at 303492-2127 or the Office of Judicial Affairs at 303-492-5550. Information about the ODH and the campus resources available to assist individuals regarding discrimination or harassment can be obtained at http://www.colorado.edu/odh. Honor Code All students of the University of Colorado at Boulder are responsible for knowing and adhering to the academic integrity policy of this institution. Violations of this policy may include cheating, plagiarism, and aid of academic dishonesty, fabrication, lying, bribery, and threatening behavior. All incidents of academic misconduct shall be reported to the Honor Code Council ([email protected]; 303-725-2273). Students who are found to be in violation of the academic integrity policy will be subject to both academic sanctions from the faculty member and non-academic sanctions (including but not limited to university probation, suspension, or expulsion). Additional information on the Honor Code can be found at http://www.colorado.edu/policies/honor.html and at http://www.colorado.edu/academic/honorcode.