MICROECONOMICS
Obiettivi formativi
The goal of this course is to provide students with the tools necessary to understand the economics behaviours of consumers, producers and markets. Special emphasis will be given to the functioning and malfunctioning (market failures) of the markets mechanisms. By reviewing a collection of real-world examples and applications, students will develop economic intuition and be stimulated to think more deeply about the technical tools they learn, and to find more interesting ways to apply them. This enables students to not just understand microeconomics, but to think like economists themselves.
Risultati di apprendimento attesi
Knowledge and understanding:
The course will offer key theoretical tools for the analysis of microeconomic phenomena: consumption decisions, production, markets and their limitations (market failure, asymmetric information, public goods).
Applying knowledge and understanding:
The students will be able to examine and understand basic economic phenomena with the appropriate frames, models and terminology.
Making judgements:
We expect students to be able to understand the current debate on microeconomic phenomena and related policies and assess the sustainability, effectiveness and implications of the latter.
Communications Skills:
This course will give the students the possibility to acquire and understand major terms and concepts in order to communicate their ideas, proposals, analysis and critical reasoning in an appropriate way, but at the same time being able to convey effectively insights and economic implications to a non-specialized audience.
Learning skills:
This course will contribute to empower learners giving them very versatile tools that can be applied to many social and economic contexts. They can also be combined with knowledge from other disciplines to provide more accurate or alternative analysis.
Contenuti Del Corso
INTRODUCTION
Thinking Like an Economist
Supply and Demand
THE THEORY OF CONSUMER BEHAVIOUR
Rational Consumer Choice
Individual and Market Demand
Applications of Rational Choice and Demand Theories
Choice under Uncertainty and the Economics of Information
Explaining Tastes: The Importance of Altruism and Other Non-Egoistic Behaviour
Cognitive Limitations and Consumer Behaviour
THE THEORY OF THE FIRM AND MARKET STRUCTURE
Production
Costs
Perfect Competition
Monopoly
Imperfect Competition
EXTERNALITIES, PUBLIC GOODS AND WELFARE
Externalities, Property Rights and the Coase Theorem
Testi Di Riferimento
- Frank, Robert H. Microeconomics and behavior, 10th Edition McGraw-Hill, 2021 (or later ones).
Metodologie Didattiche
Face-to-face teaching and case studies will be complemented by practical exercises and classroom experiments. Students’ participation during lectures is strongly encouraged.
Modalità di verifica dell'apprendimento
The exam consists of (i) a first midterm written exam, (ii) a second midterm written exam based on the practices, (iii) a final written exam, and (iv) group assignment.
In the examination process students are required to demonstrate that:
• they have a solid understanding of the economic concepts and technical tools;
• they have developed a critical and solid comprehension of consumer behavior theory and the firm and market structure theory;
• they have a critical mind about functioning and malfunctioning of the markets mechanisms;
• they are able to distinguish pros and cons of the standard economic theory.
Midterm written exam and final written exam will count for 30% of the grade each.
The midterm practice exam and the group assignment will count for 20% of the grade each.
Criteri per l’assegnazione dell’elaborato finale
no criteria
Settimana 1
• What is Economics? What is Microeconomics? • What is a model? Why is it useful? The economist as a policy maker or as a designer • How usefuls are economic models? 3 applications* o Cost-Benefit Analysys: building an infrastructure* o Matching doctors to schools* o Auctioning off user’s attention*
• The cost-benefit approach to decisions • Realism, economic theory, and the price of everything • Pitfalls in decision making o Ignoring imoplicit costs o Failing to ignore sunk costs o Measuring costs and benefits as proportions o Average Marginal distinction
Settimana 2
• Using marginal benefits and costs graphically • The invisible hand • Self-interest and homo-economicus • The Economic Naturalist • Should you think like an Economist • Micro and Macroeconomics
• Some Welfare properties of Equilibrium • Free markets, fair markets • Rent controls
Settimana 3
• Price ceilings and price supports • Rationing and allocative function of prices • Determinants of supply and demand • The algebra of supply and demand
• Consumer preferences. o Indifference curves and indifference o representation theorem • Utility function • Indifference curve and indifference map
Settimana 4
• The budget set and budget line • Budget shifts due to price or income changes • Budget involving more than two goods • Kinked budget constraints* • If the budget constrain is the same the decision should be the same* • Consumer preferences o Indifference curves o Using indifference curves to describe preferences • Indifference curve and indifference map • Trade-offs between goods o Marginal Rate of Substitution The best feasible bundle ▪ Optimal budle and Tangency condition of the optimal bundle ▪ Corner solutions • Indifference curves whne there are more than two goods • An application of the rational choice model* • Characterizing the optimal bundle using marginal utility and price ratio o Spend the marginal euro o Comparing marginal utility to price o What happens when the Marginal Rate of substitution is different than the price ratio? • The utility function approach to consumer choice
Settimana 5
• Individual and market demand • The effect of changes in price – o the price consumption curve o The individual consumer demand curve • The effects of changes in income o Engel curve o Nomal and inferior goods • Income and substitution effect of a price change o Giggen goods o Consumer responsiveness to changes in price* • Market demand – aggregating individual demand curves • Consumer surplus The effects of changes in income (continued) o Normal and inferior goods o Engel curve o Normal and inferior goods o Income and substitution effect of a price change • The effects of changes in income (continued) o Giffen goods o Perfect complements* o Perfect substitutes* • Market Demand: aggregating individual demand curves o Market demand with identical consumers* • Price elasticity of demand o Geometric interpretation o Unit free property o Some representative estimates o Determinants of price elasticity. • Dependence of market demand on income o Income elasticity of demand • Cross-price elasticity of demand*
Settimana 6
• Using the rational choice model ro answer policy questions: application a gasoline tax. • Consumer Surplus o Using demand curves to measure consumer surplus o Two part pricing
• Intertemporal choice model • Intertemporal consumption bundles, budget constraint and indifference curves o Marginal rate of time preference Choice under uncertainty o Probability and expected value o Expected utility model o Risk aversion, risk seeking, risk neutrality
Settimana 7
• The Input-Output Relationship, or Production Function • Production in the Short Run • Total, Marginal, and Average Products • Production in the Long Run • Returns to Scale • Appendix: Mathematical Extensions of Production Theory * • Costs in the Short Run • Graphing the Total, Variable, and Fixed Cost Curves
Settimana 8
• Other Short-Run Costs • The Relationship Among MP, AP, MC, and AVC • Costs in the Long Run • The Minimum Cost for a Given Level of Output • Long-Run Costs and the Structure of Industry • Appendix: The Short-Run and Long-Run Expansion Paths • Appendix: Mathematical Extensions of the Theory of Costs* • The Goal of Profit Maximization • The Four Conditions for Perfect Competition
Settimana 9
• The Short-Run Condition for Profit Maximization • The Short-Run Competitive Industry Supply • Producer Surplus and The Total Benefit from Exchange in a Market • The Invisible Hand • The Long-Run Competitive Industry Supply Curve • Applying the Competitive Model* • Defining Monopoly • Five Sources Of Monopoly • The Profit-Maximizing Monopolist
Settimana 10
• The Profit-Maximizing Monopolist • A Monopolist Has No Supply Curve • The Welfare Loss from a Single-Price Monopoly • Price Discrimination • Price Discrimination • The Efficiency Loss from Monopoly
Settimana 11
• Game theory • Types of equilibrium • The Prisoner’s dilemma • Evaluating outcomes • The Public Goods game: theory and evidence*
Settimana 12
• Sequential games* • The Ultimatum game: theory and evidence* • Cournot model • Bertrand model • Stackelberg model