Lecturer: Martin Paredes

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Lecture 01 Introduction Lecturer Martin
Paredes
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Outline

• Definition of Microeconomics
• Who Should Study Microeconomics?
• Course Information
• Microeconomic Modeling
• Elements of models
• Solving the models

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Definition of Microeconomics

• Microeconomics studies economic behavior of
  individual economic decision-makers
• E.g. consumers, workers, firms, managers.
• This study involves
• The behavior of these economic agents on their
  own
• The way their behavior interacts to form larger
  units, such as markets.

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Who Should Study Microeconomics?
Example The Railroad Industry in the US
74.9 of all freight, 1929 39.8 of all
freight, 1970 1970s poor profits,
bankruptcies, inability to invest 1980s
loosened regulation and union rules improved
profitability
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Who Should Study Microeconomics?

• Analysis of this issue requires Microeconomic
  tools.
• Who are the actors who need to know something
  about Microeconomics?
• Managers
• Union Leaders / Workers
• Lenders
• Policy Makers
• and beyond!

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Course Information

• Main (required) textbook
• David Besanko Ronald Braeutigam,
  Microeconomics John Wiley Sons, 2nd Ed.,
  2005.
• Ancillaries
• Study Guide
• APLIA Online resources and problem sets.

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Course Information

• Alternative textbooks (at your own risk)
• B. Curtis Eaton, Diane Eaton, Douglas Allen,
  Microeconomics Theory With Applications,
  Prentice Hall, 6th Edition, 2004.
• Robert Pyndick Daniel Rubinfeld, Microeconomics
  Prentice Hall, 6th Edition, 2005.
• Andrew Schotter, Microeconomics a Modern
  Approach, Addison Wesley, 3rd Edition, 2001.
• Hal Varian, Intermediate Microeconomics a Modern
  Approach, W.W. Norton, 6th Edition, 2006.

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Course Information

• Course Website
• http//www.tcd.ie/Economics/staff/paredesm/EC2010
  

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Course Information

• Lecture Meetings
• Tuesdays from 1000 AM to 1100 AM
• Wednesdays from 500 PM to 600 PM
• Location Arts building, room 1008
• Lecture from January 9th to be rescheduled after
  Reading Week

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Course Information

• Class Meetings

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Course Information

• Office Hours - Martin Paredes
• Mondays from 300 PM to 400 PM
• Thursdays from 1130 AM to 1230 PM
• Office Arts Building, room 3012

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Course Information

• Office Hours Teaching Assistants
• Marta Zieba Mondays, 1100 AM to 100 PM
• Padraig Flynn Fridays, 1000 AM to 1200 PM
• Office Arts Building, room 3002

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Course Information

• Course Assessment Two Examinations.
• Hilary Term Test 20
• Final Exam 60
• Several homeworks to be assigned during the
  semester on a weekly basis

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Course Information

• The Final Exam includes both Macro Micro in
  equal proportions
• Five questions in Micro
• One compulsory question
• Answer two out of the remaining four.
• Five questions in Macro
• One compulsory question
• Answer two out of the remaining four.
• Answer a total of 6 questions

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Course Outline

• 1. Introduction Ch. 1.
• 2. Demand and Supply Ch. 2.
• 3. Consumer Theory Ch. 3, 4 5.
• 4. Production and Cost Theory Ch. 6, 7 8.

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Course Outline

• 5. Perfect Competition Ch. 9 10.
• 6. Monopoly Ch. 11 12.
• 7. Imperfect Competition, Game Theory and
  Strategic Behavior Ch. 13 14
• 8. Risk and Information Ch. 15
• 9. General Equilibrium Theory Ch. 16
• 10. Externalities and Public Goods Ch. 17

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Microeconomic Modeling

• Models are simplificationslike maps
• Resemble reality
• Understandable
• Appropriate scale (not all details)

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Example World-wide market for unprocessed
coffee beans, December, 1997
Price per pound
Supply (P,W)
Quantity, pounds
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Example World-wide market for unprocessed
coffee beans, December, 1997
Price per pound
Supply (P,W)
Demand (P,I)
Quantity, pounds
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Microeconomic Modeling

• Elements of Models
• Need to specify
• Choices/Alternatives
• Assumptions

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Exogenous and Endogenous Variables

• Definition
• Variables that have values that are taken as
  given in the analysis are exogenous variables.
• Variables that have values that are determined as
  a result of the workings of the model are
  endogenous variables.

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Opportunity Cost
Definition The Opportunity Cost of a resource is
the value of that resource in its best
alternative use. Example 100K in facilities
yields 800K in revenue 100K in RD yields 1M
revenue ? Opportunity cost of investing in
facilities 1M ? Opportunity cost if investing
in RD 800K Note Opportunity cost depends on
how we specify alternatives.