BAEcon Economics and Sociology

Microeconomics 2 delves deeper into the fundamental model of demand and supply, introduced in (the principles of) Microeconomics 1 course in semester 1. We introduce basic microeconomic models of consumer and producer choice, which we use to derive market outcomes. We discuss how these models apply to actual practice, and how economists use them to describe and predict market outcomes and their relevance to economic policy decisions. Choice is a fundamental element of microeconomic analysis and human behaviour and in this course we develop formal economic models of choice, which we then use to describe, explain, and predict the behaviour of individuals and firms. 

 

(ECON10221 or ECON10331) and (ECON10061 or ECON10071)

(ECON10221 OR ECON10331) AND (ECON10061 OR ECON10071)

 

The main aim of this course is to introduce students to the study of individual choice and supply decisions, under two different market structures - pure competition, and monopoly.  We build on knowledge from (the principles of) Microeconomics 1 course in semester 1, but we employ more formal mathematical (calculus) techniques learned in either ECON10061 or ECON10071. We also introduce Game Theory as a tool for analysing strategic interactions between economic agents. The application of these basic models to actual practice and economic policy, is discussed throughout the course, and we highlight both their usefulness as well as limitations in that context. 

By the end of this course you will be able to: 

• Model individual choice i.e., solve utility maximisation problems under budgetary constraints. 
• Derive individual and market demand schedules. 
• Use the consumer choice model to describe actual practice, and how it can be used to analyse choice between actual commodities.   
• Understand the applications and limitations of the consumer choice model. 
• Understand and model supply decisions of individual firms under pure competition and monopolistic market conditions and understand the application and limitations of the pure (perfect) competition and monopolistic market models.   
• Identify when markets can be described as perfectly competitive or monopolistic, and when they cannot, and explain the output and pricing decisions of  firms operating in such markets.    
• Understand how Game Theoretic approaches can be used in the study of strategic interactions between market agents.  
• Identify when firms’ decisions are strategic in actual practice, and how inter-dependence affects their decisions. 

Provisional

Introduction to Consumer’s Choice  

• Preferences & Utility 
• Budget Constraints & Choice 
• Demand & The Slutsky Equation

Introduction to Producer’s Choice

• Technology & Profit Maximisation 
• Cost Minimisation & Costs

Introduction to market structures: Pure (Perfect) Competition

• Firm & Industry Supply

Introduction to market structures: Monopoly

• Pricing decision of a monopolist

Introduction to Game Theory

• Pure & Mixed Strategies 
• Nash Equilibrium 
• Best response functions 

Synchronous activities (such as Lectures or Review and Q&A sessions, and tutorials), and guided self-study

 

Hal R. Varian, Intermediate Microeconomics with Calculus, Norton, 1st edition. 

For every 10 course unit credits we expect students to work for around 100 hours. This time generally includes any contact times (online or face to face, recorded and live), but also independent study, work for coursework, and group work. This amount is only a guidance and individual study time will vary