Course Title: Microeconomics II
Credits: 1 (20 Sessions)
Type: Compulsory
Session Duration: 75 minutes
Term: III
Year: 2022
Faculty:
_______________________________________________________________________
Introduction
This course aims to build further on the foundation provided by the previous course of
microeconomics. The course aspires to dig deeper into the previously discussed concepts with an
application focus.
Course Objectives
1) To revise and consolidate the concepts of microeconomics
2) To provide applied insights into the conventional ideas of microeconomics
3) To explore the emerging concepts and applications of microeconomics
4) To make sure that participants are able to think critically and structure any problem with
an economic worldview
Pedagogy
Pedagogy would be mainly lecture centric; however, classroom discussion and activities would
form an intrinsic part of the sessions; Therefore, pre-class preparation is necessary. Given the
wide range of assorted application topics, a selection of suitable examples and cases would be
provided.
Evaluation Scheme
Class Preparation and Participation
Midterm Exam
Quizzes
End term Exam
10 %
35 %
15 %
40 %
Main Textbook:
Intermediate Microeconomics: A Modern Approach (2015), by Hal R. Varian.
Brief Outline
Consumer Preferences, Consumer Behavior, Consumer Demand and Market Demand, Technology,
Producer Theory, Costs, Profit Maximization, Game Theory.
Course Outline:
Week
Session
1
1
Topic and Sub-topics
Textbook
Example / Case /
Assignment
The “scope and methods” of
economics and the economic
concept of “best things.”
Intermediate Microeconomics:
A Modern Approach (2015),
by Hal R. Varian.
Case:
Rent Control
p:13
Chapter 1: THE MARKET
1-2
2-3
Session Objective:
To understand how we come to
know about economics and
consumers’ best choice.
Theory of consumer behavior
and the use of utility to
describe consumer preferences.
Session Objective:
Employment of the utility
concept to capture preferences.
2-3
4-5
Employment of budget set and
the theory of preferences to
describe optimal consumer
choice.
Chapter 3: PREFERENCES
Intermediate Microeconomics:
A Modern Approach (2015),
by Hal R. Varian.
EXAMPLE:
Indifference
Curves from
Utility
Chapter 4: UTILITY
p: 59
Intermediate Microeconomics:
A Modern Approach (2015),
by Hal R. Varian.
Chapter 5: CHOICE
NA
Session Objective:
Use of the economic model of
consumer choice to show that
people choose the best bundle
they can afford.
3-4
6-7
Derive the demand function by
maximizing the utility subject
to a budget constraint.
Session Objective:
Use of information about the
consumer’s preferences and
Intermediate Microeconomics:
A Modern Approach (2015),
by Hal R. Varian.
Chapter 6: DEMAND
EXAMPLE:
Perfect
Substitutes and
Perfect
Complements
p: 107-108
budget constraint to determine
his or her demand.
4-5
5
8-9
10
Measuring the net benefit
associated with the
consumption of the good and
evaluating consumer’s
behavior changes in response
to changes in the economic
environment.
Session Objective:
To understand how we assess
the net benefits to consumers
under changes in the economic
environment.
Adding up individual choices
to get the total market demand.
Session Objective: To
understand the mechanism
behind the aggregate demand.
Intermediate Microeconomics:
A Modern Approach (2015),
by Hal R. Varian.
Chapter 8:
SLUTSKY EQUATION
EXAMPLE:
Calculating the
Substitution
Effect and the
Income Effect
p:140 &142
Chapter 14:
CONSUMER SURPLUS
Intermediate Microeconomics:
A Modern Approach (2015),
by Hal R. Varian.
EXAMPLE:
Adding Up
Linear Demand
Curves
Chapter 15:
MARKET DEMAND
p:272
6
MIDTERM
7
7-8
11-12
12-13
MIDTERM
Theory of producer behavior.
Production function and
constraints.
Intermediate Microeconomics:
A Modern Approach (2015),
by Hal R. Varian.
Session Objective: To describe
and understand technological
constraints facing a firm
Chapter 18:
TECHNOLOGY
fixed
proportions
Introducing the concept of
profit maximization, deriving
the inverse factor demand
curves and analyzing returns
to scale.
Intermediate Microeconomics:
A Modern Approach (2015),
by Hal R. Varian.
EXAMPLE:
Session Objective: To
understand, set up and solve
the firm’s profit maximization
problem.
PROFIT MAXIMIZATION
Chapter 19:
EXAMPLES:
Cobb Douglas
perfect
substitutes
Cobb Douglas
8-9
14
Cost minimization choices in
the short run vs long run
Session Objective: To show
how a firm minimizes its costs
in the short versus the long run.
Deriving the results
analytically.
9
10
15
16-17
18
19-20
COST MINIMIZATION
Intermediate Microeconomics:
A Modern Approach (2015),
by Hal R. Varian.
Session Objective: To
understand short run and long
run cost curves and their
relationship
Deriving the supply curve of a
competitive firm.
Chapter 21:
To analyze firm behavior under
Monopoly.
Session Objective: To
understand and analyze profit
maximization under monopoly.
11
Chapter 20:
Introducing and understanding
cost curves and their
connection(s).
Session Objective: To derive
the supply curve of a
competitive firm from its cost
function using the model of
profit maximization.
11
Intermediate Microeconomics:
A Modern Approach (2015),
by Hal R. Varian.
Introducing the main elements
in the theory of oligopolistic
markets along with certain
models (game theory etc.)
Session Objective: To
introduce the students to the
main elements synthesizing the
oligopolistic markets and
expose them to key approaches
in game theory.
EXAMPLES:
Cobb-Douglas,
perfect
substitutes,
fixed
proportions +
Lagrangean
method
EXAMPLE:
The relationship
between MC and
VC
COST CURVES
Intermediate Microeconomics:
A Modern Approach (2015),
by Hal R. Varian.
Chapter 22:
FIRM SUPPLY
Intermediate Microeconomics:
A Modern Approach (2015),
by Hal R. Varian.
Chapter 24:
MONOPOLY
EXAMPLE:
Analytical
solution in
profit
maximization
Intermediate Microeconomics:
A Modern Approach (2015),
by Hal R. Varian.
EXAMPLES:
OLIGOPOLY
APPLICATIONS
Sequential
games
(BITS AND PARTS FROM
CHAPTERS 27, 28 & 29)
Prisoner’s
dilemma
The Course will not tolerate plagiarism, copying or active or passive collaboration in this type of dishonest behavior
in papers written by our students. This penalty for plagiarism will be immediate failure of the course. Furthermore,
the Institute will initiate proceedings against the student that could lead to his/her expulsion from the programme.
***Happy Learning-All The Best***