LOUGHBOROUGH UNIVERSITY
Department of Economics
ECA002 Principles of Microeconomics (20 credits)
Academic Year 2008-09
Semester I and Semester II
Lectures:
In Semester I on Mondays, 10:00-11:00 in room J/1/10 (weeks 1-3, 5-11)
and Tuesdays, 16:00-17:00 in room J/1/10 (weeks 6-11). Total for Semester
I: 15 hours. In Semester II there will be another 15 hours of lectures, venue
and times will be announced shortly before the start of Semester II.
Tutorials:
Ten one-hour tutorials (delivered by GUTs). Please see relevant noticeboard
for further details.
Assessment:
One two-hour written examination (weight 60%) at the end of Semester II,
one coursework test (weight 20%) normally in week 12 of Semester I and
one coursework test (weight 20%) during Semester II. Coursework tests are
entirely based on multiple-choice questions. The exam at the end of
Semester II consists of two parts: (i) Part A (25 multiple choice questions)
and (ii) part B (5 structured questions). All questions must be answered, that
is, the twenty five (25) multiple choice questions in part A and all five (5)
structured questions in part B. The exact dates of the coursework tests will
be announced during lectures and on the Learn server.
Methods of Teaching and Learning: Each student is expected to participate in two hundred
hours (200) of effort which comprise:
(a)
Contact time: thirty hours (30) of lectures plus ten (10) tutorials;
(b)
Private study: guided reading and preparation associated with
lectures and tutorials; student self-directed learning in the subject area of
the module; preparation and production of assessed work; examination
preparation and revision.
Lectures given by: Prof. J Poyago-Theotoky (Semester I) and Dr C. Piga (Semester II).
Office Hours: TBA.
For urgent matters you may use e-mail: j.poyago-theotoky@lboro.ac.uk
(Semester I) and c.a.g.piga@lboro.ac.uk (Semester II).
Outline and Reading List
There are no prerequisites to taking this module and there is no requirement that students
have studied economics previously. The module provides a thorough introduction to
microeconomics. It is theoretically based, although examples will be used to illustrate the
material and applications to specific issues will be made. The approach taken is rather
different from A-level economics. This not only avoids repetition for those who have studied
economics already but also, more importantly, provides a rigorous theoretical basis for
further study and analysis.
Aims
The aims of this module are:
- to provide students with a sound basis in modern microeconomics and its
application to both theoretical and real world problems;
- to give students the ability to develop analytical skills using diagrams and simple
mathematics;
- to equip the students with the ability to communicate and report findings.
Objectives and Intended Learning Outcomes
By the end of this module students should:
- be knowledgeable of microeconomic principles;
- be able to understand simple mathematical, verbal and diagrammatic methods of
analysis;
- be able to identify and evaluate key microeconomic issues facing market economies
and evaluate alternative policy responses.
Transferable and General Skills
On completion of this module students should have acquired transferable skills in analytic
reasoning, numeracy and clear and effective communication.
Module Texts
Recommended Text
R.G. Lipsey and A. Chrystal (2007), Economics, 11e, Oxford (you may substitute this for the
older 10th edition). http://www.oxfordtextbooks.co.uk/orc/lipsey11e
Some Good Alternatives:
N. G. Mankiw and M.P. Taylor (2006), Economics, Thomson Learning (JPT prefers this).
J. Stiglitz and N. Driffill (2000), Economics, W W Norton.
P. Krugman and R. Wells (2006), Economics, Worth.
D. Begg, S. Fisher and R. Dornbusch (2002), Economics, 7e, McGraw-Hill.
M. Parkin, M. Powell and K. Matthews (2002), Economics, 5e, Addison-Wesley.
Additional Reading
At a slightly more advanced level than the basic textbooks above students will gain a lot in
understanding microeconomics by consulting the following two books. The first one puts
emphasis on intuition and covers a broad range of topics while the second one is a must if
you wish to pursue a career in economics and are serious about understanding how the
‘dismal’ science works.
J. Hirshleifer, A. Glazer and D. Hirshleifer (2005), Price Theory and Applications: Decisions,
Markets, and Information, 7th Edition, Cambridge University Press.
H. Varian (2006), Intermediate Microeconomics, 7th edition, Norton.
It is generally a good strategy to consult at least one additional textbook apart from the
recommended one from the above list. Be aware that no textbook is ideal and that the best
way to learn economics is to study from different sources. Note that the lectures will not
strictly follow any one textbook. Students are also encouraged to read beyond textbooks.
Getting into the habit of doing background reading is essential and the earlier this can be
achieved the better. For example, publications such as The Economist, The Financial Times
and Business Week form an essential part of the broadening of students horizons.
Moreover, there are two policy-oriented academic journals aimed specifically at
undergraduates, economic journalists, policy-makers and others who do not wish to plough
through large amounts of mathematics (as found in the technical economics journals):
Economic Policy and the Oxford Review of Economic Policy. Suggestions for further reading
along these lines include: S.D. Levitt and S.J. Dubner (2006), Freakonomics, revised edition,
Penguin and N. Klein (2007), The Shock Doctrine, Penguin.
Module Content
1.
Introduction (JPT)
What is and what does economics try to achieve; opportunity cost; positive versus normative
economics.
Lipsey and Chrystal: chs 1 and 2
Stiglitz and Driffill: chs 1 and 2
Begg, Fisher and Dornbusch: chs 1 and 2
Parkin, Powell and Matthews: chs 1 and 2
Krugman and Wells: chs 1 and 2
Mankiw and Taylor: chs 1 and 2
2.
Demand and Supply (JPT)
Interaction of demand and supply; equilibrium; elasticities.
Lipsey and Chrystal : chs 3 and 4
Stiglitz and Driffill: chs 4 and 5
Begg, Fisher and Dornbusch: chs 3 and 4
Parkin, Powell and Matthews: chs 4, 5 and 6
Krugman and Wells: chs 3, 4 and 5
Mankiw and Taylor: chs 4, 5 and 6
3.
The Producer/Firm (JPT)
Production and costs; the law of diminishing returns; profit maximisation.
Lipsey and Chrystal : 10th ed. chs 8 and 9, 11th ed. Chs 6 and 7
Stiglitz and Driffill: chs 10 and 11
Begg, Fisher and Dornbusch: chs 6 and 7
Parkin, Powell and Matthews: chs 9 and 10
Krugman and Wells: chs 7, 8 and 9
Mankiw and Taylor: chs 13 and 14
4.
The Consumer (JPT)
The consumer’s problem; indifference curve analysis; price and income changes; substitution
and income effects; normal, inferior and Giffen goods; application to labour supply;
application to intertemporal choice.
Lipsey and Chrystal : 10th ed. chs 6, 7 and 15, 11th ed. chs 5 and 10
Stiglitz and Driffill: chs 8 and 9
Begg, Fisher and Dornbusch: chs 5 and 10
Parkin, Powell and Matthews: chs 7, 8 and 14
Krugman and Wells: chs 10, 11 and 12 (appendix)
Mankiw and Taylor: ch 21
5.
Market Structure I: Perfect Competition (JPT)
The conditions for perfect competition; output and price in the short- and long-run;
competitive equilibrium.
Lipsey and Chrystal : 10th ed. ch 10, 11th ed. ch 7
Stiglitz and Driffill: ch 12
Begg, Fisher and Dornbusch: ch 8
Parkin, Powell and Matthews: ch 11
Krugman and Wells: ch 9
Mankiw and Taylor: ch 14
6.
Market Structure II: Monopoly (CP)
Determination of price and output; why a monopoly does not have a ‘supply’ curve; price
discrimination; the multiplant monopolist.
Lipsey and Chrystal : 10th ed. ch 11, 11th ed. ch 8
Stiglitz and Driffill: ch 13
Begg, Fisher and Dornbusch: ch 9
Parkin, Powell and Matthews: ch 12
Krugman and Wells: ch 14
Mankiw and Taylor: ch 15
7.
Market Structure III: Monopolistic Competition (CP)
Determination of price and output; excess capacity; efficiency and variety.
Lipsey and Chrystal : 10th ed. ch 12, 11th ed. ch 9
Stiglitz and Driffill: ch 13
Begg, Fisher and Dornbusch: ch 9
Parkin, Powell and Matthews: ch 13
Krugman and Wells: ch 16
Mankiw and Taylor: ch 17
8.
Market Structure IV: Oligopoly (CP)
Simple duopoly models: Cournot and Bertrand competition; introduction to game theory.
Lipsey and Chrystal : 10th ed. chs 12 and 14, 11th ed. ch 9
Stiglitz and Driffill: ch 14
Begg, Fisher and Dornbusch: ch 9
Parkin, Powell and Matthews: ch 13
Krugman and Wells: ch 15
Mankiw and Taylor: ch 16
9.
Factors of Production (CP)
Pricing of factors of production; the demand for labour; labour markets.
Lipsey and Chrystal : 10th ed. chs 15 and 16, 11th ed. chs 10 and 11
Stiglitz and Driffill: chs 11 and 18
Begg, Fisher and Dornbusch: chs 10, 11 and 12
Parkin, Powell and Matthews: chs 14, 15 and 16
Krugman and Wells: ch 12
Mankiw and Taylor: ch 18
10.
Welfare Economics (CP)
Economic efficiency; the ‘invisible hand theorem’; market failure; externalities; government
intervention and regulation.
Chrystal and Lipsey: 10th ed. chs 19 and 20, 11th ed. chs 13 and 14
Stiglitz and Driffill: chs 7,12, 15 and 19
Begg, Fisher and Dornbusch: chs 15 and 16
Parkin, Powell and Matthews: chs 16, 17 and 18
Krugman and Wells: chs 6, 13, 19, 20 and 21
Mankiw and Taylor: chs 7, 10, 11 and 12
Joanna Poyago-Theotoky
Claudio Piga
Summer 2008