Econ 302 Intermediate Microeconomic Theory

Feb 15, 2013

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Course Requirements. TextbookThomas Carroll, intermediate Microeconomic Theory, download from www.thomascarrollandassociates.comExamsClosed book multiple-choice examsTypical question has two right answers, three wrong answersOne point for each right answer minus one point off for each wrong ans

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Econ 302 Intermediate Microeconomic Theory

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Economics 202: Intermediate Microeconomic Theory

213 views • 8 slides

Intermediate Microeconomic Theory

Intermediate Microeconomic Theory. Firm Behavior. Profit Maximization. Given its technology, we now want to develop a model of firm behavior. Standard assumption: firms make decisions to maximize profits , or maximize total revenue minus total costs . where q = f(x 1 ,…,x m )

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Intermediate Microeconomic Theory

Intermediate Microeconomic Theory. Technology. Inputs. In order to produce output, firms must employ inputs (or factors of production) Sometimes divided up into categories: Labor Capital Land . The Production Function.

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Intermediate Microeconomic Theory

Intermediate Microeconomic Theory. Labor Supply. Endowments vs. production. In our simple exchange model, our individuals were endowed with coconut milk and mangos. We then considered an example where individuals had to “produce” goods using their time and skill.

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Intermediate Microeconomic Theory

Intermediate Microeconomic Theory. Exchange. What can a market do?. We’ve seen that markets are interesting in that if one exists, and someone chooses to join, it must make him or her better off. But how are prices determined? What are they reflecting?

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Economics 202: Intermediate Microeconomic Theory

Economics 202: Intermediate Microeconomic Theory. Finish Chapter 15. Oligopoly with Fixed Number of Firms. Reaction Functions P = a - bQ, MC = c, Q = q 1 + q 2 Profits for firm 1 ? (q 1 ) = Pq 1 - cq 1 = (a-bq 1 -bq 2 ) q 1 - cq 1 Max   MR = MC  a -2bq 1 -bq 2 = c

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Economics 202: Intermediate Microeconomic Theory

Economics 202: Intermediate Microeconomic Theory. Any questions? Read Ch 10 HW #9 on website, due next Thursday. Long-Run Costs of Production. Capital (K). TC 3 /r. TC 2 /r. slope = -w/r. TC 1 /r. TC 1 /w. TC 3 /w. Labor. TC 2 /w. All inputs are variable

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Economics 202: Intermediate Microeconomic Theory

Economics 202: Intermediate Microeconomic Theory. Reminder: Review is due in class on Tuesday. Short-Run Costs of Production. A firm’s production costs equal explicit + implicit costs (i.e., the opportunity cost of their resources -- their value in their next best use)

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Intermediate Microeconomic Theory

Intermediate Microeconomic Theory . Cost Curves. Cost Functions. We have solved the first part of the problem: given factor prices, what is cheapest way to produce q units of output? Given by conditional factor demands for each input i, x i (w 1 ,…, w n , q)

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Intermediate Microeconomic Theory

Intermediate Microeconomic Theory. Buying and Selling. An Endowment Economy. We have now developed a theory of choice. Given this theory, we can already consider the role of prices and markets in an economy.

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Economics 202: Intermediate Microeconomic Theory

Economics 202: Intermediate Microeconomic Theory. Read Chapter 15 up to Tacit Collusion HW on website due Thursday. Two-Part Tariffs: Identical Customers. Two-part tariff is composed of a fixed entry fee for which you get the right to

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Economics 202: Intermediate Microeconomic Theory

Economics 202: Intermediate Microeconomic Theory. 1. Student Information Sheets 2. Any questions? 3. For next time, finish reading Chapter 5 4. HW #2 due Thursday in class (it’s on the website). Budget Constraints. Shifts in the Budget Line Change in Income Change in Prices

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Economics 202: Intermediate Microeconomic Theory

Economics 202: Intermediate Microeconomic Theory. 0. Welcome! 1. Go over class website (syllabus, requirements, etc.) Take attendance and go over attendance policy

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Intermediate Microeconomic Theory

Intermediate Microeconomic Theory. Factor Demand/Firm Behavior. Firm Behavior. Given its technology, we now want to develop a model of firm behavior. What is our basic assumption about firm behavior?. Firm Behavior.

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Intermediate Microeconomic Theory

Intermediate Microeconomic Theory. Intertemporal Choice. Intertemporal Choice. So far, we have considered: How an individual will allocate a given amount of money over different consumption goods.

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Intermediate Microeconomic Theory

Intermediate Microeconomic Theory. Thinking Like an Economist. Thinking like an Economist. Primary goals of this class were to get you all to think deeper about what prices reflect and how economic agents react to changes in their costs. To do so, we often relied on somewhat technical tools.

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Intermediate Microeconomic Theory

Intermediate Microeconomic Theory. Market Demand. Market Demand. Given an individual i ’s endowment and preferences, we’ve seen how to calculate an individual’s demand curve for each good, q 1 i (p 1 )

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Intermediate Microeconomic Theory

Intermediate Microeconomic Theory. Externalities. Markets and Efficiency. We have seen that markets can provide an efficient mechanism for allocating scarce resources. However, this result only holds when markets are perfect. (i) Tax revenue raised via lump-sum taxes,

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Intermediate Microeconomic Theory

Intermediate Microeconomic Theory. Market Supply. Market Supply. Similar to demand, market supply will simply be the summation of all the individual firm supply curves: Q s (p) = q 1 s (p) + q 2 s (p) +…+ q n s (p)

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Intermediate Microeconomic Theory

Intermediate Microeconomic Theory. Exchange. Creating an Economy. So far, we showed how an individual can potentially be made better off by a market, Market opens up the possibility of consuming preferred bundles to his or her endowment.

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Economics 202: Intermediate Microeconomic Theory

Economics 202: Intermediate Microeconomic Theory. HW #6 on website. Due Tuesday. Second test covers up through today’s material, and will be “pseudo-cumulative” (to be explained). Game Theory. “The Dating Game” Multiple Nash equilibria Nash equilibrium concept loses appeal “Copycat Game”

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Economics 202: Intermediate Microeconomic Theory

Economics 202: Intermediate Microeconomic Theory. 1. Inquiries? 2. No new reading. 3. HW #4 due next class (it’s on the website). Utility Maximization. Maximize utility subject to a budget constraint Demand function: X * = d X (P X , P Y , I)

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