MICROECONOMICS
Syllabus
Updated A.Y. 20172018
Course Formative Objectives
The course aims at providing students with the tools necessary to understand the individual consumption and production choices, both static and dynamic under certainty and uncertainty;
the functioning of the markets and their allocative properties; the market failures and social dilemmas.
Course Teaching Methods
Lectures and practice classes.
Homework (exercises, additional readings).
Classroom experiments.
Course Teaching Material
Textbooks.
Slides.
Handouts.
Main Textbook
D. Besanko and R. Braeutigam, Microeconomics (Fifth Edition), Wiley
Additional Textbook
H. Varian, Intermediate Microeconomics, W.W. Norton & Company
Office Hours (during the course. For office hours in the first semester, please send an email or consult the Avvisi section for updated information)
 Luca Panaccione: Monday and Wednesday 10.0011.00 (during the teaching term)  To be confirmed by email after the end of the course
 Teaching Assistants  During teaching term: Tuesday, 9.0011.00, and Thursday, 11.0013.00 (Research building, 2nd floor, aula riunioni F). During first semester: by appointment.
Syllabus
Consumer Preferences and the Concept of Utility
The Theory of Demand
Inputs and Production Functions
Profit and Profit Maximization
Costs and Cost Minimization
Cost Curves
Perfectly Competitive Markets
Monopoly
Externalities and Public Goods
General Competitive Equilibrium
Extended Syllabus (chapters Besanko & Braeutigam, 5th edition)
Analyzing Economic Problems
1.1 Why Study Microeconomics?
1.2 Three Key Analytical Tools
1.3 Positive and Normative Analysis
Demand and Supply Analysis
2.1 Demand, Supply, and Market Equilibrium
2.2 Price Elasticity of Demand
2.3 Other Elasticities
2.4 Elasticity in the Long Run versus the Short Run
Consumer Preferences and the Concept of Utility
3.1 Representations of Preferences
3.2 Utility Functions
3.3 Special Preferences
Consumer Choice
4.1 The Budget Constraint
4.2 Optimal Choice
4.3 Borrowing and Lending
The Theory of Demand
5.1 Optimal Choice and Demand
5.2 Change in the Price of a Good: Substitution Effect and Income Effect
5.3 Change in the Price of a Good: The Concept of Consumer Surplus
5.4 Market Demand
5.5 The Choice of Labor and Leisure
Inputs and Production Functions
6.1 Introduction to Inputs and Production Functions
6.2 Production Functions with a Single Input
6.3 Production Functions with More Than One Input
6.4 Substitutability Among Inputs
6.5 Returns to Scale
Costs and Cost Minimization
7.1 Cost Concepts for Decision Making
7.2 The CostMinimization Problem
7.3 Comparative Statics Analysis of the CostMinimization Problem
7.4 ShortRun Cost Minimization
Cost Curves
8.1 LongRun Cost Curves
8.2 ShortRun Cost Curves
Perfectly Competitive Markets
9.1 What Is Perfect Competition?
9.2 Profit Maximization by a PriceTaking Firm
9.3 How the Market Price Is Determined: ShortRun Equilibrium
9.4 How the Market Price Is Determined: LongRun Equilibrium
Competitive Markets: Applications
10.1 The Invisible Hand, Excise Taxes, and Subsidies
Monopoly
11.1 Profit Maximization by a Monopolist
11.2 The Importance of Price Elasticity of Demand
11.3 Comparative Statics for Monopolists
11.5 The Welfare Economics of Monopoly
11.6 Why Do Monopoly Markets Exist?
Risk and Information
15.1 Describing Risky Outcomes
15.2 Evaluating Risky Outcomes
15.3 Bearing and Eliminating Risk
Externalities and Public Goods
17.1 Introduction
17.2 Externalities
17.3 Public Goods
Extended Syllabus (chapters from Varian, 9th edition)
9. Buying and Selling
20. Profit Maximization
32. Exchange
33. Production
Extended Syllabus (updates)
The following topics are not part of the final program:
 Excise Taxes, and Subsidies (hence only the first section of chapter 10 from section from Besanko & Braeutigam is included in the final program)
 Externalities (hence section 17.2 from Besanko & Braeutigam is not included in the final program)
 Production in General Equilibrium (hence the chapter "Production" from Varian is not included in the final program)
For your convenience, the sections from Varian's textbook which are part of the final program are listed below:
 “Buying and Selling”: section 1, 2, 3, 4
 “Profit maximization”: section 1, 4, 5, 6, 7
 “Exchange”: all sections except section 8 and the example on the monopoly in the Edgeworth box
 The syllabus is subject to variations to be communicated in class and on the web page of the course.
 For the mathematical requisites, consult the Mathematical Appendix of the textbook. In addition, students may consult "Mathematics for Economists" by C.P. Simon and L. Blume (W.W.Norton).
 The book is available, among others, at this reseller. Contacts for info on pricing and delivery: cristina@aab.it  riccardo@aab.it
 Important information regarding the Italian legislation on illegal photocopying of textbooks
List of Topics

Week 1: Preferences and Utiliy
 Introduction to the course. Preferences (19.02.2018)
 Utility. Marginal Utility (21.02.2018)
 Indifference curves. Marginal Rate of Substitution (23.02.2018)

Week 2: Preferences and Utility. Expenditure Minimization Problem
 Lecture cancelled to due weather conditions [Resceduled on 28.02.2018 (1h) and 7.03.2018 (1h)] (26.02.2018)
 Types of Utility Functions (Perfect Complement, Perfect Substitutes, CobbDouglas, Quasilinear). Expenditure and Isoexpenditure lines (28.02.2018)
 Changes in Price and Change in Isoexpendiure lines. Expenditure Minimization Problem (02.03.2018)

Week 3: Expenditure Function. Law of Compensated Demand
 Lecture cancelled to due election (05.03.2018)
 Expenditure Function. Expenditure Function and Price Change. Solution to Expenditure Minimization Problem (07.03.2018)
 Law of Compensated Demand (09.03.2018)

Week 4: Utility Maximization Problem
 Law of Compensated Demand when both commodity prices change. Budget Line. Utility Maximization Problem (12.03.2018)
 PriceConsumption Curve. Engel Curve. Income and Substitution Effects (14.03.2018)
 An example of Giffen good. Buying and Selling: initial endowment, gross and net demand, budget constraint (16.03.2018)

Week 5: Utility Maximization with Initial Endowment. LaborLeisure Choice
 Solution to utility maximization problem with initial endowment. Income and Substitution effects with initial endowment. LaborLeisure choice. Demand for Leisure and Labor Supply. (19.03.2018)
 Income and Substitution effects in the Demand for Leisure. Backward bending labor supply curve. Intertemporal Choice. Twoperiod model. Income and Substitution effect on savings (21.03.2018)
 The discounted utility (twoperiod) model. Choice under uncertainty: lotteries and expected value (23.03.2018)

Week 6: Choice under Uncertainty
 Expected utility. Risk aversion, risk neutrality, risk preference. Certainty equivalent (26.03.2018)
 Risk premium. Application and exercises on choice under uncertainty (28.03.2018)
 Exercises and applications on choice with endowment and intertemporal choice (30.03.2018)

Week 7: General Equilibrium in Exchange Economies. Welfare Theorems
 Edgeworth box. Pareto optimal allocation. Contract curve (09.04.2918)
 Walrasian trading mechanism. Auctioneer. Aggregate Excess Demand. Walras' Law (11.04.2018)
 Numeraire. Counting equations and unknowns. First and Second Theorem of Welfare Economics (13.04.2018)

Week 8: Inputs, Production Function, Profit Maximization
 Inputs and Production Functions. Marginal and Average Product. Isoquants. Marginal Rate of Technical Substitution. Returns to Scale (18.04.2918)
 Profit Maximization with one input. Isoprofit lines. Change in wage and price of output. Profit Maximization with two inputs. Law of Supply (20.04.2018)

Week 9: Cost Minimization. Cost Curves
 Cost Minimization problem in the long run and in the short run. Change in price of input and change in optimal combination of inputs. Labor Demand. Sunk and nonsunk fixed costs. (23.04.2918)
 Shortrun and Longrun cost curves (27.04.2018)

Week 10: Short Run Competitive Equilibrium
 Short Run Profit Maximization. Market Demand and Market Supply (30.04.2018  11.00/13.00)
 Excess Demand and Excess Supply. Short Run Competitive Equilibrium. Comparative Statics  Part 1 (30.04.2018  14.00/16.00)
 Comparative Statics  Part 2. Elasticty of Demand and Elasticity of Supply (02.05.2018)
 Classroom Experiment on Short Run Equilibrium (04.05.2018)

Week 11: Long Run Competitive Equilibrium. Introduction to Monopoly
 Discussion of Classroom Experiment on Short Run Equilibrium. Consumers' and Producers' surplus (07.05.2018  11.00/13.00)
 Classroom Experiment on Long Run Equilibrium (07.05.2018  14.00/16.00)
 Long Run Competitive Equilibrium. Introduction to the Monopoly (09.05.2018)
 Classroom Experiment on Public Goods (11.05.2018)

Week 12: Monopoly. Public Goods
 Monopoloy (14.05.2018  11.00/13.00)
 Classroom Experiment on Risk Aversion (14.05.2018  14.00/16.00)
 Inverse Elasticity Pricing Rule. Comparative Statics in the Monopoly. Deadweight Loss of the Monopoly. Introduction to Public Goods (16.05.2018)
 Public Goods (18.05.2018)
Practice Classes
Practice Class 1 (01/03/2018)
Practice Class 2 (08/03/2018)
Practice Class 3 (15/03/2018)
Practice Class 4 (22/03/2018)
Practice Class 5 (29/03/2018)
Practice Class 6 (12/04/2018  Exam simulation)
Practice Class 7 (19/04/2018)
Practice Class 8 (26/04/2018)
Practice Class 9 (03/05/2018)
Practice Class 10 (10/05/2018)
Practice Class 11 (17/05/2018)
Useful Links
 A mathematical tutorial by Prof. M.J. Osborne (University of Toronto)
 A short biography of Leon Walras (18341910) from the History of Economic Thought website
 A short biography of Sir John Hicks (19041989) from the History of Economic Thought website
 A short biography of Francis Ysidro Edgeworth (18451926) from the History of Economic Thought website
 A case study in demand and supply analysis (from the Financial Times)
 A case study in demand and supply analysis (from The Guardian)