Facoltà di Economia

Aggiornato A.A. 2017-2018

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 10.00-11.00 (during the teaching term) - To be confirmed by email after the end of the course
• Teaching Assistants - During teaching term: Tuesday, 9.00-11.00, and Thursday, 11.00-13.00 (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 Cost-Minimization Problem
7.3 Comparative Statics Analysis of the Cost-Minimization Problem
7.4 Short-Run Cost Minimization
Cost Curves
8.1 Long-Run Cost Curves
8.2 Short-Run Cost Curves
Perfectly Competitive Markets
9.1 What Is Perfect Competition?
9.2 Profit Maximization by a Price-Taking Firm
9.3 How the Market Price Is Determined: Short-Run Equilibrium
9.4 How the Market Price Is Determined: Long-Run 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
  1. Introduction to the course. Preferences (19.02.2018)
  2. Utility. Marginal Utility (21.02.2018)
  3. Indifference curves. Marginal Rate of Substitution (23.02.2018)

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

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

• Week 4: Utility Maximization Problem
  1. Law of Compensated Demand when both commodity prices change. Budget Line. Utility Maximization Problem (12.03.2018)
  2. Price-Consumption Curve. Engel Curve. Income and Substitution Effects (14.03.2018)
  3. 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. Labor-Leisure Choice
  1. Solution to utility maximization problem with initial endowment. Income and Substitution effects with initial endowment. Labor-Leisure choice. Demand for Leisure and Labor Supply. (19.03.2018)
  2. Income and Substitution effects in the Demand for Leisure. Backward bending labor supply curve. Intertemporal Choice. Two-period model. Income and Substitution effect on savings (21.03.2018)
  3. The discounted utility (two-period) model. Choice under uncertainty: lotteries and expected value  (23.03.2018)

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

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

• Week 8: Inputs, Production Function, Profit Maximization
  1. Inputs and Production Functions. Marginal and Average Product. Isoquants. Marginal Rate of Technical Substitution. Returns to Scale (18.04.2918)
  2. 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
  1. 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 non-sunk fixed costs. (23.04.2918)
  2. Short-run and Long-run cost curves (27.04.2018)

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

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

• Week 12: Monopoly. Public Goods
  1. Monopoloy (14.05.2018 - 11.00/13.00)
  2. Classroom Experiment on Risk Aversion (14.05.2018 - 14.00/16.00)
  3. Inverse Elasticity Pricing Rule. Comparative Statics in the Monopoly. Deadweight Loss of the Monopoly. Introduction to Public Goods (16.05.2018)
  4. 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 (1834-1910) from the History of Economic Thought website
• A short biography of Sir John Hicks (1904-1989) from the History of Economic Thought website
• A short biography of Francis Ysidro Edgeworth (1845-1926) 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)

Aggiornato A.A. 2016-2017

Course Formative Objectives

The formative objective of the course consists in providing students with the tools necessary to understand:
(i) individual consumption and production choices, both static and dynamic under certainty and uncertainty;
(ii) the functioning of the markets and their allocative properties;
(iii) market failures and social dilemmas.
This body of knowledge will allow students to analyze economic phenomena and build up an informed personal opinion of economic reality.

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 reference

H. Varian, Microeconomic Analysis (any edition), W.W. Norton & Company

Office Hours

• Luca Panaccione: Monday and Wednesday 10.00-11.00 or by appointment to be scheduled by e-mail (during the teaching term)
• Luca Panaccione: Wednesday 10.00-12.00 or by appointment to be scheduled by e-mail
• Walter Ferrarese: after each practice class or by appointment to be scheduled by e-mail (walter.ferrarese@uniroma2.it)
• Eugenio Levi: after each practice class or by appointment to be scheduled by e-mail (euglevi@gmail.com)
• Francesca Marazzi: after each practice class or by appointment to be scheduled by e-mail (fr.marazzi@gmail.com)
• Matteo Pittiglio: after each practice class or by appointment to be scheduled by e-mail (Matteo.pittiglio@iusspavia.it)

Syllabus

Demand and Supply Analysis
Consumer Preferences and the Concept of Utility
The Theory of Demand
Inputs and Production Functions
Costs and Cost Minimization
Cost Curves
Perfectly Competitive Markets
Competitive Markets: Applications
Monopoly
Externalities and Public Goods
General Competitive Equilibrium

Extended Syllabus

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
6.6 Technological Progress
Costs and Cost Minimization
7.1 Cost Concepts for Decision Making
7.2 The Cost-Minimization Problem
7.3 Comparative Statics Analysis of the Cost-Minimization Problem
7.4 Short-Run Cost Minimization
Cost Curves
8.1 Long-Run Cost Curves
8.2 Short-Run Cost Curves
Perfectly Competitive Markets
9.1 What Is Perfect Competition?
9.2 Profit Maximization by a Price-Taking Firm
9.3 How the Market Price Is Determined: Short-Run Equilibrium
9.4 How the Market Price Is Determined: Long-Run Equilibrium
9.5 Economic Rent and Producer Surplus
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 Outcomesn
15.2 Evaluating Risky Outcomesn
15.3 Bearing and Eliminating Riskn
Externalities and Public Goods
17.1 Introduction
17.2 Externalities
17.3 Public Goods
General Economic Equilibrium
A. Pure Exchenge Economies
B. Production Economies
C. Welfare Theorems

- Numbers refer to sections in the main textbook by Besanko and Braeutigam.
-Letters refer to the supplementary textbook by Varian, and specifically chapters on: "Buying and Selling" (until section 9.5), "Exchange", and "Production".
- 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: Demand and Supply Analysis
  1. Introduction to the course. Law of Demand and Law of Supply. Equilibrium in a Perfectly Competitive Market (20.02.2017)
  2. Comparative Statics and Equilibrium. An illustration from the Financial Times (22.02.2017)
  3. Elasticity (24.02.2017)

• Week 2: Preferences and Utiliy
  1. Preferences. Utility. Marginal Utility. Indifference curves (27.02.2017)
  2. Properties of indifference curves. Marginal Rate of Substitution (01.03.2017)
  3. Special preferences: perfect substitutes, perfect complements, Cobb-Douglas, quasi-linear, CES. Introduction to prices and expenditure (03.03.2017)

• Week 3: Expenditure Minimization Problem and the Law of Compensated Demand
  1. Isoexpenditure lines. Expenditure Minimization Problem. Compensated Demand. Expenditure Function (06.03.2017)
  2. Changes in miminum expenditure following a change in price. Graphical solution to the expenditure minimization problem (08.03.2017)
  3. The Law of Compensated Demand (10.03.2017)

• Week 4: Utility Maximization Problem and the Law of Demand
  1. Budget lines. Utility Maximization Problem. Demand. Indirect Utility (13.03.2017)
  2. Characterization of Interior and Corner Point solution to the Utility Maximization Problem (15.03.2017)
  3. The Law of Demand (17.03.2017)

• Week 5: Topics in Consumer Theory
  1. The Law of Demand: A Graphical Analysis. A case of Giffen behavior (20.03.2017)
  2. Labor-Leisure Choice (24.03.2017)

• Week 6: Intertemporal Choice and Choice under Uncertainty
  1. Intertemporal Budget Constraint. Intertemporal Utility. Optimal Intertemporal Consumption Plan. Change in the Interest Rate and Change in Savings (27.03.2017)
  2. Lotteries. Probability Distribution. Expected Value and Variance. Expected Utility (29.03.2017)
  3. Risk Preferences. Risk Premium. Insurance. Portfolio Choice (31.03.2017)

• Week 7: Midterm Break and Exam Simulation
  1. Exam Simulation (07.04.2017)

• Week 8: Technology and Cost Minimization.
  1. Inputs and Production Functions (10.04.2017)
  2. Cost Minimization (14.04.2017)

• Week 9: Cost Curves and Profit Maximization.
  1. Cost Curves (26.04.2017)
  2. Profit maximization and firm's supply in the long run (28.04.2017)

• Week 10: Perfectly Competitive Equilibrium.
  1. Profit maximization and firm's supply in the short-run (03.05.2017)
  2. Perfectly competitive equilibrium in the short-run and in the long-run (05.05.2017)

• Week 11: Efficiency of Competitive Equilibrium. Monopoly.
  1. Increasing cost industry and long run equilibrium. Surplus and efficiency of competitive equilibrium (08.05.2017)
  2. Monopoly. Profit Maximization problem of the monopoly. Elasticity and marginal revenue in the monopoloy (10.05.2017)
  3. Inverse Elasticity Pricing Rule. Comparative statics in the monopoly (11.05.2017)
  4. Deadweight loss from monopoly. Taxation and deadweight loss from taxation (12.05.2017)

• Week 12: Voluntary Contribution Mechanism. General Competitive Equilibrium in Exchange Economies
  1. Public Goods. Voluntary Contribution Mechanism (15.05.2017)
  2. Pure Exchange Economies. Edgeworth Box (17.05.2017)
  3. Pareto Efficient Allocations (18.05.2017)
  4. Gross and Net Demand. Aggregate Excess Demand. General Competitive Equilibrium (19.05.2017)

• Week 13: General Competitive Equilibrium. Theorems of Welfare Economics
  1. Walras' Law. Relative Prices. Finding the equilibrium prices (22.05.2017)
  2. Examples of General Competitive Equilibrium. First Theorem of Welfare Economics (23.05.2017)
  3. Second Theorem of Welfare Economics (24.05.2017)
  4. Production Economies. (25.05.2017)
  5. General Competitive Equilibrium and Welfare in Production Economies. (25.05.2017)

List of Recommended Exercises (numbers refer to the fifth edition of the textbook, International Student Version)

Chapter 2: Learning By Doing 2.1, 2.2, 2.3, 2.4, 2.5, Exercise 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.10, 2.13, 2.15, 2.17, 2.18, 2.20
Chapter 3: Learning By Doing 3.3, Exercise 3.7, 3.8, 3.11, 3.13, 3.14, 3.15, 3.18
Chapter 4: Learning By Doing 4.2, 4.3, Exercise 4.1, 4.2, 4.4, 4.5, 4.6, 4.9, 4.13, 4.17
Chapter 5: Learning By Doing 5.3, 5.14, Exercise 5.4, 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.13, 5.14, 5.15 (part (c) and (d) excluded), 5.16 (part (c) excluded), 5.17, 5.18, 5.20, 5.21, 5.22
Chapter 6: Learning By Doing 6.1, 6.2, 6.3, 6.4, Exercise 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.9, 6.10, 6.14, 6.15, 6.17
Chapter 7: Learning By Doing 7.1, 7.2, 7.3, 7.4, Exercise 7.1, 7.2, 7.4, 7.5, 7.6, 7.7, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14, 7.15, 7.17, 7.18, 7.19, 7.20, 7.22, 7.24, 7.25
Chapter 8: Learning By Doing 8.1, 8.2, 8.3, 8.4 Exercise 8.5, 8.6, 8.7, 8.9, 8.10, 8.11, 8.12, 8.14, 8.17, 8.19
Chapter 9: Learning By Doing 9.1, 9.3, 9.4 Exercise 9.1, 9.2, 9.3, 9.6, 9.7, 9.8, 9.10, 9.12, 9.16, 9.17, 9.18, 9.21, 9.23, 9.24, 9.26
Chapter 10: Learning By Doing ... Exercise 10.11, 10.12, 10.14 (par at (a) and (c) only), 10.19 (point (i) only), exercise on taxation in the section "Teaching Material"
Chapter 11: Learning By Doing ... Exercise 11.1, 11.2, 11.3, 11.4, 11.9, 11.10, 11.11, 11.12, 11.12, 11.15, 11.17, 11.18, 11.19, 11.22, 11.24, 11.25
Chapter 15: Learning By Doing ... Exercise 15.1, 15.2, 15.3, 15.4, 15.8, 15.10, 15.12, 15.13, 15.14, 15.17, 15.18, 11.19, 11.22, 11.24, 11.25

Practice Classes

Practice Class 1 (01-03/03/2017): Demand and Supply Analysis
Practice Class 2 (08-10/03/2017): Preferences and Utility
Practice Class 3 (15-17/03/2017): Expenditure Minimization Problem
Practice Class 4 (22-24/03/2017): Utility Maximization Problem. Theory of Demand
Practice Class 5 (29-31/03/2017): Intertemporal Choice. Income and Substitution Effect. Labor-Leisure Choice
Practice Class 6 (11-14/04/2017): Choice under Uncertainty
Practice Class 7 (26-28/04/2017): Inputs and Production Function. Cost Minimization
Practice Class 8 (02-05/05/2017): Cost Curves
Practice Class 9 (09-12/05/2017): Market Demand. Consumers' Surplus. Producers' Surplus
Practice Class 10 (16-19/05/2017): Monopoly
Practice Class 11 (23-26/05/2017): General Equilibrium

Useful Links

• A mathematical tutorial by Prof. M.J. Osborne (University of Toronto)
• A short biography of Leon Walras (1834-1910) from the History of Economic Thought website
• A short biography of Sir John Hicks (1904-1989) from the History of Economic Thought website
• A short biography of Francis Ysidro Edgeworth (1845-1926) from the History of Economic Thought website