PRINCETON UNIVERSITY ECON300 Intermediate Microeconomics Fall 2011

Lectures: Precepts: Instructor: Tuesdays and Thursdays 11-12:20

Swati Bhatt Fisher 101 Office Hours: T, Thu 2-4

Preceptors:

Course Description: The objective of this course is to further develop your knowledge, in particular, numerical fluency, in microeconomic theory. To enable you to read the professional literature in preparation for your junior independent work and senior thesis research, quantitative problem solving using simple algebra and calculus will be emphasized. We will explore the topics covered in introductory courses in greater detail, paying special attention to simple mathematical formulations of equilibrium and efficiency conditions. We will modify some of the simplifying assumptions of perfect information and perfect competition to explore the ramifications of decision making under conditions of uncertainty and risk, imperfect competition, incomplete markets (externalities and public goods), asymmetric information, and choices over time. We will study the implications for public policy, government regulation, and business strategy. A more mathematical version of this course is ECO310. If you are planning on graduate study in economics or business, and are comfortable with multi-variable calculus and linear algebra, you should consider taking ECO310. Textbook: B. Douglas Bernheim and Michael D. Whinston, 2010, Microeconomics, published byMcGraw-Hill. Prerequisites: ECO100 (with a minimum grade of C- ) or a 5 on AP Microeconomics (or grade 7 on IB Higher Level Economics or grade A on British A-levels). MAT103 (with a minimum grade of C-) or placed out of it. ECO101 (with a minimum grade of C-) or placed out of it. Course Requirements: Problem Sets: Six (biweekly) problem sets, containing 8-10 problems or short essay questions. (5 points each) Quizzes: Six (biweekly) multiple choice quizzes covering material in the chapter readings for the week and material covered in lecture. (5 points each). These quizzes replace the midterm, and provide better preparation for the final. Final: 3 hour closed book final during the exam period in January 2012. (40 points)

Course Time-table: Weeks 1 and 2 Supply and demand, elasticities; consumer preferences, utility maximization, Marshallian demand curve; Slutsky equation, substitution and income effects, Hicksian demand curve; consumer surplus Bernheim and Whinston (B&W), chapters 1-3 (quickly in first lecture); 4, 5, 6 Quiz 1(week 1) and Problem Set 1 (week 2) Weeks 3 and 4 Production, returns to scale; cost-minimization; short-run, long-run, average and marginal costs; profit maximization, marginal revenue and marginal cost; choice over time, net present value, investments B&W chapters 7, 8, 9 and 10 Quiz 2 (week 3) and Problem set 2 (week 4) Week 5: Risk: probability, expected payoff, risk aversion, expected utility, risk premium, certainty equivalent B&W chapter 11 Quiz 3 Week 6: Behavioral economics: non-rational decision-making and implications for choices involving time and risk B&W chapter 13 Problem set 3 Fall Break Week 7: Competitive equilibrium in the short-run and long-run, efficiency and aggregate surplus B&W chapter 14 Quiz 4 (week 7) Weeks 8 and 9: General equilibrium, efficiency, equity; market interventions using taxes and subsidies, tariffs and quotas B&W chapters 15 and 16 Problem set 4 (week 8) and Quiz 5 (week 9) Week 10: Monopoly, price discrimination, monopsony B&W chapters 17 and 18 Problem set 5 Week 11: Oligopoly, Cournot quantity competition, Bertrand price competition, differentiated products B&W chapter 19 Quiz 6 Week 12: Market failures: externalities, property rights and public goods. Asymmetric information: moral hazard and adverse selection B&W chapters 20 and 21 Problem set 6