Microeconomics I (21125)

Degree/study: degree in international Business Economics
Year: 1st
Term: 3rd
Number of ECTS credits: 5 credits
Hours of studi dedication: 125 hours
Teaching language or languages: English
Teaching Staff: Helena Perrone 

1. Presentation of the subject

Microeconomics I is the first subject in the Economic Theory learning cycle. Its importance, and its difficulty, are due to the fact that it is the first time students become familiar with modern economic models. 

All the basic economic models concerning consumer theory, business theory and partial equilibrium will be covered during the course. 

Basic mathematical knowledge and some idea of economics are required. 

As the subject requires a change in the way we think (moving from real conditions to models and vice versa) this course can be seen in the same light as learning a new language. 

The Bologna methodology will be used to make learning continuous, in order to facilitate both the student's preparation and teaching. Missing out steps in this course is like not learning the alphabet and then trying to write essays when learning a language.

Requirements for following a track

This subject teaches how to change one's approach to analysing economic phenomena. It is important because it teaches how to create the first mathematical-economic models.  

At the heart of the syllabus is first, the basis for understanding all the theoretical subjects in the following years and second, the first part of the Economic Theory learning cycles.  

The basic skills necessary for beginning the learning process in this subject are:
1. Knowledge of economic conditions. Apart from the knowledge acquired on the course, it is necessary for the student to have some knowledge of the economic situation on his/her own account.
2. The ability to consider the most important characteristics of microeconomic phenomena in abstract terms. It is necessary to be able to filter information and create a model of reality.
3. The ability to relate the results of mathematical models to real conditions.
4. The ability to compare the results of a model with real results, in order to improve the model. 

The prior knowledge necessary for taking this subject is divided into two groups:
1. Basic mathematical knowledge: algebra, geometry, trigonometry, functional analysis, optimization. Most of this knowledge is basic, and is acquired before the student comes to University. As the subject requires a firm mathematical grounding, students with difficulties are advised to resolve them as soon as possible. Part of the syllabus requires instrumental mathematics, which is taught at the same time (Mathematics III) as the subject. This is not a problem, as there is an alternative way of solving problems. Students wishing to use the mathematical knowledge acquired during the examination may do so.
2. Basic economic knowledge: during the first term of the first year, in the Introduction to Economics course the student learns to analyse economic phenomena. Microeconomics I uses this knowledge to teach how to construct models of economic conditions.  

The in-depth and constructive knowledge gained in Microeconomics I provides a firm grounding for the rest of the degree course.

Learning objectives  

The ultimate objective of this subject is for the student to understand economic models and to learn to work with them. On this learning track, the student becomes acquainted with the construction and solution process in these models. At the end of this process, the student must be able to construct this type of model, and specifically the consumer theory, business theory and partial equilibrium models. These types of models are the basis for the rest of the Economic Theory cycle.

2. Competences to be attained

General competences	Specific competences
Instrumental  1. Ability to synthesise 2. Information management skills 3. Ability to think in abstract terms 4. Adaptation and clarity of ideas   Interpersonal 4. Ability to work in a group 5. Ability to criticise   Systemic 6. Creativity (ability to generate new ideas) 7. Autonomy (ability to undertake autonomous work)	1. Analysis of economic models 2. Knowledge of economic conditions 3. Ability to apply basic mathematical concepts to economics 4. Analysis of situations in terms of economic models

3. Contents

First part: the consumer and demand  

1. Factors in the problem
The limits of choice: budgetary restrictions. The reasons for choice preferences. The representation of preferences: usefulness. 

2. Choice
The formal problem of maximising preferences and derivation of the demand function.

3. Revealed preference and the Slutsky equation
The strong and weak axioms of revealed preference. Price indexes. The Slutsky equation: income and substitution effects. The Hicks income and substitution effects.

4. Consumer surplus and market demand
Consumer surplus: discrete goods and continuous goods. Market demand: aggregation of individual demands. Demand elasticity and its relationship to income.

Second part: the company and supply:

5. Technology
Technological restrictions. Different types of technology. Marginal product and the rate of technical substitution. Returns to scale.

6. Maximising profits and minimising costs
The formal problem of maximising profits. Minimising costs. Cost functions: marginal cost and average cost.

7. Supply curves
The supply of a competitive business. The relationship between supply and marginal costs. Producer surplus. The industry supply curve.

Third part: supply and demand

8. Equilibrium
Equilibrium in a competitive market. Comparative statistics. Taxes and welfare.

4. Assessment

The subject Microeconomics I will be assessed by:

1)    Compulsory continuing assessment
Discussions and problem solving and/or multiple choice examinations in the seminar sessions.

2)    Compulsory final assessment, final examination

The relative weight of each type of assessment is:
Problems/ Practical Exercises / Tests / Midterm Examination: approximately 40%
Final examination: approximately 60%

5. Bibliography and teaching resources

Varian, H. R. Intermediate microeconomics. 7th ed. Antoni Bosch. 

Varian, H. R. Intermediate Microeconomics. 7th or 8th ed.

6. Metodology

Methodology

7. Planning of activities

Week	Work in the classroom	Work outside the classroom
Week 1: From 5 to 11 April 2 theory classes	Introduction, consumer preferences and utility	Read the theory (Varian 1, 3, 4) Problem solving.
Week 2: From 12 to 18 April 2 theory classes	Used, budgetary restrictions and consumer choice	Read the theory (Varian 2, 5) Problem solving.
Week 3: From 19 to 25 april 2 theory classes Seminar	The demand function	Read the theory (Varian 6) Problem solving.
Week 4: From 26 April to 2 May 2 theory classes Seminar	Revealed preferences and the Slutsky equation	Read the theory (Varian 7, 8) Problem solving.
Week 5: From 3 to 9 May   1 theory class Seminar	Consumer surplus and added demand	Read the theory (Varian 14, 15) Problem solving.
Week 6: From 10 to 16 May 2 theory classes Seminar	Summary of the first part  Technology	Read the theory (Varian 18)  Problem solving.
Week 7: From 17 to 23 May 1 theory class Seminar	Maximising profits	Read the theory (Varian 19) Problem solving.
Week 8: From 24 to 30 May 2 theory classes Seminar	Minimising costs, cutting costs and the company supply	Read the theory (Varian 20, 21, 22) Problem solving.
Week 9: From 31 to 6 June 1 theory class Seminar	Industry supply Partial equilibrium	Read the theory (Varian 23, 16) Problem solving.
Week 10: From 7 to 13 June 1 theory class Seminar	Summary of the second part	Prepare for the final examination