Microeconomics I (20836)
Degree/study: degree in Economics
Year: 1st
Term: 3rd
Number of ECTS credits: 5 credits
Hours of studi dedication: 125 hours
Teaching language or languages: English and Spanish
Teaching Staff: Patricia Funk
1. Presentation of the subject
Microeconomics I is the first subject of the training cycle in Economic Theory. Its importance and, at the same time, complexity arises from the fact that it is the first time the student becomes familiar with current economic models. Over the course the student will learn all the basic economic models of consumer theory, production theory, and partial equilibrium.
The course requires basic mathematical skills and basic knowledge of economics. As the subject requires a change in the way of thinking (from real events to models and the other way round) it can be considered as the learning of a new language.
The Bologna methodology attempts the learning process to be continuous, which facilitates both student preparation and teaching. To think that in this course it is possible to jump steps is like thinking that in the learning process of a language one can skip steps and then want to write essays.
Requirements to follow training route
This course teaches a new approach to the analysis of economic phenomena. Its importance stems from the fact that it teaches how to build the first mathematical-economic models.
This course can be considered the foundation for the understanding of all the theoretical subjects in the following years. It also constitutes the first part of the training cycle in Economic Theory.
The basic skills required to start the learning process in this subject are:
1. Knowledge of the economic reality. Besides the skills acquired during the studies it is necessary that the student knows the economic reality by their own.
2. Ability of abstraction of the most important microeconomic phenomena. It is necessary to filter information in order to create simplified models.
3. Ability to relate the results of mathematical models with the actual facts.
4. Ability to contrast the model results with actual results, with the aim of improving the model.
The background needed to follow this course can be divided in two groups:
1. Basic mathematical skills: Algebra, Geometry, Trigonometry, Function Analysis, Optimization.
Most of these skills are basic and are obtained before the student's access to college. Given that the subject requires a good mathematical background, it is recommended for students with a weak mathematical background to try to strength it as soon as possible.
Some of the topics require some mathematical tools that are taught at the same time in a different subject (Mathematics III). This is not a problem, since there is an alternative way of solving problems. The student who wants to apply these mathematical tools in the exam, can do it.
2. Basic economic knowledge.
In the course Introduction to Economics, during the first term of first year, the student learns to analyze economic phenomena. Microeconomics I builds on this knowledge to show how to build models of the economic reality.
In-depth and constructive knowledge of Microeconomics I allows the student to access the rest of the studies with a solid foundation.
Learning Objectives
The ultimate goal of this course is that students are able to understand and learn to work with economic models. Through the training route, the student becomes familiar with the process of construction and solution of these models. At the end of this process the student must be prepared to build such models, specifically models of consumer theory, theory of the firm and partial equilibrium. Such models are the basis for the rest of the cycle in Economic Theory.
2. Competences to be attained
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General competencies |
Specific competencies |
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Instrumental 1. Ability to summarize 2. Ability to manage information 3. Ability of abstraction 4. Adaptation and clarity of ideas
Interpersonal 4. Ability to work in group 5. Critical capacity
Systemic 6. Creativity (ability to generate new ideas) 7. Autonomy (ability to work autonomously)
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1. Analysis of microeconomic models 2. Knowledge of the economic reality 3. Ability to apply basic mathematical concepts to economics 4. Analysis of situations from the perspective of economic models
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3. Contents
Part One: Consumer Choice and Demand
1. Elements of the problem.
Limits of consumer choice: the budget constraint. Reasons for choice: preferences. Representation of preferences: Utility.
2. The choice.
The formal problem of maximization of preferences and derivation of the demand function.
3. Revealed preference and Slutsky equation.
Weak and strong axioms of revealed preference. Price indices. The Slutsky equation: Income and substitution effects. Income and substitution effects of Hicks.
4. Consumer surplus and market demand.
Consumer surplus: Discrete goods and continuous goods. Market demand: Aggregation of individual demands. The elasticity of demand and its relation with income.
Part Two: The Firm and the Supply Function.
5. Technology.
Technological constraint. Different types of technology. Marginal product and marginal rate of technical substitution. Returns to scale.
6. Benefit maximization and cost minimization.
The formal problem of profit maximization. The cost minimization problem. Cost functions: marginal cost and average cost.
7. Supply curve.
The supply function of a competitive firm. The relation of the supply with marginal costs. The producer surplus. Supply curve of an industry.
Part Three: The demand and the supply.
8. The equilibrium.
Equilibrium in a competitive market. Comparative statics. Taxes and welfare.
4. Assessment
JUNE AND SEPTEMBER
The Course in Microeconomics I will be evaluated through
• Compulsory continuous evaluation
Solving problem sets and participation in seminars
• Mandatory final evaluation - final exam
Relative weight of each type of evaluation:
Attendance Seminars (10%) / Problem Sets (20%): 30%
Final exam (min. 4 out of 10): 70%
5. Bibliography and teaching resources
Varian, H. R. Intermediate Microeconomics. 7th or 8th. Edition.
6. Methodology
7. Planning of activities
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Week |
Classroom activities |
Activities outside the classroom |
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Week 1: April 4 to 8 2 theory classes |
Introduction, consumer preferences and utility |
Read theory (Varian 1,3,4) Solve problems |
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Week 2: April 11 to 15 2 theory classes |
Utility, budget constraint and consumer choice |
Read theory (Varian, 2,5) Solve problems |
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Week 3: April 25 to 29 2 theory classes Practical session |
Demand |
Read theory (Varian 6) Solve problems |
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Week 4: May 2 to May 6 2 theory classes Practical session |
Revealed Preference and Slutsky Equation |
Read theory (Varian 7, 8) Solve problems |
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Week 5: May 9 to May 13 2 theory classes Practical session |
Consumers' Surplus Aggregate Demand
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Read theory (Varian14, 15) Solve problems |
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Week 6: May 16 to May 20 2 theory classes Practical session |
Summary of Part One Reserve |
Repeat Part One Solve problems |
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Week 7: May 23 to May 27 2 theory classes Practical session |
Technology Profit maximization |
Read theory (Varian 18, 19) Solve problems |
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Week 8: May 30 to June 3 2 theory classes Practical session |
Cost minimization Cost curves and firm's supply |
Read theory (Varian 20, 21, 22) Solve problems |
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Week 9: June 6 to June 10 2 theory classes Practical session |
Industry supply Partial equilibrium |
Read theory (Varian 23, 16) Solve problems |
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Week 10: June 13 to June 17 2 theory classes Practical session |
Summary of the second part Reserve |
Prepare for the final exam |