Intermediate Microeconomics

UCSC - Fall 2015

Kris:an Lpez Vargas

About Me

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Assistant Professor Economics UCSC

My eld of work: Micro, Behav. & Exp. Econ PhD in Economics from the Univ. of Maryland

Prev. experience: MEF, WB, IADB, Tel Reg.

Taught IM before

Why take this course? Well, it is a requirement!

But, more important:

Because this course gives you tools to understand better how consumers and firms make decisions, and how prices are determined.

Examples: Policy Analysis Entrepreneurship - Life decisions Marketing - Thinking things through

Why take this course? (cont.)

This course will provide you with some tools that economists use to assess the benets and costs of possible courses of ac:ons.

This allows us to determine if a certain ac:on or situa:on is best (op:mal).

Examples: Do we increase the minimum wage? If so, by how much? For example, if a company does not set the op:mal price for its product, it is leaving money

on the table! The same is true if a company is ineciently alloca:ng its resources so that its costs are

higher than they should be

Why take this course? (cont)

Economics will help you in subsequent courses

Marke:ng explores how op:mally to aect consumer preferences. Well spend the rst several weeks of the course on consumer theory

Management oben focuses on how to maximize a companys eciency subjects to the constraints in its economic environment

Labor economics

Finance explores risk-return tradeos

Think of this course as an investment!

Syllabus Contact Kris:an

o kris:an@ucsc.edu o Oce hours: Thursdays 9:00 to 11:00am - Engineering 2 Building -

Oce 419

Lectures: o MWF from 3:30pm to 4:40p.m. Thim Lecture 001

Teaching Assistants:

o Zeinab Golmohammadian: zgolmoha@ucsc.edu Oce Hrs.: Mon 1:14-3:15 pm, Engineering 2 Rm 403F

o Bryan Pral: brpral@ucsc.edu Oce Hrs.: Tue 2-3 pm and Thu 10-11 am, Engineering 2 Rm 403B

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Syllabus

Discussion Sec:ons

Economics 100A: Intermediate Microeconomics

UniversityofCalifornia,SantaCruzProfessorKristianLpezVargas

kristian@ucsc.edu419Engineering2

Classes, Sections and Office Hours Class:Mondays,Wednesdays,andFridaysfrom3:30pmto4:40p.m.ThimLecture001Officehours:Thursdays9:00to11:00amEngineering2Building#419TeachingAssistants:ZeinabGolmohammadian:zgolmoha@ucsc.edu

OfficeHrs:Mon1:143:15pm,Engineering2Rm403FBryanPratt:brpratt@ucsc.edu

OfficeHrs:Tue23pmandThu1011am,Engineering2Rm403BSection Class# Days Time Location TeachingAssistant(TA)

02A 22593 W 09:3010:40AM SocSci2#171 Zeinab02B 22594 Tu 06:0007:10PM SocSci2#141 Bryan02C 22595 Tu 07:3008:40PM SocSci2#141 Bryan02D 22596 W 11:0012:10PM SocSci2#141 Zeinab

Course Overview Welcome!Thiscourseprovidesthefundamentaltoolsformicroeconomicanalysis.Microeconomicsisabodyofideasforunderstandingandanalyzingtheeconomicbehaviorofindividualsandfirms.Themainobjectiveistogetstudentstointernalizethisbodyoftheorywellenoughsotheycananalyzealargevarietyofsituationswithaneconomicsperspective.Wewillcoverimportantconceptualtoolsandmanyoftheirapplications.Thegreatestfocusinourclassisunderstandinghowsupplyanddemandform,andthenoperatetogetherinamarket.Wewillgivestrongemphasistothevarietyofwaysinwhichmarketscanoperate.Wewilldiscussmarketsthatoperatewithnearperfectionandgrantsocietythebestoutcomes,aswellasmarketsinwhichsomefeaturesofthesupply/demandpreventthemarkettobecompletelyefficient.Inparticular,wewilldiscussmorerealisticmarketstructuressuchasmonopolyandoligopoly.Inthiscontext,wewilllearnthefundamentaltoolstoanalyzestrategicinteractionamongeconomicagents.Wewillalsoexaminemarketfailuressuchasasymmetricinformationandexternalities.

[version09202015Seeecommonsforanupdatedversionorgotobit.ly/econ100a]

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Syllabus: Overview The main objec:ve: students able to analyze a large variety of situa:ons

with an economics perspec:ve.

Microeconomics is a body of ideas for understanding and analyzing the economic behavior of individuals, rms and markets.

The greatest focus in our class is understanding how supply and

demand form and then operate together in a market.

We will give strong emphasis to the variety of ways in which markets can operate. o We will see perfectly compe::ve markets as well as monopolis:c ones.

We will study strategic interac:on and decisions under uncertainty.

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Syllabus Prerequisites Economics 1 and calculus.

Mathema:cs is a vital tool for conduc:ng economic analysis.

Main mathema:cal tools to be familiar with: o graphing func:ons on a plane, o solving a system of two equa:ons and two unknown variables, and o deriva:ves (understand the concept and being able to compute the

deriva:ve of a simple equa:on).

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Syllabus TA sessions

TAs will help clarify material from lectures and help prepare for homework and exams.

Each TA gives two discussion sec:ons and holds two oce hours per week.

Textbook and Readings

Microeconomics (5th edi:on) by Besanko and Braeu:gam. The prior edi:on is acceptable as well. It is students responsibility to keep up with any important

devia:ons from the current version.

Addi:onal readings may be assigned during the quarter.

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Syllabus Course Grading

Exams: Two midterms each worth 20% - October 19 and November 9 A comprehensive nal exam worth 40% on Wednesday, December

9 (4-7PM). Exams are closed book and notes may not be used. Unless otherwise indicated, only a pen is needed for the exams.

Homework: There will be 6 homework assignments worth 20% of the total

grade.

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Syllabus Homework Assignments and other Materials

Assignments will be graded and late assignments will not be accepted.

BUT the good news is that the lowest grade will be dropped. This will help you if have an emergency that prevents you from turning in your homework.

Team work is encouraged. However, everyone must hand in their own homework.

Students must show their work. eCommons Course informa:on and materials, including homework assignments and prac:ce

exams, will be posted on eCommons (hlps://ecommons.ucsc.edu). It is each students responsibility to check eCommons for course updates and new material during the quarter.

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Syllabus Academic Misconduct / Dishonesty A student who is responsible for academic misconduct or dishonesty

(chea:ng during tests, plagiarism etc) is subject to both academic and disciplinary sanc:ons. As the academic sanc:on, the student will automa:cally earn a failing grade for the course. Disciplinary sanc:ons are determined by the students College Provost or the Academic Tribunal. I encourage you to review the (new) Academic Misconduct Policy for Undergraduates: hlp://www.ue.ucsc.edu/academic_misconduct

Special Accommoda:ons due to Disability Any student who thinks s/he is in need of accommoda:on, based on the

impact of a disability, should contact me privately to submit their Accommoda:on Authoriza:on and discuss specic needs, preferably within the rst two weeks of the quarter. Please contact the Disability Resource Center at 831-459-2089 in room 125 Hahn Student Services or by e-mail at drc@ucsc.edu to coordinate those accommoda:ons.

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Syllabus 1. Students will have full access to the Intermediate Micro Video Handbook (IMVH)

developed by UCSD-Economics. Look for the UCSD IMVH link on the class site on e-commons. This is op:onal, but likely helpful.

2. In some lectures, we will use MobLab (www.moblab.com) to illustrate some economic concepts using interac:ons in classroom experiments or games (free, with real prizes!). You will receive an invita:on soon.

3. Evalua:ons: There will be an informal evalua:on late in October that you can use to provide feedback about lectures and discussion sec:ons. Sugges:ons are very welcome any:me!

4. To help professor and TAs keep track of communica:ons from students, please include [ECON 100A] in the subject of every email you send to the instructor or TAs. For example: Subject: [ECON 100A] I have a ques:on about HW2!

5. In eCommons site you will nd lectures materials under the Resources folder.

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Syllabus

Final Class Rules

Modied Supplemental Instruc:on

Op:onal Material

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Analyzing Economic Problems

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Overview

1. Dening Microeconomics

2. Microeconomic Modeling

3. Three Elements of Microeconomic Analysis

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Microeconomics Dened

Microeconomics is the study of how individual economic decision-makers such as

consumers, workers, rms or managers allocate scarce resources among alternate

uses.

This study involves both the behavior of these economic agents on their own and the way their behavior interacts to form larger

units, such as markets.

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Is Microeconomics relevant?

Socie>es collec>vely solve these ques>ons: Microeconomics helps us understand how they do it / how to do it beGer!

1. What goods and services will be produced and in what quan88es

2. Who will produce these services and how will they produce them

3. Who will receive these goods and services and how will they get them

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Microeconomic Models

Economic Models are like maps: they simplify reality to facilitate our understanding.

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Three key modeling tools:

Constrained Op:miza:on

Equilibrium Analysis

Compara:ve Sta:cs

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Constrained Op:miza:on

A constrained op:miza:on problem arises when an economic agent wants to make the best (op:mal) decision

But s/he must do so with limited resources (i.e. respec:ng some constraints)

Objec:ve (func:on) e.g. my sa:sfac:on Constraints: e.g. my budget

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Constrained Op:miza:on

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Equilibrium Analysis and Compara:ve Sta:cs

Equilibrium State or condi:on of a system that will con:nue as long as the ac:ng forces in the system remain in balance.

Compara:ve Sta:cs Descrip:on/analysis of how the system responds the a change of one relevant external factor

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Case: UBER

Source: www.edgewortheconomics.com 26

Case: UBER