Lecture # 01 Introduction Lecturer: Martin Paredes
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Lecture # 01Lecture # 01
IntroductionIntroduction
Lecturer: Martin ParedesLecturer: Martin Paredes
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1. Definition of Microeconomics
2. Who Should Study Microeconomics?
3. Course Information
4. Microeconomic Modeling
• Elements of models
• Solving the models
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• Microeconomics studies economic behavior of individual economic decision-makers• E.g.: consumers, workers, firms, managers.
• This study involves:• The behavior of these economic agents on
their own• The way their behavior interacts to form
larger units, such as markets.
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Example: The Railroad Industry in the US
74.9% of all freight, 1929 39.8% of all freight, 1970
1970’s: poor profits, bankruptcies, inability to invest
1980’s: loosened regulation and union rules improved profitability
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• Analysis of this issue requires Microeconomic tools.
• Who are the actors who need to know something about Microeconomics?
Managers Union Leaders / Workers Lenders Policy Makers …and beyond!
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Main (required) textbook:David Besanko & Ronald
Braeutigam, Microeconomics John Wiley &
Sons, 2nd Ed., 2005.Ancillaries:
Study Guide APLIA: Online resources and problem sets.
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Alternative textbooks (“at your own risk”) B. Curtis Eaton, Diane Eaton, & Douglas Allen,
Microeconomics: Theory With Applications, Prentice Hall, 6th Edition, 2004.
Robert Pyndick & Daniel Rubinfeld, Microeconomics Prentice Hall, 6th Edition, 2005.
Andrew Schotter, Microeconomics: a Modern Approach, Addison Wesley, 3rd Edition, 2001.
Hal Varian, Intermediate Microeconomics: a Modern Approach, W.W. Norton, 6th Edition, 2006.
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Course Website:
http://www.tcd.ie/Economics/staff/paredesm/~EC2010
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Lecture Meetings Tuesdays from 10:00 AM to 11:00 AM Wednesdays from 5:00 PM to 6:00 PM
Location: Arts building, room 1008
Lecture from January 9th to be rescheduled after Reading Week
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Class Meetings
Day Time Location Monday 3:00 PM to 4:00 PM Arts 4050B Tuesday 12:00 PM to 1:00 PM Arts 4047 Tuesday 5:00 PM to 6:00 PM Arts 3051 Wednesday 1:00 PM to 2:00 PM AP2.03 Thursday 11:00 AM to 12:00 AM Arts 5039 Friday 9:00 AM to 10:05 AM Arts 3126
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Office Hours - Martin Paredes: Mondays from 3:00 PM to 4:00 PM Thursdays from 11:30 AM to 12:30 PM
Office: Arts Building, room 3012
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Office Hours – Teaching Assistants: Marta Zieba: Mondays, 11:00 AM to 1:00
PM Padraig Flynn: Fridays, 10:00 AM to
12:00 PM
Office: Arts Building, room 3002
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Course Assessment: Two Examinations. Hilary Term Test: 20% Final Exam: 60%
Several homeworks to be assigned during the semester on a weekly basis
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The Final Exam includes both Macro & Micro in equal proportions Five questions in Micro:
One compulsory questionAnswer two out of the remaining four.
Five questions in Macro: One compulsory questionAnswer two out of the remaining four.
•Answer a total of 6 questions
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1. Introduction Ch. 1.2. Demand and Supply Ch. 2.3. Consumer Theory Ch. 3, 4 &
5.4. Production and Cost Theory Ch. 6, 7 &
8.
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5. Perfect Competition Ch. 9 & 10.6. Monopoly Ch. 11 & 12.7. Imperfect Competition, Game Theory and
Strategic Behavior Ch. 13 & 148. Risk and Information Ch. 159. General Equilibrium Theory Ch. 1610. Externalities and Public Goods Ch.
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• Models are simplifications…like maps• Resemble reality• Understandable• Appropriate scale (not all details)
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Example: World-wide market for unprocessed coffee beans, December, 1997
Price per pound
Quantity, pounds
Supply (P,W)
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Example: World-wide market for unprocessed coffee beans, December, 1997
Price per pound
Quantity, pounds
Supply (P,W)
Demand (P,I)
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Elements of Models
Need to specify: Choices/Alternatives Assumptions
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Definition:
• Variables that have values that are taken as given in the analysis are exogenous variables.
• Variables that have values that are determined as a result of the workings of the model are endogenous variables.
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Definition: The Opportunity Cost of a resource is the value of that resource in its best alternative use.
Example: €100K in facilities yields €800K in revenue€100K in R&D yields €1M revenue
Opportunity cost of investing in facilities = €1M
Opportunity cost if investing in R&D = €800K
Note: Opportunity cost depends on how we specify alternatives.
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