Syllabus-Applied Masters Microeconomics

Economics 501 is designed for students in the MAE program. It provides a rigorous introduction to decision-making, game theory, partial and general equilibrium theory, but always with an emphasis on real world applications of the analysis.

This is a lecture-based course. Lectures may contain material not in readings. If something is unclear, please ask me questions - in person or by email (lones@umich.edu). Don't be shy. If you have a question, chances are good that others have the same question and you will be doing everyone a favor by getting it answered.

Reading assignments are to be done before class. Some chapters of the Perloff textbook are assigned. Virtually all of the other readings will be announced in class & on email.

There are three midterms and a final. The midterms count 20% of the grade, and the final 40%. The final exam grade will replace your lowest midterm grade if it helps you. I will also hand out some problems for you to try to solve. If you miss a midterm, then there is no make-up, but with a convincing excuse, I'll ignore it, and shift the course grade weight to the other exams.

Class: M/W 1-2:30PM in 110DENN

Text: "Microeconomics: Theory & Applications with Calculus" by Jeffrey Perloff

The text is very useful, but not essential if you can leap tall buildings in a single bound.

Exam Dates:
1st Exam: Sept. 30
2nd Exam: Oct. 28
3rd Exam: Nov. 23
Final exam: Fri., Dec. 18 (4-6pm)

Office hours: Tuesdays 3-4:30 p.m. or by appointment.

Location: Lorch 335A, lones@umich.edu, www.umich.edu/~lones

Topic Outline
In this course, we study a set of fables that help us understand the economics of the world around us. We will see that these "white lies" have enough truth buried within that they capture the most important forces.

The class has about four quarters, each with six lectures (well, the last has seven lectures).

1.      Cost Benefit Analysis (eg. marginal vs. global analysis; opportunity costs; dynamic programming, search theory)
2       Rational Choice under Certainty (eg. preferences & opportunities; transitivity) - pages 61-68
3       Rational Choice under Uncertainty (eg. expected utility, risk aversion, college application) - chapter 16
4.      Static Game Theory with Complete Information (eg. Nash equilibria; zero sum games) - chapter 14.2
5.      Dynamic Game Theory with Complete Information (eg. subgame perfect equilibrium; bargaining) - chapter 14.3
6.      Market equilibrium (eg. Double Auctions, elasticities; the "invisible hand") - chapter 2
7.      Government Intervention (eg. taxes & subsidies, quotas, price floors) - chapter 5
8.      Consumer Theory (eg. Income & substitution effects, the law of demand, willingness-to-pay) - chapters 3,4
9.    Producer Theory and Factor Pricing (eg. entry and exit)- chapters 6,7, 8, 15
10.    Multi-market Equilibrium and Trade (eg. comparative advantage) - chapter 10
11.    Public Goods (eg. externalities, Pigouvian taxes, the Coase Theorem) - chapter 17
12.    Monopoly and Market Power (eg. Inefficiency, Cournot duopoly) - chapter 11, 13
13.    Oligopoly Pricing (eg. price discrimination) - chapter 12
14.    Asymmetric Information (Bayesian analysis, signaling, lemons markets, auctions) - chapter 14.3, 18
15.    Incentives (eg. moral hazard) - chapter 19