ECN5402, Advanced Microeconomic Theory

Dr. Ali R. Moshtagh

2605 Coleman Hall

(217) 581 - 2719

amoshtagh@eiu.edu

OFFICE HOURS: 10:00 - 10:50 am MWF, 8:30 - 9:20 TR

Course Description:

A development of value and distribution theories. Detailed analysis of the reactions of consuming and producing units.

Course Outline

1. Introduction:

• Theoratical Models
  1. General Features of Economic Models
  • The Factor Price Equilization Model
  2. The Economic Theory of Value
  3. Partial Equilibrium Analysis
  4. General Equilibrium Analysis
• The Mathematics of Optimization
  1. Maximization of a Function of One Variable
  2. Maximization of Functions of Several Variables
  3. Implicit Functions
  4. The Envelope Theorem
  5. Constrained Maximization
  6. Maximization Without Calculus
  7. Rules for Differentiating Univariate Functions

2. Choice and Demand:

• Preferences and Utility
  1. Theories of Consumer Choice
  2. Axioms of Rational Choice
  3. Indifference Curves
• Examples of Utility Functions
  1. Cobb-Douglas Utility
  2. Perfect Substitutes
  3. Perfect Complements
  4. Constant Elasticity of Substitution (CES)
• Utility Maximization
  1. Demand Functions
  2. Changes in Income
  3. Engel's Law
  4. Changes in a Good's Price
  5. The Individual's Demand Curve
  6. Compensated Demand Curves
  7. Shephard's Lemma
  8. Consumer Surplus
  9. Sample Exam 1 Questions
• Demand Relationships Among Goods
  1. The Two-Good Case
  2. Substitutes and Complements
  3. Net Substitutes and Complements
  4. Composite Commodities
• Market Demand and Elasticity
  1. Market Demand Curve
  2. Price Elasticity of Demand
  3. Price Elasticity and Total Expenditure
  4. Income Elasticity of Demand
  5. Cross-Price Elasticity of Demand
  6. Problem 7.1

3. Production and Supply:

• Production Functions
  1. A Two-Input Production Function
  2. Marginal Productivity
  3. Average Physical Productivity
  4. Isoquant Maps
  5. Returns to Scale
  6. The Elasticity of Substitution
  7. Some Common Production Functions
• Cost Functions
  1. Definitions of Costs
  2. Cost-Minimizing Input Choices
  3. Total Cost Function
  4. Average and Marginal Cost Functions
  5. Shifts in Cost Curves
  6. Short-Run, Long-Run Distinction
• Profit Maximization and Supply
  1. The Nature and Behavior of Firms
  2. Marginal Revenue
  3. Short-Run Supply by a Price-Taking Firm
  4. Profit Maximization and Input Demand
  5. Producer Surplus
  6. Manager and the Principle-Agent Problem

4. Perfect Competition:

• The Partial Equilibrium Competitive Model
  1. Pricing in the Very Short-Run
  2. Short-Run Price Determination
  3. Long-Run Analysis
  4. Comparative Static Analysis of Long-Run Equilibrium
• Applied Competitive Analysis
  1. Economic Efficiency and Welfare Analysis
  2. Price Controls and Shortages
  3. Tax Incidence Analysis
  4. Trade Restrictions
  • Assignment
• General Competitive Equilibrium
  1. Perfectly Competitive Price System
  2. A Simple Graphical Model of General Equilibrium
  3. The Edgeworth Box
  4. General Equilibrium Modeling
  5. Money in General Equilibrium Model
• The Efficiency of Perfect Competition
  1. Pareto Efficiency
  2. Efficiency in Production
  3. The Theory of Comparative Advantage
  4. Efficiency in Product Mix
  5. Competitive Prices and Efficiency
  6. Imperfect Competition
  7. Externalities
  8. Public Goods

5. Models of Imperfect Competition:

• Models of Monopoly
  1. Barriers to Entry
  2. Profit Maximization and Output Choice
  3. Monopoly and Resource Allocation
  4. Monopoly and Product Quality
  5. Price Discrimination
• Models of Oligopoly
  1. Pricing Under Homogeneous Oilgopoly
  2. Product Differentiation
  3. Contestable Markets and Industry Structure

6. Pricing in Input Markets:

• Firm's Demands for Inputs
  1. Profit Maximization and Derived Demand
  2. Comparative Statics of Input Demand
  3. Marginal Productivity Analysis and the Determinants of Factor Shares
  4. Monopoly in the Input Market
• Labor Supply
  1. Allocation of Time
  2. A Mathematical Analysis of Labor Supply
  3. Market Supply Curve for Labor
  4. Wage Variation
• Capital
  1. Capital and the Rate of Return
  2. Determination of the Rate of Return
  3. The Firm's Demand for Capital
  4. Present Discounted Value Approach to Investment Decisions
  5. Optimal Resource Allocation Over Time

  

Grade Policy:

Your grades will be based on the accumulated total of your scores on the following:

Mid-Term Exam 100 Points, Tuesday, March 5, 2013

Final Exam 100 Points, Monday, April 29, 2013, 10:15 am - 12:15 pm

Term Paper 50 Points

Assignments 50 Points

Total 300 Points

Note 1:

No Exam grades will be eliminated. No Exams will be made up unless proper arrangements have been made prior to the scheduled Exam date.

Note 2:

If you have a documented disability and wish to receive academic accommodations, please contact the Coordinator of the Office of Disability Services (581-6583) as soon as possible.

NOTE 3:

"Each faculty member has the authority to establish the conditions for student cell phone use in his/her classroom. These conditions are at the discretion of the faculty member, but will provide that a university-initiated campus security text message can be received and disseminated to those in the classroom in a timly manner." Eastern position on cell phones in classrooms.

Reference and Text Book:

Walter Nicholson, MICROECONOMIC THEORY, BASIC PRINCIPLES AND EXTENSIONS, Eighth Edition, South-Western Thompson Learning, Inc., 2002.

YOU MUST BRING YOUR BOOKS TO CLASS. PLEASE!

SPECIAL DATES IN THE SPRING TERM 2013 CALENDAR

Classes Begin: January 7, 2013

Last Day to Drop a Course With No Grade: January 18

W for Course Withdrawal Beings: January 19

M.L. King's Brithday Observance-No Classes: January 21

Lincoln's Birthday Observance-No Classes: February 15

Mid Term: February 28

Spring Recess: March 11 - 15

Last Day to Withdraw from a Course or University with W: March 29

Final Examinations: April 29- May 3

Deadline to Return Books/TRS/No Fine 3 p.m. May 3