ECN5402, Advanced Microeconomic Theory

Dr. Ali R. Moshtagh

2605 Coleman Hall

(217) 581 - 2916

OFFICE HOURS: 9:00 - 10:00 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****The Mathematics of Optimization**

2. Choice and Demand:

**Preferences and Utility****Examples of Utility Functions**- Cobb-Douglas Utility
- Perfect Substitutes
- Perfect Complements
- Constant Elasticity of Substitution (CES)

**Utility Maximization**- Demand Functions
- Changes in Income
- Engel's Law
- Changes in a Good's Price
- The Individual's Demand Curve
- Compensated Demand Curves
- Shephard's Lemma
- Consumer Surplus
- Sample Exam 1 Questions

**Demand Relationships Among Goods**- The Two-Good Case
- Substitutes and Complements
- Net Substitutes and Complements
- Composite Commodities

**Market Demand and Elasticity**- Market Demand Curve
- Price Elasticity of Demand
- Price Elasticity and Total Expenditure
- Income Elasticity of Demand
- Cross-Price Elasticity of Demand

3. Production and Supply:

**Production Functions**- A Two-Input Production Function
- Marginal Productivity
- Average Physical Productivity
- Isoquant Maps
- Returns to Scale
- The Elasticity of Substitution
- Some Common Production Functions

**Cost Functions**- Definitions of Costs
- Cost-Minimizing Input Choices
- Total Cost Function
- Average and Marginal Cost Functions
- Shifts in Cost Curves
- Short-Run, Long-Run Distinction

**Profit Maximization and Supply**- The Nature and Behavior of Firms
- Marginal Revenue
- Short-Run Supply by a Price-Taking Firm
- Profit Maximization and Input Demand
- Producer Surplus
- Manager and the Principle-Agent Problem

4. Perfect Competition:

**The Partial Equilibrium Competitive Model**- Pricing in the Very Short-Run
- Short-Run Price Determination
- Long-Run Analysis
- Comparative Static Analysis of Long-Run Equilibrium

**Applied Competitive Analysis****General Competitive Equilibrium**- Perfectly Competitive Price System
- A Simple Graphical Model of General Equilibrium
- The Edgeworth Box
- General Equilibrium Modeling
- Money in General Equilibrium Model

**The Efficiency of Perfect Competition**- Pareto Efficiency
- Efficiency in Production
- The Theory of Comparative Advantage
- Efficiency in Product Mix
- Competitive Prices and Efficiency
- Imperfect Competition
- Externalities
- Public Goods

5. Models of Imperfect Competition:

**Models of Monopoly**- Barriers to Entry
- Profit Maximization and Output Choice
- Monopoly and Resource Allocation
- Monopoly and Product Quality
- Price Discrimination

**Models of Oligopoly**- Pricing Under Homogeneous Oilgopoly
- Product Differentiation
- Contestable Markets and Industry Structure

6. Pricing in Input Markets:

**Firm's Demands for Inputs**- Profit Maximization and Derived Demand
- Comparative Statics of Input Demand
- Marginal Productivity Analysis and the Determinants of Factor Shares
- Monopoly in the Input Market

**Labor Supply**- Allocation of Time
- A Mathematical Analysis of Labor Supply
- Market Supply Curve for Labor
- Wage Variation

**Capital**- Capital and the Rate of Return
- Determination of the Rate of Return
- The Firm's Demand for Capital
- Present Discounted Value Approach to Investment Decisions
- 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, Thursday, March 6, 2014

Final Exam 100 Points, Tuesday, May 6, 2014, 2:45 - 4:45 pm

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 2014
CALENDAR**

Classes Begin: January 13, 2014

M.L. King's Brithday Observance-No Classes: January 20

Last Day to Drop a Course With No Grade: January 27

W for Course Withdrawal Beings: January 28

Lincoln's Birthday Observance-No Classes: February 14

Mid Term: March 6

Spring Recess: March 10 - 14

Last Day to Withdraw from a Course or University with W: April 4

Final Examinations: May 5 - 9

Deadline to Return Books/TRS/No Fine 3 p.m. May 9