Introductory Microeconomics

The aim of the course is for the students to acquire basic knowledge of microeconomic principles and methodology, as well as the skills needed to make simple microeconomic analyses. After the course is completed the students should be able to:

• explain and calculate the concept of opportunity cost (1)
• explain what influences demand- and supply curves in the market for goods and how they influence price and quantity (2)
• explain and apply the elasticity concept (3)
• explain the basis for consumer demand: utility theory and indifference curves (4)
• derive and graphically construct cost curves for a firm (5)
• derive and graphically construct demand- and marginal revenue curves for firms in perfect competition and monopoly (6)
• explain how game theory can be used in microeconomic analysis (7)
• make simple analyses of imperfect markets, incomplete competition, external factors, and imperfect information (8)
• apply the concepts of consumer- and producer surplus and so-called dead weight loss to analyse the effect of imperfect markets and taxation on economic efficiency (9)
• derive and graphically construct the demand curve for labour (10)

The course starts with a discussion about the concept of scarcity (that there are limited resources) and the trade-offs that this implies, since this is the basis for economic analysis. Thereafter the concept of opportunity cost and the implications of trade and specialization for production are explained. Following this introduction the focus will shift to the principles and methodology used in microeconomic analysis. First demand- and supply curves are described along with explanation on how they can be used in economic analysis of different markets, for example explaining the role of prices in the distribution of resources as well as analysing trade effects. Moreover it provides knowledge of the basics regarding the theories on consumer and producer behaviour and how these theories can be used for efficiency and welfare analysis. After this first part of the course is completed, the focus will shift towards imperfect markets and how microeconomic theory can be used to explain and analyse the effects of market failures. The role of the state and the effects of regulations (taxes, laws etc.) are also discussed in this part of the course. Furthermore, game theory and how it can be used in microeconomic analysis is introduced as well as the basics of labour market theory.

The learning outcomes 1-10 are assessed by a mid-course exam “Dugga” (multiple-choice questions) 1,5 credits (U-G) and a written exam 6 credits (U-VG).

The course contains lectures, math exercises and economic experiments. The lectures cover the central parts of the literature, while the math exercises deepens the knowledge about the mathematics that is the basics for the economic analysis. In the economic experiments the students undertake trade. The information from the trade is then used to evaluate how theoretical predictions compare with the true market outcome.

The Swedish grades U–VG.

There is a maximum of five opportunities to take the exam.