Whether it is explaining the behaviour of consumers, producers or government agencies, microeconomics lies at the heart of decision making.
This course will provide students with a thorough grounding in Intermediate Microeconomics. The course will blend theory and practical relevance and focus on a range of applications including the regulation of firms in competitive markets, consumer behaviour and uncertainty and the role of government. The course will further focus on decision making under uncertainty and Game Theory.
Warwick Economics is very strong in microeconomics and applied theory, and has many outstanding academics engaged in research across a variety of areas, including game theory, competition, voting and auction theory, information economics and behavioural economics. By drawing on some of these key areas, this course will develop the students’ existing knowledge base and allow them to gain a broader understanding of the way in which microeconomic theory can be applied to wider policy issues.
The course will focus on contemporary microeconomics and provide a conceptual foundation for analysis of policy. We will learn about the conditions needed for markets to operate successfully and more importantly, analyse when those conditions fail and how intervention can remedy problems. Intervention in markets fall into two main categories: first, it can be imposed voluntarily by market participants (e.g. self-regulation, such as the setting of industry technical standards) or it may be imposed externally by agents of government (e.g. by regulatory authorities).
The module will develop microeconomic theories with the aim of providing students with an analytical ability to understand, interpret and solve practical microeconomic problems using a modelling framework. This is one of the key skills highly valued by many employers as testified by the high demand from leading employers for our full-time students.
This course is aimed at students who have studied a first year course in Economics at university or equivalent and will be delivered at an intermediate level. Mathematical notation, basic algebra and a little calculus (constrained optimisation) is involved. Please get in touch with us if you are unsure about the mathematical content. The course texts (see reading list) provide an overview of the mathematical tools required.
The course will cover the main topics of intermediate microeconomics, based around 3 main themes:
- Consumers, firms and markets
- Strategic interaction, game theory and uncertainty
- Asymmetric information and market equilibria
We will look at models of consumer and producer behaviour, understanding how conditions can affect the way in which we behave.
The course will cover the main topics of intermediate microeconomics, including analysis of consumer choice and the problems that emerge when uncertainty and risk exist. Producer decisions will be analysed and they will then be considered in the context of market structures. Within this broad topic, we will look at models in which economic agents (consumers and producers) are passive price takers. In other words, we will consider the somewhat unrealistic benchmark of so-called perfect competition. Following on from this, we shall look at models of imperfect competition in which firms and possibly consumers are able to influence market prices through the decisions they take. While we consider models of imperfect competition as representing a more realistic environment, we start with perfect competition to allow us to understand what factors give rise to market power – that is, the ability to influence market prices. The course will then move on to study the topic of Game Theory. This allows us to develop richer models of behaviour by recognising that agents often interact strategically within market contexts. We will also be concerned with scenarios in which decision makers are uncertain about aspects in their environment. For example, a firm making ice cream does not know whether the summer will be hot, or a firm looking to hire a worker does not know whether this worker intends to exert a high level of effort in the work place. Using Game Theory, we will analyse such scenarios and try to predict the behaviour of the agents in our models, and the consequences for market outcomes.
We will also draw upon General equilibrium analysis to consider the importance of trade and exchange and whether there is a role for government in correcting the failings of the market.
By the end of this module, students should be able to:
- Understand intermediate and some advanced principles of microeconomic theory
- Apply microeconomic models to practical economic issues and real-world scenarios
- Explain consumer and producer economic behaviour using well-developed theory
- Explain the uses and applications of game theory and the role of uncertainty
- Assess the microeconomic theories and models in terms of their policy implications
- Demonstrate the ability to select and apply an appropriate model to a given microeconomic problem
- Present clearly and methodically in their own words, but also using equations and diagrams
For this course, there will be 4 hours of teaching per day, comprised of lectures and small group teaching. The structure will be:
- 3 hours of lectures
- A 1 hour seminar in small groups
Students will be given time each day for independent study. Towards the end of the third week, students will also be provided with time for revision.
The module will be assessed via a 2-hour examination. It should be noted that the exam is not compulsory. Everyone who completes the course – whether or not they sit the exam - will receive a certificate of attendance. However, by taking the exam you will also receive a grade/mark for the course which can be helpful to you.
Course Reading List
The main textbooks we shall use are:
- Goolsbee, S. Levitt and Syverson, C. “Microeconomics” International Edition (2013); Macmillan
- Watson, J. “Strategy – An Introduction to Game Theory” Third edition (2013); Norton.
Additionally, the student may wish to consult the following:
- N.G. Mankiw and M.P. Taylor; “Microeconomics”; 2nd Edition (2011); Cengage
- J.M. Perloff; “Microeconomics”; 6th Global Edition; (2012); Pearson
- W. Nicholson, C. Snyder, P. Luke and M. Wood; “Intermediate Microeconomics”; (2008); Cengage
- A. Schotter: “Microeconomics”; 1st International Edition; (2009); Cengage
- W. Snyder and C.M. Nicholson: “Microeconomic Theory: Basic Principles and Extensions”; 11th International Edition; (2012); Cengage
- T.J. Nechyba: “Microeconomics with Calculus”; International Edition; (2011); Cengage