Faculty of Economics and Business

BACHELOR´S DEGREE IN BUSINESS ADMINISTRATION Course

Microeconomics

Code

802265

Module

Basic Education

Area

Economics

Character

Basic

Attending

2.7

Nonattending

3.3

Semester

2

Credits

6

Year

First

DEPARTMENT OF PRINCIPLES OF ECONOMIC ANALYSIS I Coordinator: Esperanza Gracia

Department Professor

e-mail

Rafael Salas

[email protected] 1TU

U1T

SYNOPSIS SHORT DESCRIPTOR Basic consumer and producer theory

PRE-REQUISITES Students are expected to have completed an introductory course in economics.

OBJECTIVES OBJETIVES Develop a fundamental understanding of the behaviour of individual economic agents and of the functioning of markets. COMPETENCIES General: Capacity to solve problems (CG1).

Faculty of Economics and Business Capacity of analysis and synthesis (CG2). Capacity of organization and planning (CG3). Capacity of communication and work in team (CG4). Cross-sectional: Capacity of research and search of information (CT1). Capacity to work under pressure (CT3). Capacity to apply knowledge to practice (CT4). Specific: Derive relevant economic information from data (CE4). Understand the basic elements in economic environment (CE8).

LEARNING METHODOLOGY A mixed methodology of teaching and learning will be used in all educational activities with the aim of encouraging students to develop a collaborative and cooperative attitude in the pursuit of knowledge.

CONTENTS (Programme) Consumer behaviour: income and substitution effects. Production and cost theory. Competitive supply. Monopoly. Introduction to game theory. Oligopoly. % OF TOTAL TEACHING ACTIVITIES ATTENDANCE CREDITS Lectures

20%

100%

Classes

20%

75%

Tutorials

6%

100%

Assessment activities

4%

100%

Homeworks and class assignments

20%

0%

Time to study

30%

0%

Faculty of Economics and Business

ASSESMENT Exams

Share of final grade

50%

Share of final grade

40%

Final exam Other activities

Intermediate proofs and exercises at seminars Other activities

Share of final grade

10%

Active participation in classes and seminars Method of assessment Final exam will consist of two parts: - Part I: multiple choice questions (only 1 correct answer) - Part II: long exercises (minimum required for final score) If the student attends neither the third intermediate proof of the continuous evaluation nor the final exam in June, the final grade will be “non-attending” (“no presentado”). Regardless the participation in the continuous evaluation, if the student doesn’t attend the final exam in July, the grade will be “non-attending”. Otherwise, in both cases (June and July) the grade will be the weighted average (by using the mentioned weights) between the score of continuous assessment and the score of final exam. Continuous assessment in the extraordinary examination: in case one student has failed the ordinary examination, having attended the final exam and participated in the continuous assessment, the mark to be considered as continuous assessment for that extraordinary examination will be the final mark obtained in the ordinary examination.

Faculty of Economics and Business

TENTATIVE CRONOGRAMME Week 1st

Item Item 0. Rules and functioning of the course. General comments. Programme and bibliography. Introduction.

Work at classroom

Work out of classroom Reading lecture notes. Solving assigned exercises.

Item 1. Production. The technology of production. Isoquants (decreasing and strictly convex). Marginal rate of technical substitution. CobbDouglas production function. Short-run versus long-run. Marginal productivity and returns to scale. Item 2. Cost functions. Cost minimization subject to the technology constraint for Cobb-Douglas production functions. Input demand functions. The expansion path. Short and long run cost functions.

2nd

Item 2. Cost functions. Average and marginal costs at short and long run. Costs and returns to scale. Average costs with U-shape. Examples for Cobb-Douglas technologies. Relationships between short and long run costs. Exercises.

Reading lecture notes. Solving assigned exercises.

Faculty of Economics and Business

3rd

Item 3. Profit maximization and competitive supply. Correction of exercises The competitive firm and profit maximization. Short and long corresponding to items 1 and 2 run supply curves. Examples. Supply curves with CobbDouglas technologies. Supply curve with U-shaped average costs curves.

Reading lecture notes. Solving assigned exercises.

Seminar 1

Reading lecture notes. Solving assigned exercises.

4th

5th

6th

7th

Exercises corresponding to items 1, 2 and 3

Item 3. The analysis of competitive markets. Market supply in the long run (with free entry and exit of firms). Equilibrium. Market supply with barriers to entry of new firms. Equilibrium. The impact of subsidies and taxes. The producers’ surplus at short and long run.

Reading lecture notes. Solving assigned exercises.

Correction of exercises corresponding to items 3 Short exam 1 Item 4. Monopoly. Correction of exercises Monopoly. Equilibrium of the monopolist. Equilibrium in terms corresponding to item of demand elasticities. Tax effects. Social costs of monopoly. Monopoly power. Price discrimination.

Reading lecture notes. Solving assigned exercises.

Reading lecture notes. Solving assigned exercises.

Faculty of Economics and Business 8th

9th

10th

Item 5. Oligopoly. Correction of exercises Strategies. Nash equilibrium and the prisoner’s dilemma. corresponding to item 4 Dominant strategies. Cooperative and non-cooperative games The model (duopoly) of Cournot. Reaction curves and equilibrium. The model (duopoly) of Stackelberg. The solution of collusion. Instability of collusion solution. Comparison among competitive equilibriums and Cournot, Stackelberg and multi-plant monopoly equilibriums. Item 5. Oligopoly. Competition in prices. The model of Bertrand with symmetric costs. Leadership in prices. Monopolistic competition. Seminar 2 Correction of exercises corresponding to items 4 and 5

11th

12th

Correction of exercises corresponding to item 5 Short exam 2

Item 6. Consumer choice. Budget constraint and budget line. Opportunity cost. Effects of taxes and subsidies on the budget constraint. The utility function as functional representation of consumer

Reading lecture notes. Solving assigned exercises.

Reading lecture notes. Solving assigned exercises.

Reading lecture notes. Solving assigned exercises.

Reading lecture notes. Solving assigned exercises.

Reading lecture notes. Solving assigned exercises.

Faculty of Economics and Business

13th

14th

preferences. Examples: Cobb-Douglas utility function, perfect substitutes, perfect complements, neutral goods, bads. Demand functions. Examples. Seminar 3 Correction of exercises corresponding to item 6. Solving exercises and other activities Short exam 3

Reading lecture notes. Solving assigned exercises. Reading lecture notes. Solving assigned exercises.

Note: Every four weeks, classes will be devoted to seminars. The first two hours of the week for the first half of the group and the last two for the second. The seminars are used for solving exercises to reinforce the theoretical knowledge. Some of the seminars can be used for the exhibition of works.

Faculty of Economics and Business

RESOURCES BASIC BIBLIOGRAPHY Pindyck, R. S. and Rubinfeld, D.L. (2009). Microeconomics, 7th ed., Pearson International edition. COMPLEMENTARY BIBLIOGRAPHY Nicholson, W. (1972). Microeconomic Theory. Basic Principles and Extensions. The Dryden Press Carrasco, A. y otros (2003). Microeconomía Intermedia: Problemas y cuestiones, McGraw-Hill. Sosvilla, S. y Manrique, M. (2010). Introducción a la Economía, ed. Garceta