Spring 1999.

Meets Mondays and Wednesdays, 9:30 - 10:45, in McClelland 120.

**Professor: **Mark Walker.
Office hours: MW 2:30-3:15.

Also by appointment:
*mwalker@arizona.edu*

**Preceptors: **

Craig Finster
*ccf@u.arizona.edu*
Office hours: TuTh 8:00 - 9:15, Room 401C.

Ben Lippert
*benl@u.arizona.edu*
Office hours: TuTh 2:00 - 3:00, Room 401B.

Lisa Meinhardt
*lisam@u.arizona.edu*
Office hours: M 11:00 - 12:15, W 8:30 - 9:30, Room 401B.

**Textbook:** *Intermediate Microeconomics* (7th
edition),
by Walter Nicholson.

Optional course materials will regularly be made available for purchase at the Harvill Copy Center, in Room 137 of the Harvill Building. These will include such things as lecture notes, solutions to exercises and exams, sample exams (and solutions) from previous years, optional additional exercises, etc. The total cost of all these optional items, over the course of the semester, will be about ten to fifteen dollars. See below for an up-to-date list of the items that are available at the Harvill Copy Center.

I will expect you to have an email account and to check it regularly.
This is not required, but you will find it much easier to communicate
with me or with the preceptors by email than by phone, and I will
often communicate with everyone in the class via email.

There will be two mid-term exams and a comprehensive final exam.
The quizzes are one unit, each mid-term exam is one unit, and the
final exam is two units. Your course grade will be the average of
your *best three grades* from among those five units. In other
words, *your worst two* grades will be discarded. (An example:
Quizzes B; Mid-term exams F and B; Final exam C, which counts
double. The F and one C are discarded, leaving you with two Bs and
a C, and your course grade is therefore a B-. If the Bs and the C are
very high ones, your grade is a B; if all are very low, it might be a
C+. But only these three grades are counted.)

Indifference curves and maps. Budget constraints. Constrained maximization (determination of the chosen bundle from a utility function and the "MRS = price-ratio" marginal condition). Deriving a demand function. Comparative statics. Substitution and income effects. Normal and inferior goods. Elasticity. Consumer surplus.

2. Equilibrium and welfare:

Edgeworth box. Market equilibrium. Pareto efficiency, and
characterization via the equalization of marginal rates. Efficiency
of equilibrium and the importance of "competitive" conditions. Prices
as signals for resource allocation.

3. Intertemporal choice:

Present value of an asset and of a stream of returns and costs.
Equilibrium and efficiency of saving and investment decisions.

4. The firm:

Revenue, cost, and profit. The profit maximization assumption,
and characterization via the MR = MC condition. Production function,
marginal product, MRTS. Cost function via cost minimization for given
output. Total, average, and marginal cost curves. Returns to scale.
Long run and short run. Price-taking ("competitive") firm: P = MC.
Derived demand for inputs. Comparative statics.

5. Competitive equilibrium:

Market demand and supply functions as sums of individuals'
functions. Calculating equilibrium from demand and supply functions.
Long run and short run. Comparative statics.

6. Imperfect competition:

Monopoly; welfare comparison of the monopoly and competitive
outcomes. Cartels. Oligopoly: Cournot analysis. Comparison of
monopoly, oligopoly, competition.

7. Externalities:

Public goods. Efficiency. Other externalities. Bargaining,
and the Coase analysis and its limitations.

- Syllabus and course outline
- Mathematics Review for Economics 361
- Lecture notes: Notes on Demand Theory
- Exams (with solutions) from previous years (1/27)
- Solutions for Exercise Sets and Quizzes #1 and #2 (1/27)

4: Good

3: Mostly correct

2: Some things correct, some incorrect

1: Mostly incorrect

0: Nothing answered correctly

Finish reading Chapter 2 and read Chapter 3.

Do Exercises #2.7 - 2.10 and #3.1 - 3.4 in the Nicholson textbook.

Do the following two exercises:

1. If there were only two goods in the world, with quantities denoted by
x and y, determine the demand functions for x and y of an individual
whose preferences are described by the utility function

u(x,y) = *log* x + 3 *log* y.

What proportion of his expenditures are for the x-good? How is the
proportion affected by his wealth or by prices?

2. Answer Question #1 above for the utility functions

u(x,y) = xy^{3} and

u(x,y) = (x^{a})(y^{b}).

How do you account for the similarities in your answers?