Core Course 1: Introductory Microeconomics
This course introduces the fundamental principles of microeconomic theory, focusing on individual decision-making and how markets function.
Course Content Details
1. The Scope and Method of Economics
This foundational unit introduces what economics is all about. It starts with the central economic problem: scarcity, which forces individuals and societies to make choices. We explore how economists analyze these choices using concepts like opportunity cost and through the construction of economic models. A key distinction is made between positive economics (describing what is) and normative economics (prescribing what ought to be).
Key Topics:
- Scarcity, Choice, and Opportunity Cost
- The Production Possibilities Frontier (PPF)
- Positive versus Normative Analysis
- Constructing and Using Economic Models
- Microeconomics vs. Macroeconomics
2. Supply and Demand: How Markets Work
This unit presents the most fundamental tool in microeconomics: the model of supply and demand. We will analyze the factors that influence buyer behavior (demand) and seller behavior (supply). The interaction of these forces in a market determines the equilibrium price and quantity of a good. We will also study the concept of elasticity to measure the responsiveness of quantity demanded or supplied to changes in price, income, or other variables.
Key Topics:
- The Law of Demand and Determinants of Demand
- The Law of Supply and Determinants of Supply
- Market Equilibrium: Price and Quantity Determination
- Price Elasticity of Demand and its Determinants
- Consumer Surplus, Producer Surplus, and Total Surplus
- Effects of Government Intervention: Price Controls and Taxes
3. Consumer Behavior and Utility Maximization
This unit provides a theoretical framework for understanding how consumers make choices. We introduce the concept of utility as a measure of satisfaction. The analysis uses indifference curves to represent consumer preferences and budget constraints to represent their limited income. By combining these two elements, we can determine the combination of goods that maximizes a consumer's utility, thereby deriving their individual demand curve.
Key Topics:
- The Concept of Utility: Total and Marginal Utility
- Indifference Curves and their Properties
- The Budget Constraint
- Utility Maximization and the Consumer's Equilibrium
- Income and Substitution Effects of a Price Change
- Derivation of the Individual Demand Curve
4. The Firm: Production and Costs
Here, we turn our attention from consumers to producers. This unit examines the firm's decision-making process. We start with the production function, which describes the relationship between inputs (like labor and capital) and output. We then analyze the firm's costs, making a crucial distinction between short-run costs (when some inputs are fixed) and long-run costs (when all inputs are variable). This leads to an understanding of concepts like economies and diseconomies of scale.
Key Topics:
- The Production Function: Total, Average, and Marginal Product
- Short-Run Costs: Fixed, Variable, Total, Average, and Marginal Costs
- Long-Run Costs: The Long-Run Average Cost Curve
- Economies and Diseconomies of Scale
- Relationship Between Production and Costs
5. Perfect Competition and Monopoly
This unit introduces two fundamental market structures. Perfect competition is characterized by many firms selling an identical product, leading to firms being price takers. We analyze how these firms make output decisions to maximize profit in the short run and the long run. In contrast, a monopoly is a market with only one seller. We explore how a monopolist chooses its price and quantity to maximize profit and discuss the social costs of monopoly power, including the concept of price discrimination.
Key Topics:
- Characteristics of Perfect Competition
- Profit Maximization for a Competitive Firm (P=MC)
- Short-Run and Long-Run Equilibrium in Perfect Competition
- Characteristics of Monopoly
- Profit Maximization for a Monopolist (MR=MC)
- The Social Cost of Monopoly and Price Discrimination