Intermediate Microeconomics

Shanghai Jiao Tong University

(ECON 2404)This course is based on Hal Varian's textbook (9th Edition) with added rigor by means of mathematical proofs. Typical of econ sophomores in mainland China, students are expected to know multivariable calculus, basic real analysis, and mathematical proofs. Everything publicly accessible is a public good. Please let me know if you find typos, thank you!

### Lectures

(COVID-19 special: SJTU members watch here)

**Introduction**about this course; first look at rationality, equilibrium and efficiency; in-class illustration of a market (CH 1)**Decision Theory**preference relations; utility representation theorem; cardinal vs ordinal utility; convex preferences (CH 3 & 4)utility maximization under budget constraints; indifference curves; marginal rate of substitutions and price ratio (CH 2 & 5)Lagrange method; well-behaved preferences and sufficient conditions; various examples (CH 5)weak/strong axiom of revealed preferences; rationalizable datasets; representation theorems (CH 7)**Demand Analysis**Marshallian demand; price/income changes; Giffen goods; Engle curves; homothetic preferences (CH 6)Slutsky's decomposition; income effects and substitution effects (CH 8)buying and selling; ordinary income effect; endowment income effect; application in labor supply (CH 9)visualizing consumer surplus; quasi-linear utility and dollar measure; compensating and equivalent variations (CH 14)**Market Equilibrium**aggregate demand; elasticities; revenue maximization (CH 15)demand, supply, and equilibrium; taxation and subsidy; tax incidence; implications on welfare (CH 16)**Neoclassical Firms**production; marginal rate of technical substitution; return-to-scale; marginal revenue and marginal cost (CH 19 & 20)Lagrange method; various production functions; average cost and marginal cost; convex cost (CH 21)visualizing cost, long-run/short-run; variable/fixed cost, various analysis using cost curves (CH 22)supply curve; long-run profit vs short-run profit; producer surplus; aggregate supply (CH 23 & 24)**Market Power**market power and price as a decision variable; markup; dead-weight loss and inefficiency (CH 25)1st degree price discrimination; 3rd degree price discrimination; two part tariffs and surplus extraction (CH 26)2nd degree price discrimination; Riley Maskin screening, menu design and incentive compatibility; in-class illustration (CH 26)factor price as a decision variable; monopsony; marginal revenue product (CH 27)**Game Theory**simultaneous move; Nash equilibrium; dominant strategy equilibrium; various applications (CH 29)mixed strategy NE; best response correspondences; existence of NE (CH 30)complete contingent plan; backward induction; subgame perfect NE; non-credible threat; various applications (CH 29 & 28 & 27)**Topics**pure exchange economy; Walrasian equilibrium and its existence; Pareto optimal allocations; First Welfare Theorem (CH 32)**24: Exchange II, Externalities**Edgeworth box; contract curve; core allocations; Second Welfare Theorem; externalities; Coase conjecture (CH 32 & 35)Pareto optimal level of public goods; uniqueness under quasi-linear preferences; provision decisions (CH 37)types; adverse selection; Akerlof market for lemons; moral hazard; work or shirk; signaling; Spence education model (CH 38)### Problem Sets

**Lecture 2-5**

Homework 1 (Solutions)Updated 10/3

**Lecture 6-9**

Homework 2 (Solutions)**Lecture 10-11**

Homework 3 (Solutions)**Lecture 12-15**

Homework 4 (Solutions)**Lecture 16-19**

Homework 5 (Solutions)**Lecture 20-22**

Homework 6 (Solutions)**Lecture 23-26**

Homework 7 (Solutions)**Blue Book**

Partial Solutions (pin on canvas)**Black Book**

Partial Solutions (pin on canvas)

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