## 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!

### LECTURE

**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; representative agent; weak axiom; 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 (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 & 28)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 11/14**Lecture 6-9****Homework 2**(**Solutions**)Updated 11/03**Lecture 10-11****Homework 3**(**Solutions**)Updated 11/12**Lecture 12-15****Homework 4**(**Solutions**)**Lecture 16-22 (Part 1)****Homework 5**(**Solutions**)**Lecture 16-22 (Part 2)****Homework 6**(**Solutions**)**Lecture 23-26****Homework 7**(**Solutions**)**Blue Book****Partial Solutions**(pin on canvas)**Black Book****Partial Solutions**(pin on canvas)### FAQs

**Do you have office hour?**I am available by appointment. Please check my homepage or send me an email.

**Can you write me a letter for PhD applications?**Every year I write at most three letters to students who apply to top 30 PhD programs, and it is reserved for the top students in my class. This is so that letters are credible.

**Can you write me a letter for Master's or job applications?**If you take my class and receive 90+, but not in the top three, I am happy to write you a standard letter.

**Can I sit in this class?**Antai students (Minors included) are welcomed to sit in. Non-Antai students should seek permission and is limited to 10.

**Is this class the same as other Intermediate Micro classes?**Exams are the same, but my class emphasizes the use of mathematical proofs. This approach is easier for some people and harder for others. I encourage you to take other professors' classes if you are not comfortable with proofs.

**Can you add me onto Canvas for course recording?**Yes for Antai students, send me an email with your sjtu email.

**Credits to TAs**LU Feifei (2021), FENG Xuechun (2022), QI Rui (2022)**References**(1) Varian, Hal R.

*Intermediate Microeconomics: A Modern Approach (9th Edition)*. W. W. Norton & Company , 2014. (2) 钟根元, 陈志洪*. 中级微观经济学学习指南（第四版）*.*. 中级微观经济学*.*Microeconomic Theory*. Oxford University Press, 1995.**Supported by**Department of Economics, Antai College of Economics & Management, Shanghai Jiao Tong UniversityTeaching Affairs Office, Antai College of Economics & Management, Shanghai Jiao Tong University

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