INTERMEDIATE MICROECONOMICS

Shanghai Jiao Tong University

(ECON 2404)I teach this course in Fall semesters to undergraduate students. It is based on Hal Varian's textbook (9th Edition) with added rigor by means of formal definitions and mathematical proofs. Please let me know if you find typos, thank you!

If you run into issues accessing/downloading the files, please check www.xzlim.com/bugs for possible solutions. If that does not solve your issue, please let me know.

**Fall 2023**: This course is ongoing and slides are actively updated. Please make sure you have the latest version.PART I

**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)

5b: Revealed Preference 2

system of prices and income; checking weak/strong axiom, (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)

**Partial 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)

PART II

**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)

**Game Theory**simultaneous move; Nash equilibrium; dominant strategy equilibrium; various applications (CH 29 & 28)

randomization & expected utility; mixed strategy NE; best response correspondences; existence of NE; symmetric equilibrium (CH 30)

complete contingent plan; backward induction; subgame perfect NE; non-credible threat; various applications (CH 29 & 30 & 28 & 27)

22: Bayesian Games

types; adverse selection; Akerlof market for lemons; moral hazard; work or shirk; signaling; Spence education model (CH 38)

**General Equilibrium**Walrasian equilibrium & existence; Pareto optimal allocations; First & Second Welfare Theorems; Edgeworth box, contract curve, core allocations (CH 32)

utility functions under externalities; property rights; Coase conjecture; production externalities; tragedy of the commons (CH 35)

Pareto optimal level of public goods; uniqueness under quasi-linear preferences; provision decisions (CH 37)

Other Materials

Partial Solutions for

**Blue Book**(pin on canvas)

Partial Solutions for

**Black Book**(pin on canvas)

FAQs

**Do you have office hour?**Please check my homepage: www.xzlim.com

**Can you write me a letter for PhD applications?**Every year I write at most three letters to students who apply to top 30 econ PhD programs, typically for the best students in my class.

**Can you write me a letter for Master's or job applications?**If you receive an A- or above I am happy to write you a standard letter, with minimal personalization. If you are top three I will personalize it.

**Can I sit-in?**Antai students (Minors included) are welcomed to sit-in. Non-Antai students should seek permission via email (up to 20% of standard class size).

**Is this class the same as other Intermediate Micro classes?**Exams are the same, but my lectures emphasize rigorous introduction of concepts and the use of mathematical proofs. Please choose wisely. Also, for English sessions, exams are in English; and for Bilingual (双语) sessions, exams include both English and Chinese.

**Credits to TAs**LU Feifei (2021), FENG Xuechun (2022), QI Rui (2022), LIU Xingwen (2023), SU Tan (2023)

**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）. 上海交通大学出版社, 2012. (3) 钟根元, 陈志洪. 中级微观经济学. 上海交通大学出版社, 2020. (4) Mas-Colell, Andreu, Michael Dennis Whinston, and Jerry R. Green. Microeconomic Theory. Oxford University Press, 1995.

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