Examination topics for the course “Microeconomics”

Examination topics for the course “Microeconomics-2”

Spring semester 2009

Introduction

1. Economic Modeling: Economic Modeling Assumptions: Optimality Principle and Equilibrium Principle;  Comparative Statics Analysis, Pareto Efficiency
2. Limited Resource: Rationality in Economics, Opportunity Cost
3. Method of Lagrange multipliers

Chapter 2

4. Consumption Choice Sets: Budget Constraints, General Choice Sets
5. Budget Constraints: Budget Constraints - Income Changes, Budget Constraints - Price Changes, Budget Constraints - Relative Prices
6. Budget Constraints: Uniform Ad  Valorem Sales Taxes, The Food Stamp Program
7. Shapes of Budget Constraints: Shapes of Budget Constraints - Quantity Discounts, Shapes of Budget Constraints - One Price Negative

Chapter 3

8. Preference Relations: Formal Definition of Binary Relation, Assumptions about Preference Relations, Rationality of Preference Relations, Continuity of Preference Relations
9. Preference Relation Based Indifference Curves: Indifference Curves Properties, Slopes of Indifference Curves
10. Indifference Curves: Perfect Substitutes, Perfect Complements, Preferences Exhibiting Satiation, Infinitely Divisible and Discrete Commodities
11. Well-Behaved Preferences: Monotonicity and Convexity, Weak Convexity, Non-Convex Preferences
12. Slopes of Indifference Curves: Marginal Rate of Substitution, Marginal Rate of Substitution and Indifference Curve Properties

Chapter 4

13. Utility Function: Formal Definition, A Theorem on Existence of Utility Function Representing Preference Relation, An Ordinal and Cardinal Utility,  Examples of Utility Functions, Monotonic Transformations of Utility Function
14. Utility Functions and Indifference Curves: Indifference Curves from Utility, Indifference Map, Examples: Perfect Substitutes, Perfect Complements, Quasilinear Preferences, Cobb-Douglas Preferences
15. Marginal Utility: Formal Definitions, Marginal Utility and Marginal Rate of Substitution, Examples: Perfect Substitutes, Perfect Complements, Quasilinear Preferences, Cobb-Douglas Preferences; Monotonic Transformations and Marginal Rates-of-Substitution

Chapter 5

16. Consumer Choice: Economic Rationality, Rational Constrained Choice: Analytical and Graphical Presentations of the Problem; Consumer Choice Optimality Conditions; Optimality Conditions for: Perfect Substitutes, Perfect Complements, Quasilinear Preferences, Cobb-Douglas Preferences
17. Consumer’s Ordinary (Individual) Demand: Formal Definition, Interior and Corner Solutions, Properties of the Consumer’s Ordinary (Individual) Demand; Computation of Ordinary (Individual) Demand: Examples of Internal (Cobb-Douglas Preferences, Perfect Complements), Corner (Perfect Substitutes, the Non-Convex Preferences Case) and ‘Kinky’ Solutions (Perfect Complements)

Chapter 6

18. Comparative statics analysis of Consumer’s Ordinary (Individual) Demand  – definition of Ordinary Demand Functions
19. Properties of Ordinary Demand Functions in case when preferences are represented by neoclassical utility function
20. Comparative statics analysis of Consumer’s Ordinary (Individual) Demand  in case of Changes in Income: Income-Offer Curve, Engel Curve, Normal Good, Inferior Good
21. Comparative statics analysis of Consumer’s Ordinary (Individual) Demand  in case of Own-Price Changes: Price-Offer Curve; the Ordinary Demand Curve for commodity; Ordinary Good; Giffen Good; Inverse Demand Curve
22. Own-Price Changes:  a p₁ price-offer curve for Cobb-Douglas preferences;  a p₁ price-offer curvefor a perfect-complements utility function; a p₁ price-offer curvefor a perfect-substitutes utility function
23. Inverse Demand Curve: cases of Cobb-Douglas preferences,  a perfect-complements utility function, a perfect-substitutes utility function
24. Income Changes: cases of Cobb-Douglas preferences,  a perfect-complements utility function, a perfect-substitutes utility function
25. Income Changes: Homotheticity of  a Consumer Preferences; A Nonhomothetic  Preference – Quasilinear Preference; A Quasilinear Preference with Discrete Good – reservation price.
26. Cross-Price Effects: Gross Substitute for Commodity, Gross Complement for Commodity