PAM 2000, L
The whole of science is nothing more than a refinement of everyday
Albert Einstein, Physics and Reality
: 251 Martha Van Rensselaer Hall
Wednesdays, 10:00AM-12PM, directly after class, and by appointment
Intermediate microeconomics uses the basic tools of economics to analyze the
choices and behavior of individual units in society, such as markets, consumers, households,
and profit-seeking firms. The economic approach is distinguished by the assumption that the
entity under study pursues well-defined goals but faces scarcity of resources in doing so.
The approach is versatile, and can be easily extended to include the behavior of other
decision makers, such as politicians, bureaucrats, state-owned enterprises, non-profit
enterprises and many others. The power of the analysis is illustrated throughout the course
by applying it to contemporary policy issues.
The course begins with a review of basic market operation, optimization, and
essential economic concepts such as opportunity cost, incentives, scarcity and tradeoffs. The
marginal cost/marginal benefit and supply and demand models are then applied to a variety
of situations. They are used to analyze several policies, such as price floors and price
ceilings. Each side of the market is then analyzed in detail to show how demand curves and
supply curves are derived. This requires first an analysis of consumer behavior and then an
analysis of firm behavior. Applications of the consumer choice model are explored.
Analysis of firm behavior leads naturally into a discussion of market structures, which
include competitive markets, monopolistic markets, and oligopolistic markets. The course
then examines several additional topics in microeconomics that illustrate its versatility.
Those include strategic behavior between firms, asymmetric information, and contracting