Lectures 1 and 2 - Introduction and a First Application: The
Minimum Wage Debate and Causal Inference in Economics
David Autor, MIT Department of Economics
14.03/14.003 Microeconomic Theory and Public Policy, Fall 2010
(Compiled on 9/6/2010)
1
1
Introduct
Overview
Consumer
Theory
Producer
Theory
Exchange
Edgeworth Box
All Possible Exchange Points
Contract
Curve
Overview
Consumer
Theory
Producer
Theory
Exchange
Walrasian
Equilibrium
(Multiplicity)
Walrasian Equilibrium
Requirements:
1) Full information
2) S
Topic Review: 14.04 Midterm
I. Consumer Thoery: 75-85% of Test
A. Construction of Utility Functions
1. Requirements for the construction of a utility function
2. Requirements for budget exhaustion
3. Proving Convexity and Monotinicity of indifference curv
Test II Topics
The test will have 3-4 questions. Roughly, one question will be on monopolies, one on
general equilibrium, one on game theory, and one on externalities and/or public goods.
Monopoly
1) Going from utility functions to demand curves
2) Solvin
Preferences: x f y
Consumption Set: cfw_x,y,z,
Complete, Reflexive
Transitive, Continuous
Utility Function
U(x) > U(y) iff x f y
Budget Set
B( p, m) = cfw_x X | p x m
Budget Exhaustion
Weak Monotinicity + Strong Convexity
Consumer Maximization Problem
Max