Econ 230 Lecture 2
1) Demand and supply (chapter 2)
a) Quantity demanded
i) Influenced by:
(1) Products price
(2) Prices of other
b) Quantity supplied
i) Amount that firms are willing to offer for sale and not necessarily the quantity
actually sold
ii) Th
Econ 230 Intro
1. Economics
a. Economics is the study of the use of scarce resources to satisfy unlimited human
wants
b. Scarcity
c. Choice
d. Opportunity Cost
e. Efficiency
f. Strategic Thinking
g. Theory
i. A theory provides a way to organize our thinki
Econ 230
Chapter 14 General Equilibrium
1
CHAPTER 14: GENERAL EQUILIBRIUM
14.1: General Equilibrium effects in action
General equilibrium analysis the study of market behaviour that
accounts for crossmarket influences and is concerned with conditions
p
Econ 230
Chapter 15 Asymmetric Information
1
CHAPTER 15: ASYMMETRIC INFORMATION
Complete information situation in which all participants in an economic
transaction know the relevant information.
Asymmetric information a situation in which there is an i
Econ 230
Chapter 11 Imperfect Competition
1
CHAPTER 11: IMPERFECT COMPETITION
11.1: What does equilibrium mean in an Oligopoly?
Imperfect competition market structure with characteristics between
those of perfect competition and monopoly.
Oligopoly com
Econ 230
Chapter 12 Game Theory
1
CHAPTER 12: GAME THEORY
Game theory the study of strategic interactions among two or more
economic actors.
Strategic decision an action made based on the anticipation of others
actions.
Simultaneous game a game in whi
Econ 230
Chapter 16 Externalities and Public Goods
1
CHAPTER 16: EXTERNALITIES AND GOODS
16.1: Externalities
Externality a cost or benefit that affects a third party not directly
involved in an economic transaction.
Negative externality a cost imposed
Econ 230
Chapter 10 Market Power and Pricing Strategies
1
CHAPTER 10: MARKET POWER AND PRICING STRATEGIES
10.1: The basics of pricing strategy
Pricing strategy a firms method of pricing its product based on market
characteristics.
The pricing strategy f
Econ 230
Chapter 13 Investment, Time, and Insurance
1
CHAPTER 13: INVESTMENT, TIME, AND INSURANCE
Investment the purchase of capital in the present with the intent of
reaping future benefits.
Insurance a payment from one economic actor to another with
Econ 230
Chapter 9 Market Power and Monopoly
1
CHAPTER 9: MARKET POWER AND MONOPOLY
Market power a firms ability to influence the market price of its
product.
Monopoly a market served by only one firm.
Monopolist the sole supplier and price setter of
Econ 230
Chapter 17 Behavioral and Experimental Economics
1
CHAPTER 17: BEHAVIORAL AND EXPERIMENTAL ECONOMICS
Behavioural economics branch of economics that incorporates insights
from human psychology into models of economic behaviour.
17.1: When human
Pricing strategies of
monopoly
Chapter 11 Monopoly
Chapter 12 Pricing and Advertising
Outline
1. Review Chapters 1112.3 with problems
2. Preview Chapters 12.412.7
Monopoly pricing
In competitive market, the best pricing strategy is to charge
the goin
Chapter 18: Externalities, OpenAccess, and public Goods
Topics:
1. Externalities
2. The Inefficiency of competition with externalities
3. Regulating Externalities
4. Market Structure and Externalities
5. Allocating Property Rights to Reduce Externalities
Chapter 15: Factor Markets
Topics:
1. Competitive Factor Markets
2. Effect of Monopolies on Factor Markets
3. Monopsony
Monoposony
 Monopsony: the only buyer of a good in a given market
 A monopsony is the mirror image of a monopoly. Whereas a monopoly
Chapter 19: Asymmetric Information
Topics:
1. Adverse Selection
2. Reducing Adverse Selection
3. Price Discrimination due to false beliefs about quality
4. Market power from price ignorance
5. Problems arising from ignorance when hiring
Asymmetric Informa
Chapter 14: Game Theory
Topics:
1. Static Games
2. Repeated Dynamic Games
3. Sequential Dynamic Games
4. Auctions
5. Behavioural Game Theory
Game Theory
Game theory: a set of tools that economists, political scientists, military analysts and other use
to
Chapter 20: Contracts and Moral Hazards
Topics:
1. The PrincipalAgent Problem
2. Using Contracts to reduce moral hazard
3. Monitoring to reduce moral hazard
4. Checks on Principals
5. Contract Choice
The PrincipalAgent Problem
 The principal, Paul, own
Microeconomic Theory Econ 230 D1 001
Version 1
First page just to get the numbering right  throwaway
1
Microeconomic Theory Econ 230 D1 001
Version 1
Multiple Choice Questions
Make sure that the multiple choice card contains your name and student ID. You
Questions
Econ 230D1001, Version 1
There are 41 Questions. Please answer these, using the supplementary material at the
end of the exam.
The following applies to questions 13:
Suppose that the consumer considers current and future consumption as perfect
Textbook Notes Chapter 5
Willingness to pay

For convenience in most of the following discussion, we use the equivalent
inverse demand function, which rearranges the demand function, Q = D(p), so as
to express a products price as a function of the quanti
Econ 230 Textbook note Chapter 4
Deriving demand curves
Constant elasticity of substitution

Usually, each of the two demand curves depends on both goods prices and the
consumers income.
Q1= Yp1^z1/(p1^z+p2^z)
Q2= Yp2^z1/(p1^z+p2^z)

In contrast, th
Probability: It is a number between 0 and 1 that indicates the likelihood that a particular
outcome will occur.
Frequency: If we know the history of the outcomes for an event, we can use the
frequency with which a particular outcome occurred as our estima
Econ 230 Textbook note Chapter 3
Preferences
Look at the note on the notebook
Indifference curve

It is a complete set of indifference curves that summarize a consumers tastes. It
is referred to as a map because it uses the same principle as a topographi
Econ 230 Textbook notes
Chapter 2
Demand

These changes in the quantity demanded in response to changes in price are
movements along the demand curve. The demand curve is a concise summary of
the answers to the question what happens to the quantity deman
Math Prerequistes  Are you ready?
September 2, 2014
1 Absolute Minimum
If you are not able to answer the following questions relatively easily, then you are probably
not ready for this class. In that case, I recommend considering Econ 208 instead.
1. Wha
ECON230D1 LECTURES REVIEW
Department of Economics
McGill University
CALCULUS
Elementary function:
a function of one variable which is the composition of a finite number of arithmetic
operations (+ ), exponentials, logarithms, constants, and solutions of a
Midterm Examination Fall 2015: Microeconomic
Theory Econ 230
October 19, 2015
VERSION 1
There are two sections to this exam. First there are 12 multiple choice questions and then
there are 4 nonmultiple choice questions.
Please enter your Name and Studen