Economic Theory I
Academic year 1997/98
Nir Dagan, Esther Hauk, and Albrecht Ritschl
- The consumer's problem: Basic setup
- The budget constraint, preferences, and the
presentation of preferences with a utility function.
- The consumer's choice
- Preference maximization, and the demand function
- Revealed preferences and the Slutsky equation
- The weak and strong axioms of revealed preferences. Price indices,
Slutsky equation. The substitution and income effect.
- Consumer surplus and market demand
- Consumer surplus: indivisible and perfectly divisible goods.
Quasi-linear utility functions. Aggregation of individual
demand functions. The price elasticity of demand, and its
relation to revenue.
Firms and Production
- Technology: production functions. Marginal productivity
and the rate of technical substitution. Returns to scale.
- Profit Maximization
- Profit maximization and cost minimization. Cost functions.
Marginal and average cost.
- Supply functions
- Supply of a competitive firm. The relationship between
supply and marginal cost. Producer surplus. The industry
- Competitive equilibrium in a market. Entry and "normal" profits.
Comparative statics, welfare, taxation, and redistribution.
- Hal R. Varian, Intermediate Microeconomics:
A Modern Approach (3rd edition) W.W. Norton & Company, New York, NY. 1993.