Microeconomic Principles & Policy
- Course Code:
- Unit value:
This course looks at the principles economists use to model the behaviour of individual agents (firms, consumers, and policy authorities) and the ways in which they interact in a market economy. This course examines and builds upon core theories of microeconomics, and is structured around:
- consumer demand
- theory of the firm
- pricing and output in competitive and monopolistic markets.
The module explores the economic principles that underpin the influence of market structures - whether markets are competitive or monopolistic - on consumers and firms, how these principles can be applied to economic problems, and their implications for policy.
There are two narratives, or theoretical approaches, running through this course. The first is the traditional neoclassical approach, which is based on the assumption that all economic actors behave rationally to improve their own self-interest in markets that are competitive. The second narrative covers alternative approaches that have been developed to analyse economic behaviours.
You will receive a looseleaf binder containing eight units. The units are carefully structured to provide the main teaching, defining and exploring the main concepts and issues, locating these within current debate and introducing and linking the further assigned readings. The unit files are also available to download from the Virtual Learning Environment.
- Pindyck, Robert and Daniel Rubinfeld (2012) Microeconomics, 8th Edition, Prentice Hall International.
- Goodwin, Neva, Julia Nelson, Frank Ackerman and Thomas Weisskopf (2009) Microeconomics in Context, 2nd Edition, M.E. Sharpe.
You will receive a selection of core readings, in the form of academic articles and key chapters which augment and illustrate the main text.
Virtual Learning Environment
You will have access to the VLE, which is a web-accessed study centre. Via the VLE, you can communicate with your assigned academic tutor, administrators and other students on the module using discussion forums. The VLE also provides access to the module Study Guide and assignments, as well as a selection of electronic journals available on the University of London Online Library.
Objectives and learning outcomes of the course
By the end of this course you will be able to:
- Use the demand-supply framework for analysing market behaviour
- Explain the principles of consumer theory
- Understand the supply side of the economy and apply the theory of production and costs
- Understand the meaning and significance of profit maximisation and competitive supply
- Discuss the signficance and impact of non-competitive market structures
- Explain how a firm's demand for inputs is derived and its interrelationship with with the firm's output decisions
- Describe the conditions required for general equilibrium
- Analyse the reasons for market failures and the options available to achieve an improved allocation of resources in such situations
Scope and syllabus
Unit 1: Theories and applications of microeconomics
- 1.1 The Market
- 1.2 The Basics of Demand and Supply
- 1.3 Elasticities of Demand and Supply
- 1.4 Applications of Supply and Demand Analysis
Unit 2: Consumer Theory
- 2.1 Introduction to Consumer Theory
- 2.2 Consumer Preferences 2.3 Budget Constraint
- 2.4 Consumer Choice
- 2.5 Consumer Demand
- 2.6 Application of Consumer theory: Case Study
- 2.7 Utility Theory
- 2.8 Revealed Preference Analysis
Unit 3: Theory of Production and Costs
- 3.1 Introduction to the Theory of Production and Costs
- 3.2 Production, Technology and the Firm
- 3.3 Theory of Production
- 3.4 Economic Costs
- 3.5 Cost Functions
- 3.6 Application of Theory of Production and Costs: Case Study
Unit 4: Profit Maximisation and Competitive Supply
- 4.1 Profit Maximisation
- 4.2 Perfect Competition
- 4.3 Short-run Supply Curves
- 4.4 Long-run Supply Curves
- 4.5 Applications in Competitive Markets
Unit 5: Non-Competitive Market Structures
- 5.1 Monopoly and Monopoly Power
- 5.2 Monopolistic Competition
- 5.3 Contestable Markets
- 5.4 Policy Analysis
Unit 6: Factor Input Markets
- 6.1 Competitive Input Markets
- 6.2 Non-Competitive Factor Markets
- 6.3 Summary of Input Markets
- 6.4 Applications
- 6.5 Factor Input Markets – Case Study
Unit 7: General Equilibrium, Efficiency and Pareto Optimality
- 7.1 General Equilibrium Analysis
- 7.2 Efficiency and the Pareto Optimality Criterion
- 7.3 Reviewing Theory
Unit 8: Externalities, Public Goods and Asymmetric Information
- 8.1 Externalities
- 8.2 Public Goods
- 8.3 Asymmetric Information
- 8.4 Externalities, Public Goods and Asymmetric Information – Case Study
Method of assessment
Students are individually assigned an academic tutor for the duration of the module, with whom you can discuss academic queries at regular intervals during the study session.
You are required to complete two Assignments for this module, which will be marked by your tutor. Assignments are each worth 15% of your total mark. You will be expected to submit your first assignment by the Tuesday of Week 5, and the second assignment at the end of the module, on the Tuesday after Week 8. Assignments are submitted and feedback given online. In addition, queries and problems can be answered through the Virtual Learning Environment.
You will also sit a three-hour examination on a specified date in October, worth 70% of your total mark. An up-to-date timetable of examinations is published on the website in April each year.