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Centre for Financial and Management Studies (CeFiMS)

Microeconomic Principles & Policy

Course Code:
C357
Unit value:

Introduction

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:

  • market equilibrium
  • consumer demand
  • theory of the firm
  • pricing and output in competitive and monopolistic markets.

It explores how economic theory can analyse individual agents’ and society’s resource allocation. The course starts with the idea of the market comprised of three concepts: demand, supply and equilibrium. Studying consumer theory will address how consumers make decisions about what to consume and how goods and services have different demand characteristics. This leads into theory of production and costs which underlies theories of market supply. We analyse a core model of how firms combine inputs – labour, capital and raw materials – to produce goods and services in such a way as to minimise their costs and to maximise their profits, and how these production decisions determine the market supply curve.

The course 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.

Resources

Study Guide

You will receive a looseleaf binder containing eight 'course 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 Online Study Centre.

Textbooks
  • Robert Pindyck and Daniel Rubinfeld (2008) Microeconomics, Seventh Edition, Prentice Hall International.
  • Estrin, Laidler and Dietrich (2008) Microeconomics, Fifth Edition, FT Prentice Hall, Pearson Education.
Readings

You will receive a selection of core readings, in the form of academic articles and key chapters which augment and illustrate the main text.

Online Study Centre

You will have access to the OSC, which is a web-accessed learning environment. Via the OSC, you can communicate with your assigned academic tutor, administrators and other students on the course using discussion forums. The OSC also provides access to the course 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

Course Units
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

You will complete two assignments, which will be marked by your course 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 course, on the Tuesday after Week 8. Assignments are submitted and feedback given online. In addition, queries and problems can be answered through the Online Study Centre. 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 in April of each year.