Principles of Microeconomics

Learn how markets work, what they accomplish well and what their limitations are.

About the Course
We make economics decisions every day: what to buy, whether to work or play, what to study. We respond to markets all the time: prices influence our decisions, markets signal where to put effort, they direct firms to produce certain goods over others. Economics is all around us. 

This course is a rigorous introduction to the microeconomic theory of markets: why we have them, how they work, what they accomplish. We will explore what outcomes they generate when they work well and what happens when they do not. We will learn why governments are important and when regulation and intervention is necessary. Examples are taken from everyday life, from goods and services that we all purchase and use. We will apply the theory to current events and policy debates through weekly exercises. These will empower you to be an educated, critical thinker who can understand, analyze and evaluate market outcomes.

Course Syllabus

Week One: Where do markets come from? We will start with understanding the constraints that we face and then discuss how gains from specialization and trade allow us to use our resources efficiently.

Week Two: The basic model of Supply & Demand. This is a week full of terminology that will allow you to communicate with other economists and finally understand those business pages and market updates. Introduction of the concept of elasticity to discuss effects of price and income changes on market outcomes.

Week Three: The great accomplishment of markets: maximizing the size of the pie. What happens when government intervenes in the market? We will analyze price floors and ceilings, taxes and subsidies.

Week Four: Introduction to firms’ decisions: understanding firms’ cost curves and the goal of profit maximization.

Week Five: The Perfectly Competitive Market: what is it? does it exist? why is it a crucial benchmark?

Week Six and Seven: Monopolies of various types: one price monopoly, natural monopoly, price discrimination and monopolistic competition. What market outcomes do we get in each case? How should government intervene in such cases?

Week Eight: When markets fail: externalities and public good.

Week Nine: Poverty and inequality: how do we measure these? How do we balance our concern about poverty and inequality while allowing markets to work for the benefit of society at large?

Recommended Background
Economics requires thinking in three “languages”: words, graph and mathematical notation. All concepts are introduced slowly and gradually, but comfort with thinking analytically will be helpful.