This module introduces students to the main principles of microeconomics.  It assumes no previous knowledge of economics and outlines some basic concepts necessary for further study in all areas of economics.  More specifically, it provides the foundations for the Macroeconomics module in the first year and the Microeconomic Theory module in the second year.  It covers the microeconomics of individual behaviour based on utility and profit maximisation and the operation of markets including the sense and circumstances in which a competitive market generates an optimal outcome and certain rationales for government intervention.  The emphasis is on theoretical issues although it also deals with the application of mathematics to microeconomics.

The Microeconomics module aims to introduce students to the method, content and scope of microeconomic analysis.

A    Knowledge and Understanding:

• describe the issues with which microeconomics is concerned, including trade-offs and the operation of markets
• describe the conditions under which markets generate optimal and sub-optimal levels of welfare
• explain the behaviour of individual optimising firms and households
• analyse the various methods, and their implications, by which governments can intervene in markets

B    Intellectual Skills: 

• use elementary economic and mathematical models to explain economic arguments

C    Discipline Specific Skills: 

• use elementary graphical and mathematical techniques to represent microeconomic models
• apply simple optimisation techniques graphically and mathematically

D    Transferable Skills: 

• use structured argument to derive a conclusion from a set of assumptions
• find the solutions of a simple problem under different assumptions 

Teaching takes place in the Autumn Semester. There are 35 hours of lectures and 16 hours of classes.  Approximately 30 lectures are devoted to the core economics concepts.  These lectures will be supported by a short series of 5 lectures explicitly linking the mathematics component of the Quantitative Methods module to the Microeconomics module.  

Classes are an integral part of the module.  Question sheets are distributed in advance of the classes and students are expected to prepare answers and be prepared to describe their answers in classes.  The questions will reflect the types of question asked in the examination and will emphasise the need to solve problems using the basic concepts introduced in the lectures and required reading.

Indicative study hours:   200

Students are encouraged to evaluate their own progress by comparing their answers to class-work questions with answers supplied in classes and through the electronic notice board.  Additional questions and answers are also supplied to the students.  The assessments are returned to the students and outline answers are provided.

 The class tests provide an incentive for students to become familiar with the module’s content and the importance of self study.  (For example, theygive the students a chance to develop their examination technique in the new environment of a university).  The tests cover both the economics and mathematics components of the module. 

The main examination has 2 sections explicitly relating to the economics lectures and 1 to the application of mathematics.  (Mathematical argument is encouraged on all parts of the module so the distinction lies in the origin of the questions rather than the style of the answers).  One section requires the student to answer a number of short questions.  There is some choice but the student will have to answer questions drawn from several areas of the module.  Another section invites the student to answer longer questions on a particular topic.  The student is expected to show some detailed knowledge of the topic chosen.  The final section will require the student to answer a question on the use of mathematics in microeconomics.

The knowledge presented in this module is vital for all students studying economics so the student is tested on a broad range of topics.  Students should be able to use the knowledge acquired rather than write vaguely about it.  Hence, the emphasis throughout is on being able (i) to explain the concepts taught on the module clearly and (ii) to apply them to a particular problem.

The market economy - Introduction to microeconomics.  Introduction to the mathematical concepts used in microeconomics (linear and non-linear functions, concept of gradient, applications)

Demand and supply - Demand and supply curves, changes in demand and supply, market equilibrium, applying simultaneous equations to the analysis of markets.

Elasticity - Definition and use in analysis

Government intervention in markets - Price-fixing, taxes and bans

Welfare with competition - Consumer surplus, producer surplus, allocative efficiency, dead-weight loss of taxation, appraising interventions 

Cardinal utility theory (marginal utility theory) - Total and marginal utility, budget line, equalising marginal utility per pound

Ordinal utility theory (Indifference curve analysis) - Indifference curve, MRS, optimal choice, income-consumption line, price-consumption line, income and substitution effects

Firms and profit maximisation - Opportunity cost, economic profit

Short run cost curves - Total, average and marginal product curves, diminishing returns, total, average and marginal cost curve, fixed and variable costs, mathematics of average and marginal concepts

Long run cost curves - Returns to scale, economies of scale

Market equilibrium in the short run - Competitive industries: Market equilibrium in the short run, short-run profit maximisation for a price-taking firm, firm and market supply curves, short run market equilibrium

Market equilibrium in the long run - Entry and exit, long run supply curves, long run effects of changes in demand and technology

Single price monopoly and monopolistic competition - Determination of output and price in the short and long run, mathematics of revenue and profit maximisation

Market Failure: Assessing Monopoly and Externalities - Allocative efficiency and marginal cost pricing, natural monopolies and average cost pricing, gains from monopoly, externalities (definition, optimal quantity, and intervention)

M Parkin, M Powell and K Matthews, Economics, Addison Wesley