This module introduces students to the concepts underpinning all economic analysis – those of microeconomics. Microeconomics studies how individuals respond to incentives.  Starting from this point, the module builds an explanation for why society might choose to organise itself into competitive markets, before evaluating whether alternative approaches could yield better outcomes. This provides a rationale for certain forms of government intervention. Whilst the emphasis is on developing an understanding of theoretical issues, the module also deals with the application of mathematics to microeconomics.

A. Knowledge and Understanding:

• Describe the issues with which microeconomics is concerned;
• discuss the tools employed by microeconomists and their uses;
• describe the conditions under which markets generate optimal and sub-optimal levels of welfare;
• explain the behaviour of individual optimising firms and households.

B. Intellectual Skills:

• Analyse a range of social phenomena using the tools of microeconomics;
• propose appropriate government intervention in response to well-defined economic problems;
• evaluate the validity of an economic analysis with particular reference to its underlying assumptions.

C. Discipline-Specific Skills:

• Explain the results of an economic analysis by combining intuitive argument, graphical representation and mathematics;
• 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. 

The core material will be presented during three weekly lectures by Dr. Iain Long (approximately 33 hours in total). Prof. Boyns will present supplementary material on quantitative microeconomics. These lectures will take place fortnightly.

Each week (starting week two), students will be required to complete a brief quiz on Learning Central. These quizzes will consist of both multiple choice and numerical questions, based upon the lecture and reading materials. The quiz will also present a short discussion question. Students should write a solution (usually not longer than one side of A4), and bring it to class.

Classes start in week three, and will begin by discussing the solutions to the previous week’s quiz. The answer to the discussion question will then be presented, and students will peer-mark their discussion question essays. Classes are unlikely to cover every question from the quiz, but will instead focus on the ones that most students in each group struggled with.

Quantitative microeconomics classes will begin in either week two or three. They will take place fortnightly.

Notional learning hours: 200

The class tests provide an incentive for students to become familiar with the module’s content and the importance of self-study. (For example, they give 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 two sections explicitly relating to the economics lectures and one 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.

Part I: Thinking Like an Economist

The module initially presents the basic concepts that underpin all economic analysis. These concepts are then applied to several situations, notably supply and demand in markets.

Specific content: Introduction to microeconomics; scarcity; cost/benefit analysis; economic cost; marginalist analysis; supply and demand; price controls; taxes and subsidies.

Part II: Individual Response to Incentives

This part of the module discusses how individuals make decisions in much more detail. Initially considering how consumers choose what to buy, given their income and market prices, it then applies similar ideas to ‘irrational’ behaviour such as altruism.

Specific content: Budget constraints; consumer preferences; indifference curves; optimal consumption bundles; individual demand; income and substitution effects; elasticity of demand; how policy affects consumer choice; measuring consumer welfare; individual labour supply; altruism; game theory; information.

Part III: Firm Response to Incentives

The module then turns to consider the production side of the economy. Starting from a discussion of why firms exist, it develops a framework in which to assess firm’s production decisions, given input and output prices. Perfect competition is then defined and shown to maximise societal welfare.

Specific content: Why firms exist; production; the short- and long-run; costs; cost minimisation; profit maximisation; perfect competition; market efficiency. 

Part IV: Efficient Markets?

The final part of the module further critiques the competitive market, by analysing several situations in which it fails to maximise welfare.

Specific content: Monopoly; externalities; public goods. 

Frank, R. H. and E. Cartwright (2013): Microeconomics and Behaviour, London: McGraw-Hill Education (UK) Limited.

Parkin, M., M. Powell and K. Matthews (2014): Economics (9^th Edition), Edinburgh: Pearson Education Limited.