ECO 2033
1. Introduction
Microeconomics
Microeconomics
● What is Microeconomics?
○ The study of how individual optimizing agents behave in the
presence of constraints on resources.
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Microeconomics
● What is Microeconomics?
○ The study of how (1) individual optimizing agents behave in the
presence of constraints on resources.
(1) Individual Agents vs. Economic Aggregates
Consumers (Individual Spending) Aggregate Consumption
Firms (Individual Production) GDP / Aggregate Output
Workers (Individual Employment) Unemployment Rate
Governments (Individual Policy) Government Spending, National Debt
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Microeconomics
● What is Microeconomics?
○ The study of how (1) individual (2) optimizing agents behave in
the presence of constraints on resources.
(2) Optimization
● Individual maximizes happiness.
○ Allocation of income in consumption
● Firm maximizes profit.
○ Subject to uncontrollable market forces (perfect competition)
○ With power over market forces (monopoly)
○ In direct competition with other firms (game theory)
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Microeconomics
● What is Microeconomics?
○ The study of how (1) individual (2) optimizing agents behave in
the presence of constraints on resources.
(2) Optimization
● Government regulator maximizes social welfare.
○ Equity and efficiency
○ Correct market failures
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Microeconomics
● What is Microeconomics?
○ The study of how (1) individual (2) optimizing agents behave in
the presence of (3) constraints on resources.
(3) Constraints
● The fundamental reality that forces agents to prioritize their needs
● Without resource constraints, analysis of optimization behavior
won’t be very interesting.
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Microeconomics 1
● What is Microeconomics?
○ The study of how (1) individual (2) optimizing agents behave in
the presence of (3) constraints on resources.
→ Constrained optimization
○ And the resulting aggregate behaviors and/or outcomes.
→ Equilibrium
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Microeconomics 1
● In Micro 1, we learned what happens when all rational consumers
and producers “do their best” in a competitive market.
○ Consumer’s demand
○ Producer’s supply
○ Equilibrium quantity and price; Pareto-efficient allocation
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Microeconomics 2
● In Micro 2, we relax some of the earlier assumptions we made about
agents and extend the model.
○ What if big producers have some market power?
○ What if my consumption / supply influences your consumption /
supply?
○ What if I need to buy something but I do not exactly know its
quality?
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Microeconomics 2
● In Micro 2, we spend more time on “normative analysis”.
○ Positive analysis: We can predict what choices rational consumers
and producers will make. We can also predict the resulting market
equilibrium.
○ But is the outcome “good” or “bad”?
○ How do we decide if one outcome is better than the other?
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Applications
● One can apply this economic way of thinking to study many
interesting and important questions in life.
○ Labor
○ Marriage and fertility
○ Health
○ Crime
○ Housing
○ etc.
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Syllabus
Basic Information
● Instructor: Professor Eunju Lee
Room 708
eunjlee@[Link]
● Office Hours: Tuesday 16:00-18:00
● Lectures and Exams: 100% English
● Slides will be uploaded on the morning of the class.
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Grading
● 10% Attendance
○ Up to three unexcused absences without any penalty
● 40% Midterm (April 23rd)
● 50% Final (June 16th)
● Exams will take place during regular class hours. (Location TBA)
○ Make-up exams will only be offered in exceptional circumstances
with valid documentation.
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Textbook
● Intermediate Microeconomics with Calculus: A Modern Approach,
2nd edition (or any other recent edition), by Hal Varian and Marc
Melitz, W. W. Norton & Company
● We will do some review on earlier chapters, but the main focus of
this course is between chapters 25-37.
● See syllabus for the detailed course outline.
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