Microeconomic Theory & Applications [C214]
This module is designed to be the first module of the Diploma in Economic Principles and is intended to provide a solid grounding in microeconomic theory ó a body of knowledge which focuses on the behaviour of individual units in a market economy.
The module is about the economic principles underlying the theories of market demand and supply. It develops models to explain economic behaviour of consumers and producers and the ways in which they interact in a market economy.
By the end of the module, students will have covered the four main topics needed to understand the basis of microeconomic theory:
- the basic concepts of the market, demand, supply and equilibrium;
- the principles underlying consumer demand;
- the principles underpinning the theory of the firm;
- the concept of market structures, especially competitive and monopolistic markets.
Students receive a looseleaf binder containing eight units; these texts are carefully structured to provide the main teaching and are equivalent to traditional module lectures, defining and exploring the main concepts and issues, locating these within current economics debate and introducing and linking the further assigned readings. Three assignments (of which two are counted towards the final module grade) marked by your CeFiMS tutors, and a specimen examination paper are also included within the student pack, along with the following:
Pindyck, Robert S. and Daniel L. Rubinfeld (2005) Microeconomics, Seventh Edition, Pearson Education.
Estrin, Saul and David Laidler (1995) Introduction to Microeconomics, Fifth Edition, Harvester Wheatsheaf, New York.
A compilation of further readings: recently published articles or seminal writings which augment and illustrate the main text.
Virtual Learning Environment
You will have access to the VLE, which is a web-accessed learning environment. Via the VLE, you can communicate with your assigned academic tutor, administrators and other students on the module using discussion forums. The VLE also provides access to the module Study Guide and assignments, as well as a selection of electronic journals available on the University of London Online Library.
Unit 1: IntroductionThe first unit introduces the theories and applications of microeconomics. It teaches the basic concepts, such as the market, equilibrium and supply and demand, and explains both how the demand-supply framework is used for analysing economic problems and its application for policy purposes.
Unit 2: Consumer TheoryThis unit deals with the way in which consumers make choices about which goods and services they buy. It explains the principles underlying consumer choice; that is, how consumers are influenced by their preferences and tastes, and by their level of income and market prices. Indifference curve analysis is used to derive and explain demand curves. Unit 2 concludes by examining some applications of consumer theory.
Unit 3: Theory of Production and CostsThe supply side of the economy and the theory of production and costs are introduced. An explanation is given of how firms make decisions about what quantities to produce based on the technical relationships of production between inputs and output. The economic relations of production are then examined ó that is, how the costs of inputs enter into the firmís production decisions.
Unit 4: Profit Maximisation and Competitive SupplyThis unit explores how firms make decisions about the amount of output to produce and how their supply of goods relates to the demand for these goods in the market place. Firstly, it examines what happens to output when firms choose to behave so that they maximise profits. Then it focuses on how firms supply goods in competitive market conditions.
Unit 5: Non-Competitive Market StructuresUnit 5 examines firmsí behaviour when markets are non-competitive and firms have some degree of market power which enables them to influence market prices. This is followed by a consideration of how firms with monopoly power make decisions about what price level to charge as well as what level of output to produce. There are other ways in which firms can obtain some degree of market power, by product differentiation or by acting together in cartels, for example, and the pricing and output decisions in such circumstances will also be investigated.
Unit 6: Input MarketsThis unit is about the market for inputs and how the supply and demand for inputs is determined under conditions of both perfect and imperfect competition. It explains how the firmís demand for inputs is derived and its interrelationship with the firmís output decisions. It considers how the input supply curve of the firm and the industry are determined. The unit also focuses on the demand and supply for labour under different market conditions, and in doing so it considers labour issues such as the role of trade unions and wage discrimination.
Unit 7: General Equilibrium, Efficiency and Pareto OptimalityThis part of the module introduces general equilibrium analysis ó the interaction of markets and how equilibrium can be achieved in all markets concurrently. Firstly it considers how market exchange takes place between consumers; it then introduces production and, finally, consumption and production are examined together. In its analysis, this unit also considers the notion of economic efficiency ó that is, whether a particular allocation of resources is better or worse than another.
Unit 8: Externalities, Public Goods and Asymmetric InformationThe final unit covers market failures. It discusses what happens when the market mechanism fails to result in an efficient allocation of resources. It analyses three types of market failures: externalities; public goods; and asymmetric market information. It also examines what policy options are available to achieve an improved allocation of resources in a situation of market failure. Finally, the unit invites students to apply the theoretical concepts to analyse a case study, The Economics of Malaria Control.
Students are individually assigned an academic tutor for the duration of the module, with whom you can discuss academic queries at regular intervals during the study session.
You are required to complete two Assignments for this module, which will be marked by your 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 module, on the Tuesday after Week 8. Assignments are submitted and feedback given online. In addition, queries and problems can be answered through the Virtual Learning Environment.
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 on the website in April each year.