Chapter11IntermediateMicroeconomicsOutline©2005MOLChapter12Chapter13Chapter14IIII“”“”Chapter15IChapter16II“”“”“”“”“”“”Chapter17IIIChapter18IVChapter19Chapter110Chapter111————Chapter112Mas-Colell&WhinstonVarianChapter113Chapter114WalterNicholson,MicroeconomicTheory:BasicPrinciplesandExtension,8thEdition,Southwestern,20021999——Chapter115HalVarian,IntermediateMicroeconomics:AModernApproach,6thEdition,Norton,200319942001JamesM.HendersonandR.E.Quandt,MicroeconomicTheoryAMathematicalApproach,McGraw-HillBookCo.1980(1988)Chapter116380%15%5%Chapter11795791214192192628101010121719241031112Chapter118117911161821112328113012512712141219,2226,28Chapter119:microeconomics.nease.netChapter120TheEndChapter121LastRevised:September.4,2005Chapter122ChapterOneIntroduction©2005MOLChapter123Chapteroneincludes:1.1DefiningMicroeconomics1.2EconomicTheoriesandModels1.3TheMathematicsofOptimization1.4Demand-SupplyModelChapter124OutlineofThisChapter()Thischaptermainlyprovidesomebackgroundsforthestudyofmicroeconomics.WhatismicroeconomicsThegeneralapproachusedinmicroeconomics.Howeconomistsdeviseandverifysimplemodelsofeconomicactivity.PositiveAnalysisandNormativeAnalysisThebasicSupply-DemandModel()SomeMathematicalMethodsthatcanbeusedtosolvemaximization(andminimization)problem.Chapter125ReadingsaboutthischapterNicholson:Chapter1,2,P1-61Zhang(2005)Chapter1,P1-18Henderson&Quandt:P450-493Chapter126Chapteroneincludes:1.1DefiningMicroeconomics1.2EconomicTheoriesandModels1.3TheMathematicsofOptimization1.4Demand-SupplyModelChapter1271.1DefiningMicroeconomicsEconomicsThestudyoftheallocationofscarceresourcesamongalternativeendusesScarcity()AlternativeendusesChoiceEconomicsChapter128MapoftheProcessofEconomicActivities()Chapter129DefiningMicroeconomics(1)Economicsiscomposedoftwobranches:MicroeconomicsConsumerandFirmbehaviorsOutputandinputMarketMacroeconomicsEconomicgrowthInflationUnemploymentChapter130DefiningMicroeconomics(2)Microeconomicsdealswith:Behaviorofindividualunits——ConsumersWhenConsumingMaximizingUtilityHowwechoosewhattobuy——Behaviorofindividualunits——FirmsWhenProducingMaximizingProfitHowwechoosewhattoproduce——Chapter131DefiningMicroeconomics(3)Microeconomicsdealswith:Markets:TheinteractionofconsumersandproducersOutputMarket(ProductMarket)InputMarket(FactorMarket)Chapter132Chapter133Chapteroneincludes:1.1DefiningMicroeconomics1.2EconomicTheoriesandModels1.3TheMathematicsofOptimization1.4Demand-SupplyModelChapter1341.2TheoriesandModelsChapter1351.2MicroeconomicAnalysisTheoriesandModelsMicroeconomicAnalysisTheories()ModelsChapter1361.2.1Theories(1)Theoriesareusedtoexplainobservedphenomenaintermsofasetofbasicrulesandassumptions.Chapter1371.2.1Theories(2)BasicAssumptionsofMicroeconomicTheoriesAssumptionofSelf-interest()AssumptionofRationalBehavior()AssumptionofScarcity()Chapter1381.2.1Theories(3)MicroeconomicTheoriesThePrincipleofOpportunityCost()ThePrincipleofOptimizingThePrincipleofEqualMarginThePrincipleofDiminishingBenefits(UtilitiesorReturns)ThePrincipleofExternalitiesChapter1391.2.2Models(1)Models:Chapter1401.2.2Models(2)TheProcessesofConstructingModel1.DefinitionoftheProblem()2.FormulationofHypotheses(Cause-Effect)(Tentative)(Assumption).theceterisparibus.Chapter1411.2.2Models(3)3.ExplanationorPrediction4.Verification5.AcceptModelornot?Chapter142TheProcessofConstructingModelChapter1431.2.2Models4GeneralFeaturesofMicroeconomicModel:1.TheCeterisParibusAssumption2.OptimizationAssumptionConsumers——Maximizingtheirownwell-being.Firms——MaximizingProfitsGovernmentregulator——MaximizingpublicwelfareChapter1441.2.2Models(5)3.PositiveandNormativeDistinctionPositiveAnalysis()istheuseoftheoriesandmodelstoexplainhowresourcesactuallyareallocatedinaneconomyTrytoanswer:WhatisForexample:Whatwillbetheimpactofanimportquotaonforeigncars?Chapter1451.2.2Models(6)PositiveandNormativeDistinctionNormativeanalysisistheoriesthatmakevaluejudgmentsabouthowtheeconomicresourceshouldbeallocatedTrytoanswer:“Whatoughttobe?”Forexample:Whethershouldanimportquotabeusedonforeigncarsornot?Chapter1461.2.3HowEconomistsVerifyTheoreticalModelsTwomethodsareusedDirectApproach:TestingAssumptions:Verifyingeconomicmodelsbyexaminingvalidity()oftheassumptionsonwhichtheyarebased.IndirectApproach()TestingPredictions:Verifyingeconomicmodelsbyaskingiftheycanaccuratelypredictreal-worldeventsChapter147TestingAssumptionsOneapproachwouldbetodetermineiftheassumptionsarereasonableTheobviousproblemisthatpeoplehavedifferingopinionregardingreasonableEmpiricalevidencecanalsobeusedResultsofsuchmethodshavehadproblemssimilartothosefoundinopinionpollsChapter148TestingPredictionsEconomists,suchasMiltonFriedmanarguethatalltheoriesrequireunrealisticassumptions()Thetheoryisonlyusefulifitcanbeusedtopredictreal-worldeventsEveniffirmsstatetheydon’tmaximizeprofits,iftheirbehaviorcanbepredictedbyusingthisassumption,thetheoryisuseful