The “MICROECONOMICS” course aims to review and deepen the fundamental aspects of the theory of consumer choice that were introduced in the “INTRODUCTION TO ECONOMICS I: PRINCIPLES OF MICROECONOMICS” course. The first five topics of the course focus on consumer preferences, their representation by utility functions and how consumers’ choice is derived from the maximization of these utility functions subject to a budget constraint. Finally, topic 6 is holding a general equilibrium analysis in barter economies and social welfare analysis.



To take this course it is advisable to have assimilated the knowledge of the “MATHEMATICS I” and “MATHEMATICS II” courses, as they provide necessary analytical tools.



The “MICROECONOMICS” course is part of a sequence of courses in microeconomic theory taught in the Degree in Economics. First year students are introduced to the subject in the “INTRODUCTION TO ECONOMICS I: PRINCIPLES OF MICROECONOMICS” course. Second year students will deepen the fundamental aspects of microeconomic theory with the course described here and an “INTERMEDIATE MICROECONOMICS” course focusing on the behavior of firms that is taught in the second semester. Finally, third year students are offered a more advanced training in microeconomic theory with the “MARKET POWER AND STRATEGY” and the “UNCERTAINTY AND CONTRACTS” courses that are taught in the first and second semester, respectively.



The knowledge acquired in this sequence of courses in microeconomic theory are required to take full advantage of other subjects studied in the Degree in Economics such as, for example, “PUBLIC ECONOMICS: SPENDING”, “PUBLIC ECONOMICS: REVENUE”, “EXPERIMENTAL ECONOMICS”, “INTERNATIONAL TRADE”, “MATHEMATICAL PROGRAMMING AND GAME THEORY”, “ENVIRONMENTAL AND RESOURCE ECONOMICS” and “ECONOMICS OF INFORMATION”.



The “MICROECONOMICS” course provides tools for understanding of consumer behavior and the way they make choices that can be useful of the future graduate Microeconomics provides tools for understanding consumer behavior and the way they make choices that can be useful for future graduates in Economics in their professional activities.

Course objective:





The main objective of this course is to provide a thorough assessment of the fundamental aspects of the theory of consumer¿s choice which were already introduced in "Introduction to Economics I ". The course also deals with general equilibrium analysis and social welfare analysis of barter economies.



Specific skills of the course:



1)To be able to characterize in a mathematical way how consumers make choices in such a way as to achieve as much utility as possible subject to a budget constraint. To achieve this, it will be necessary:

a.To obtain a consumer¿s budget constraint, given his/her income and the price of goods.

b.To obtain a consumer¿s preferences and the utility function that represents them.

2)To be able to derive a demand curve using the utility-maximization model.

3)To be able to formalize the results and to interpret them in economic terms, as well as to implement comparative static analysis in order to study the effect of changes in key economic variables in those results.

4)To be able to identify, assess and model some economic aspects related to eficiency, general equilibrium and equity.



Learning outcomes



1. Ability to explain consumer behavior through mathematical models based on optimization principles. This involves being able to obtain the consumer’s budget set, given the prices of goods and income, and being able to define a consumer’s preferences and the utility function that represents them.

2. Ability to obtain demand functions as a result of maximizing utility subject to the budget constraint.

3. To know how to formalize and interpret the results in economic terms, as well as an analysis of comparative statics to study the effects that changes in relevant economic variables cause on those results.

4. Ability to identify, analyze and model the economic aspects related to efficiency, general equilibrium and efficiency.



Cross-cutting skills of the course:



1)C3: To be able to critically reason and decide in relevant frameworks. Analyze the information verbally, analytically, and graphically.

2)C6: Development of writing communication skills; especially the ability to elaborate clear and coherent reports.

3)C8: The ability to work in teams; with responsibility and respect, entrepreneurship and leadership. We encourage the participation of students in team-work processes.

1. Markets and prices

1.1 Supply and demand.

1.2 Market mechanisms.

1.3 Changes in the market equilibrium.



2. Preferences

2.1 Axioms of rational choice.

2.2 Utility.

2.3 Indifference curves and the Marginal Rate of Substitution.

2.4 Examples.



3. Utility maximization and choice

3.1 Budget constraint. Changes in the budget constraint.

3.2 Utility maximization.

3.3. Expenditure minimization.



4. Individual¿s demand

4.1 Income and substitution effects.

4.2 The individual¿s demand curve.

4.3 Compensated demand curves.

4.4 Change in consumer welfare.

4.5 Substitutes and complements.



5. Market demand

5.1 Market demand curve: construction and shifts.

5.2 Elasticity of market demand.



6. Exchange and economic efficiency

6.1 Efficiency in an exchange economy.

6.2 Exchange with initial endowments.

6.3 Competitive equilibrium in excange economies.

6.4 Criteria to achieve social welfare.

6.5 Social welfare functions: efficiency and equity issues.

The central element is the master class, in which the various topics that shape the subject will be developed. In the practical classes the teacher will carry out exercises on the subject. In the seminars the students will individually solve multiple choice-type questions on the topics analyzed in the master classes and practices, and practical questions as well as theoretical ones.

In the event that the circumstances do not allow face-to-face teaching, face-to-face teaching will be replaced by online teaching using the eGela platform.

• Final Assessment System
• Tools and qualification percentages:
  • Written test to be taken (%): 70
  • Individual works (%): 30

There will be a written test that will consist of a final exam (on the date indicated by Deanship) in which the student will solve both theoretical and practical exercises and that will account for 70% of the final grade. In addition to this test, the work carried out by the student throughout the course will be evaluated through a partial evaluation, which will account for 30% of the final grade.

The partial evaluation will consist of a written test in which the student will solve both theoretical and practical questions.

The date of the partial evaluation will be made public through the eGela platform at the beginning of the course.

Students who take part in the partial evaluation but who will not sit the final exam will be graded as “Not presented”.

The grading process for those who did not take part in the different seminar assignments will be a final written exam based on the total 100% of the grade for this course.

In case the circumstances do not allow doing a face-to-face exam, the face-to-face tests will be replaced by multiple choice-type exams on-line.

Students will be graded on the basis of the final exam that will represent 100% of the final grade.

Basic bibliography and problem sets provided by the lecturers of the subject. The problem sets will be published on the platform Moodle on a topic-by-topic basis.

Basic bibliography

Snyder, C. and W. Nicholson (2008), "Microeconomic Theory: Basic Principles and Extensions", 10th Edition, South-Western Cengage Learning.



Varian, H.R. (2009) "Intermediate Microeconomics: A Modern Approach", 8th Edition, W.W. Norton & Company.

In-depth bibliography

Pyndick, R.S. and D.L.Rubinfeld (2009), "Microeconomics", 7th Edition, Prentice Hall.