University of Hong Kong



University of Hong Kong

Faculty of Business and Economics

ECON6021: Microeconomic Analysis

First Semester 2006-07

This version: September 6, 2006

Class Time: Saturday 2-5pm (Section A); Friday 2-5pm (Section B)

Venue: KKLG102 (Section A); TS403 (Section B)

Instructors: Y. Stephen Chiu Kim-Sau Chung

918 K.K. Leung Building 907 K.K. Leung Building

Office Hours: Thursday 2-3:30pm Thursday 2-3:30pm

or by appointment or by appointment

Phone: 2859-1056 2859-7037

Email: schiu@econ.hku.hk sau@econ.hku.hk

Web page: To be announced

Course Description

This object of this course is to give a general overview of concepts, techniques and tools of microeconomics. The first half of the course, taught by Dr. Chiu, covers more standard topics including consumer theory, producer theory, competitive market equilibrium and monopoly. Constrained optimization problem, the Lagrangian method, and the envelope theorem will be introduced. The second half, taught by Dr. Chung, covers newer topics such as game theory, information economics, oligopoly, etc., and a game theoretic approach will be used. The level of technicality will be a bit higher than the intermediate level. While the instructors will try to point to real world applications whenever possible, the course primarily aims at providing you a firm grip of the theory in order to facilitate your learning in other courses of the program.

Despite no prerequisite of statistics and probability, you are supposed to have some knowledge in differentiation and integration, at the level of

• Chiang’s Fundamental Methods of Mathematical Economics, any edn.

Students with deficiency in math should make it up before the semester starts.

Compared to another course on microeconomics (ECON6011, don’t be misguided by the smaller code number!), our course is mathematically less sophisticated and presumes a lesser amount of economic background. A student with weak background in economics and mathematics should first take our course as a compulsory one and then consider taking ECON6011 as an elective. As a rule of thumb, a student with his/her first degree received more than three years ago should take our course first unless he/she is a full time student. On the other hand, a student with stronger economic or math background (he or she who received an Econ/Fin degree or Math/Engineering degree in the last three years) should take ECON6011 in lieu of our course. For other cases, you are welcome to consult the instructor. (Note that our regulations preclude concurrent enrolment of both ECON6021 and 6011, as well as enrolment of ECON6021 after successful completion of 6011.)

Texts and References

For the second half of the course, we will use the following text closely,

• Watson, Joel, Strategy: An Introduction to Game Theory, latest edition, Norton.

You are recommended to have a copy of it. For the first half, we won’t follow any text closely, but the following

• R. Frank, Microeconomics and Behavior, 6th edition, McGraw-Hill (2006)

• W. Nicholson’s Microeconomic Theory: Basic Principles and Extensions, 8th edition, South-Western.

are generally the best books you would want to consult. Our course will be delivered at a level more advanced though. More advanced references include

• Silberberg and Suen’s The Structure of Economics: A Mathematical Analysis, 3rd edition, McGraw Hill (2000)

• Varian’s Microeconomic Analysis, latest edition, Norton.

News and Downloadable materials:

Lecture notes available for downloading will be posted in the following course page: . Updated news will also be posted in the page.

Assignments

There will be two assignments. There are two reasons why you should hand in your assignments. First, the assignments allow you to solidify the knowledge you learn in class, and is a good preparation for the midterm and final exam. Second, the assignments themselves are part of your overall grade. We do not expect you to have prefect answers in your assignments. Thus the grading of the assignments will stress more on whether you have put in effort, rather than on whether your answers are correct.

Exams

There will be one mid term and one final exam. The mid term is tentatively scheduled for October 28 (Sat) for both sessions; the final exam's schedule will be announced by the university in due course.

Course Grade

Provided that the minimum attendance requirement is met, your course grade will be determined as follows:

Assignments 8%

class participation 4%

mid term 44%

final exam 44%

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total 100%

A final letter grade will be given which is a monotonic transformation of your numeric grade.

Academic Integrity

Please be aware that plagiarism is a serious misconduct that may lead to a failure of the course and possibly even more serious penalties.

Survival Tip

Because economics is a problem-solving discipline, the only way to develop a knack for formulating and solving problems is through hands-on experience. Simply attending the lectures, reading the text, and reviewing your notes will not be enough to master the techniques presented in class. To do well in this course you will need to spend a fair amount of time outside of class solving problems.

Meeting schedule

The Friday session shall meet on Sept 8, 15, 22, 29, Oct 13, 28 (mid term, Saturday, despite reading week), Nov 3, 10, 17, 24, Dec 1 and 8. (No class on Oct 6 because of Mid-Autumn festival)

The Saturday session shall meet on Sept 9, 16, 23, 30, Oct 14, 28 (mid term, despite reading week), Nov 4, 11, 18, 25, Dec 2 and 9.

Course Outline

The course is divided into two parts of equal length. The first half covers more conventional topics while the second half covers newer ones.

Part I:

Topics Readings (in Frank and Watson)

Introduction Chapters 1-2 (F)

Consumer Theory Chapters 3-5 (F)

Producer Theory Chapters 9 to 10 (F)

Competitive Market Equilibrium Chapters 2 and 11 (F)

Monopoly Chapter 12 (F)

Part II:

Representing Games Chapters 1-5 (W)

Static Games Chapters 6-10, 13 (W)

Dynamic Games Chapters 14-16 & 20-23 (W)

Information and Games Chapters 24-29 (W)

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