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ESSENTIAL
Microeconomics
This web-site is designed to complement the text. The goal of the book is to help students study the core material of a first year graduate course in microeconomics. While there are other good textbooks available, their goal is typically to provide encyclopedic coverage. The goal of this textbook is to help students become comfortable with actually theorizing themselves. Of course only a small fraction of students will spend their careers as formal modelers. However to do good applied theory, it is a tremendous advantage if you can take a model, adapt it to your needs and take the applied model to the data. In their effort to come to grips with the mathematics of economics, graduate students sometimes focus single mindedly on the mathematics and forget that the ultimate purpose of theory is to provide testable insights and develop better understanding (“economic intuition”). To help redress this imbalance, this text is somewhat less formal and places more emphasis on the development of insights. Most students find that even if they once knew the calculus and linear algebra used in graduate courses, getting back up to speed is important. You may wish to test out your skills in a short Calculus and Algebra Online Review Course. The link is in the top menu. Six modules are provided, each designed to help you prepare for the course on your own. In each module you are asked to solve problems. If you are struggling, there are hints to keep you from bogging down. The second stage of your preparation is familiarizing yourself with the mathematical skills most used in economics. These mathematical foundations for economic analysis can be found in Appendix A, B and C of the text. Slides for the material covered in these Appendixes can be found by clicking on the Mathematical Foundations link in the top menu.If you scroll down the left menu you will find answers to even numbered questions in the text and further homework exercises and additional topics not covered in the text. The web-site also offers a range of material complementing the text. As a preliminary to examining economic issues, the first chapter goes in some depth into particular topics that are not usually found in courses taught in a mathematics department. At the very heart of economic analysis are two fundamental ideas. The first is that economic agents make consistent choices that lead to “maximizing” behavior. This need not be selfish behavior. For example economists study families where parents’ choices for their children play a central role. The maximizing by parents then includes the trade-off between personal and family consumption and investments. The second idea is that if agents’ plans are mutually inconsistent, market pressures provide an incentive for agents to adapt until an overall balance is reached. Much of economic theory then studies the property of the resulting balance point or equilibrium. Chapters 2 and 4 focus primarily on the choices of single agents (consumers and firms). Chapters 3 and 5 focuses on equilibrium outcomes. The later chapters look both at optimization and equilibrium and show how the forces of optimization and equilibrium interact. Much of modern theorizing has focused on strategic issues. Price theory, and in particular, general equilibrium has been viewed as a largely finished product. But this does not make understanding price theory any less vital. To use a medical metaphor, if we reach a point where the heart is so well understood that research funding switches to cancer, it will not make understanding the heart any less important in medical school. One final comment is in order. \ A considerable effort has gone into preparing exercises and detailed answers to those questions. This is because the only way to learn economic theory well is through practice. There are two types of questions. Some are designed to help you develop your understanding of core principles. Some are designed to help you see how these core principles can be generalized or applied to particular topics. For both types of question readers are strongly discouraged from reading a question and then flipping to its answer. It is only by doing that there will be learning. When you do look at the answer, if you find it confusing, let me know and I will put a revised answer on this web-site. John Riley
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This web-site is designed to complement the text. The goal of the book is to help students study the core material of a first year graduate course in microeconomics. While there are other good textbooks available, their goal is typically to provide encyclopedic coverage. The goal of this textbook is to help students become comfortable with actually theorizing themselves. Of course only a small fraction of students will spend their careers as formal modelers. However to do good applied theory, it is a tremendous advantage if you can take a model, adapt it to your needs and take the applied model to the data.
In their effort to come to grips with the mathematics of economics, graduate students sometimes focus single mindedly on the mathematics and forget that the ultimate purpose of theory is to provide testable insights and develop better understanding (“economic intuition”). To help redress this imbalance, this text is somewhat less formal and places more emphasis on the development of insights.
Most students find that even if they once knew the calculus and linear algebra used in graduate courses, getting back up to speed is important. You may wish to test out your skills in a short Calculus and Algebra Online Review Course. The link is in the top menu. Six modules are provided, each designed to help you prepare for the course on your own. In each module you are asked to solve problems. If you are struggling, there are hints to keep you from bogging down.
The second stage of your preparation is familiarizing yourself with the mathematical skills most used in economics. These mathematical foundations for economic analysis can be found in Appendix A, B and C of the text. Slides for the material covered in these Appendixes can be found by clicking on the Mathematical Foundations link in the top menu.If you scroll down the left menu you will find answers to even numbered questions in the text and further homework exercises and additional topics not covered in the text. The web-site also offers a range of material complementing the text.
As a preliminary to examining economic issues, the first chapter goes in some depth into particular topics that are not usually found in courses taught in a mathematics department. At the very heart of economic analysis are two fundamental ideas. The first is that economic agents make consistent choices that lead to “maximizing” behavior. This need not be selfish behavior. For example economists study families where parents’ choices for their children play a central role. The maximizing by parents then includes the trade-off between personal and family consumption and investments. The second idea is that if agents’ plans are mutually inconsistent, market pressures provide an incentive for agents to adapt until an overall balance is reached. Much of economic theory then studies the property of the resulting balance point or equilibrium. Chapters 2 and 4 focus primarily on the choices of single agents (consumers and firms). Chapters 3 and 5 focuses on equilibrium outcomes. The later chapters look both at optimization and equilibrium and show how the forces of optimization and equilibrium interact. Much of modern theorizing has focused on strategic issues. Price theory, and in particular, general equilibrium has been viewed as a largely finished product. But this does not make understanding price theory any less vital. To use a medical metaphor, if we reach a point where the heart is so well understood that research funding switches to cancer, it will not make understanding the heart any less important in medical school. One final comment is in order. \
A considerable effort has gone into preparing exercises and detailed answers to those questions. This is because the only way to learn economic theory well is through practice. There are two types of questions. Some are designed to help you develop your understanding of core principles. Some are designed to help you see how these core principles can be generalized or applied to particular topics. For both types of question readers are strongly discouraged from reading a question and then flipping to its answer. It is only by doing that there will be learning. When you do look at the answer, if you find it confusing, let me know and I will put a revised answer on this web-site. John Riley
In their effort to come to grips with the mathematics of economics, graduate students sometimes focus single mindedly on the mathematics and forget that the ultimate purpose of theory is to provide testable insights and develop better understanding (“economic intuition”). To help redress this imbalance, this text is somewhat less formal and places more emphasis on the development of insights.
Most students find that even if they once knew the calculus and linear algebra used in graduate courses, getting back up to speed is important. You may wish to test out your skills in a short Calculus and Algebra Online Review Course. The link is in the top menu. Six modules are provided, each designed to help you prepare for the course on your own. In each module you are asked to solve problems. If you are struggling, there are hints to keep you from bogging down.
The second stage of your preparation is familiarizing yourself with the mathematical skills most used in economics. These mathematical foundations for economic analysis can be found in Appendix A, B and C of the text. Slides for the material covered in these Appendixes can be found by clicking on the Mathematical Foundations link in the top menu.
If you scroll down the left menu you will find answers to even numbered questions in the text and further homework exercises and additional topics not covered in the text. The web-site also offers a range of material complementing the text.
As a preliminary to examining economic issues, the first chapter goes in some depth into particular topics that are not usually found in courses taught in a mathematics department.
At the very heart of economic analysis are two fundamental ideas. The first is that economic agents make consistent choices that lead to “maximizing” behavior. This need not be selfish behavior. For example economists study families where parents’ choices for their children play a central role. The maximizing by parents then includes the trade-off between personal and family consumption and investments. The second idea is that if agents’ plans are mutually inconsistent, market pressures provide an incentive for agents to adapt until an overall balance is reached. Much of economic theory then studies the property of the resulting balance point or equilibrium. Chapters 2 and 4 focus primarily on the choices of single agents (consumers and firms). Chapters 3 and 5 focuses on equilibrium outcomes. The later chapters look both at optimization and equilibrium and show how the forces of optimization and equilibrium interact.
Much of modern theorizing has focused on strategic issues. Price theory, and in particular, general equilibrium has been viewed as a largely finished product. But this does not make understanding price theory any less vital. To use a medical metaphor, if we reach a point where the heart is so well understood that research funding switches to cancer, it will not make understanding the heart any less important in medical school.
One final comment is in order. A considerable effort has gone into preparing exercises and detailed answers to those questions. This is because the only way to learn economic theory well is through practice. There are two types of questions. Some are designed to help you develop your understanding of core principles. Some are designed to help you see how these core principles can be generalized or applied to particular topics. For both types of question readers are strongly discouraged from reading a question and then flipping to its answer. It is only by doing that there will be learning. When you do look at the answer, if you find it confusing, let me know and I will put a revised answer on this web-site.
John Riley
