The course aims at providing students with essential insight into microeconomics, namely with principles of decisions of the demand and supply segments of the product and service market and the production factor market. Students get to know the basic principles of finding the most efficient use of scarce resources by means of the market mechanism (equilibrium) and optimization (limited, limitless). Upon completing the course, students shall understand essential cornerstones of the current microeconomics – household and business behaviour optimization, market equilibrium constitution and the issue of market failures, income distribution and the macroeconomic power of the state.
What are you going to learn
1. Introduction to economics. The subject of economy. Economic scarcity. Production factors. Factor income. Production capacity and opportunity costs. The issue of the optimum (finding the extreme), the issue of equilibrium.
2. Consumer behaviour and forming of the demand in the product and service market. Utility, measuring utility. A consumer’s optimization. Deriving individual demand (Marshall’s demand). Comparative statics. The substitution and income effect, demand elasticity. A consumer’s surplus.
3. Production. Production factors in the short- and long-term. Production function in the short-term, economies of scale, isoquants. Expenditures as a production factor function – limitations (isocost). Production optimization.
4. Expenditures and income. Expenditures as a produced good function. Expenditures in the short- and long-term, the progress of the expenditure curve in relation to the character of the production function. The functions of income, characterising income in perfect and imperfect competition (explaining perfect and imperfect competition).
5. Profit in perfect competition environment.Economic profit. Profit functions. Maximizing profit in perfect competition in the short- and long-term. Turnover, closure. Deriving supply in the perfect competition environment.
6. Equilibrium in a market with perfect competition.Market equilibrium and its conditions. Market demand, market supply. A consumer’s surplus, a producer’s surplus. Market equilibrium and influencing factors. Non-equilibrium in the market, its causes and effects. The Cobweb Model (converging and diverging markets).
7. Imperfect competition. The causes of existence of imperfect competition and its characteristics. Similarities and differences between perfect and imperfect competition. Income functions in the imperfect competition environment (including demand and its elasticity). Maximizing profit and the function of supply in imperfect competition environment. Production and allocation inefficiency in imperfect competition environment.
8. Forms of imperfect competition.Monopoly – causes of origin, characteristics, price discrimination. Collusive oligopoly and oligopoly with a dominant corporation. Monopolistic competition. The volume of production and price compared to other market structures. Comparing the efficiency of perfect competition and monopolistic competition.
9. Profit as incentive and alternative goals of a company. Types of companies. A large corporation’s behaviour. Alternative goals of a company. Comparing a company that maximizes profit and a company that maximizes turnover.
10. Setting prices in the production factor market.Demand for and supply of production factors. Income on the total product and income on marginal product in perfect and imperfect competition environment. Marginal costs of production factors. Determining the optimal amount of input with profit maximization (link to topic 3), demand for production factor.
11. Labour market and capital market. Individual demand for labour. Individual supply of labour. Labour market in the perfect and imperfect competition environment. Capital market. Capital and capital goods. Demand and supply in the capital market. Capital market equilibrium. Revenue on capital, rate of revenue. Forms of revenue.
12. Income distribution, market failure and microeconomic policy of a state. Income and wealth, income distribution (the Gini coefficient). The essence and causes of market failures. Monopolistic power. Externalities. Public goods. Asymmetric information. Reasons for microeconomic policies of a state. Forms of microeconomic policies of a state. The influence of a state on market equilibrium. A state’s failure.
Optional textbooks and resources
VARIAN, H. L.: Microeconomic Analysis, 3rd edition. Norton &. Company, 1992.
SAMUELSON, P. A., NORDHAUS, W. D.: Ekonomie. 19. vydání, Svoboda, 2013.
SAMUELSON, P. A., NORDHAUS, W. D.: Economics, 19th edition. Tata McGraw-Hill Education, 2010.
ROSSER, M.: Basic Mathematics for Economists, Routlege, 2003.