Subject: Microeconomics II

Scientific Area:

Economics

64 Hours

Number of ECTS:

6 ECTS

Language:

Portuguese

# Overall objectives:

1 - Understand and apply the concepts introduced in the curricular unit.
2 - Use the methodology of economic logic, with emphasis on their mathematical formalization.
3 - Learn conceptually the formalization of the diverse models of the syllabus and be able to solve practical applications derived from them.
4 - Know how the theoretical approaches guide the decision-making process in the context of uncertainty.
5 - Analyse the necessary conditions for a more efficient and equitable functioning of the market.
6 - Analyse diverse ways of distortion to the perfectly competitive market, namely the market failures derived from the existence of externalities, public goods, the use of the information at the agents' disposal and from the uncertainty about the functioning of the markets.
7 - Understand and predict the behaviour of different types of markets of imperfect competition (monopoly, monopolistic competition, oligopoly) and analyse the consequences on economic efficiency, equity, and welfare.

# Syllabus:

1 - BUYING AND SELLING: 1.1) Net Demand and Gross Demand; 1.2) Endowments in the Budget Constraint; 1.3) Changing the Endowment; 1.4) Price Changes; 1.5) The Slutsky Equation; 1.6) Labour Supply.
2 - INTERTEMPORAL CHOICE: 2.1) Intertemporal Consumption Basket; 2.2) The Intertemporal Budget Constraint; 2.3) Intertemporal Indifference Curves; 2.4) Intertemporal Optimization with two periods; 2.5) Marginal Rate of Time Preference; 2.6) The Slutsky Equation and Intertemporal Choice; 2.7) Present Value: A Closer Look; 2.8) Applications.
3 - CHOICE UNDER UNCERTAINTY:3.1) Probabilities and Expected Value; 3.2) Utility Functions and Probabilities; 3.3) Expected Utility Model of von-Neumann-Morgenstern; 3.4) Risk Aversion; 3.5) Insurance Against Bad Results; 3.6) Diversification; 3.7) Risk Spreading.
4 - GENERAL EQUILIBRIUM AND MARKET EFFICIENCY: 4.1) The Core of an Exchange Economy; 4.2) The Edgeworth Box; 4.3) Pareto Efficient Allocations; 4.4) The Algebra of Equilibrium; 4.5) Walras' Law; 4.6) Relative Prices; 4.7) Equilibrium and Efficiency; 4.8) First Welfare Theorem; 4.9) Second Welfare Theorem; 4.10) Efficiency in Production; 4.11) Production and the Edgeworth Box; 4.12) Efficiency in Output Composition; 4.13) Production Possibilities Frontier; 4.14) Marginal Rate of Transformation.
5 - EXTERNALITIES: 5.1) The Reciprocal Nature of Externalities; 5.2) Quaselinear Preferences and the Coase Theorem; 5.3) Production Externalities; 5.4) Social Cost and Private Cost; 5.5) Different Examples and Applications.
6 - PUBLIC GOODS: 6.1) The Provision of Public Goods; 6.2) Private Provision of Public Goods; 6.3) Free Riding; 6.4) Different Levels of the Public Good; 6.5) Comparison to Private Goods; 6.6) Voting.
7 - ASYMMETRIC INFORMATION: 7.1) The Market for Lemons; 7.2) Quality Choice; 7.3) Adverse Selection; 7.4) Moral Hazard; 7.5) Signalling; 7.6) Incentives.
8 - MARKET POWER: 8.1) Monopoly; 8.2) Monopolistic Competition; 8.3) Collusion; 8.4) Game Theory; 8.5) Oligopoly.

# Literature/Sources:

Mateus, A. e M. Mateus , 2008 , Microeconomia - Teoria e Aplicações , Editorial Verbo
Mateus, A. e M. Mateus , 2001 , Microeconomia - Exercícios e Estudo de Casos , Editorial Verbo
Varian, H. , 2010 , Microeconomia Intermédia: Uma Abordagem Moderna , Verlag Dashöfer Edições

# Assesssment methods and criteria:

Classification Type: Quantitativa (0-20)

Evaluation Methodology:
In the lectures, the teaching methodology is basically the oral exposition supported by PowerPoint and/or lecture notes. In the tutorials, the teaching methodology is based essentially on problem solving by students. Evaluation consists of an intermediate examination with a weight of 50% of the final mark and a final examination with a weight of 50% of the final mark. To pass the module, the student needs to achieve a minimum average of 10 out of 20. Reset/ Improvement Time: if a student fails in the normal evaluation time, but achieved a positive mark in one of the examinations, he/she can take, if desired, an examination about the course material of the failed examination. In that case, the examination taken in this period will be a substitute of the failed examination in the normal evaluation time, for calculating the final mark. For other cases of failure or for improvements of the evaluation mark, the student should take an overall examination with the weight of 100%.