Intermediate Microeconomics

ECON A311 Intermediate Microeconomics is the first of several higher level courses that make up the Bachelor of Social Sciences and Bachelor of Social Sciences (Honours) in Economics degree. Although there is no prerequisite, students are strongly encouraged to take ECON A231 Introduction to Microeconomics before taking this course.

This course provides you with a comprehensive and vigorous coverage of the mainstream economic theories. Since most of you likely do not have a background in advanced mathematics such as calculus, which is believed to be essential to appreciate the vigour of modern economics, I have deliberately omitted the more difficult mathematical treatments in the development of the course content. The fact that advanced mathematics is not required for this course is reflected in the selected text books which cover, in depth, the major economic theories without using calculus.

This does not mean, however, that this course is less rigorous than a comparable advanced economics course. I believe that mathematics is only a language, and in most circumstances a precise language, to describe economic theories and to make predictions. If a student in economics cannot describe a theory in plain words other than using mathematics, he or she does not understand economics at all. Having said that, I do encourage you to go through the footnotes of the texts which contain the calculus treatments of the economic concepts in the main text. However, I want to emphasize that by no means is calculus required in writing your assignments or examination.

This course is developed on the basis of ECON A231 Introduction to Microeconomics. There are two differences between this course and ECON A231. First, this course is more rigorous. You are expected to use a lot of graphs and equations to delineate economic models and to analyse economics problems. Second, more advanced topics are included. These advanced topics include, for example, the asymmetric problems and the intertemporal problems in microeconomics, and the theory of rational expectation and real business cycles in macroeconomics. Those who have a solid foundation in ECON A231 will find these advanced topics interesting and useful for analysing real world economic problems.

This course is composed of six units, which are based on the textbook: Price Theory and Applications (2nd edn) by Peter Pashigian. It will take you 19 weeks to complete the course, and you should spend at least 10 hours per week on working through the course materials.  Each unit in your study guide contains at least two elements. You will be guided to read your textbooks topic by topic, and in moving from one topic to another you will be asked to do a series of self-test questions to check your progress.

This course is about economic theories and their applications. From a modern economics perspective, all economic agents are rational, in the sense that they seek to maximize their own welfare. After completing the course, you will learn how economists think and how a rational economic agent behaves. This course aims to provide you with a theoretical framework to analyse the behavior of households and firms. After all, individual households and firms are the building blocks of the modern economy.

More specifically, this course allows you — equipped with economics theories — to effectively analyse and develop business strategies. From a broader perspective, this course provides you with the economic framework needed to analyse and evaluate government policies.

After completing the course, you should be able to:

1. Apply theoretical framework for the analysis of the behavior of consumption and production.
2. Analyse the functions of markets and their limitations in the allocation of economic resources.
3. Apply economic theories in the management of firms.
4. Evaluate the effectiveness of government policies.

Materials

In addition to this Course Guide, the course has the following important components. Please ensure that you have all of these materials available.

Study units

The course is composed of six study units. Each study unit requires about 30 hours of study time. This includes reading the study unit and the textbook, and working on the self-tests.

Unit 1        Consumption

Unit 2        Production

Unit 3        Perfect competition

Unit 4        General equilibrium and Pareto efficiency

Unit 5        Imperfect competition

Unit 6        Special topics in microeconomics

Set textbook

There is one compulsory textbook for ECON A311 Intermediate Microeconomics:

Pindyck, R and Rubinfeld, D (2018) Microeconomics, 9th Global edn, Harlow, UK: Pearson Education Limited.

Assignment File

There are two assignments for this course. More information is provided under the heading 'Assignments' later in this Course Guide. Please refer to the Assignment File itself for more specific information.

Presentation Schedule

A Presentation Schedule is available on the Online Learning Environment (OLE). It lists the dates for completing assignments, attending tutorials and day schools, etc.

Assessment

The self-tests in the study units provide a means for self-assessment. They help you to better understand the key concepts in the units and check your progress. The assignments in the Assignment File will be assessed by your tutor. Most of the questions in the self-tests and assignments are quantitative and have closed-form solutions, while others are questions for discussion. Regardless the question type, your answer will based on economic theories. Answers generated from intuition or based on daily life will generally bear very low marks.

Assignments

There are two assessment exercises for the course. They will cover the following broad topic areas:

1. consumption, production and perfect competition
2. general equilibrium and Pareto efficiency; imperfect competition; externality, public goods and inter-temporal problems

The assignment questions are generally of two types. Most questions require you to solve hypothetical economic problems based on given assumptions. These problems typically come with closed-form solutions. There will also be questions which require you to analyse real world economic issues.

Final examination and grading

The final examination carries the weight of 50% of the final grade, and will be of two hours' duration. The final examination covers information from all parts of the course and will be in a form you have experienced in the course.

To earn a pass grade for the course, an overall mark of 40% or better is required, but you must attain an average mark of 40% or better on both the assignments and a mark of 40% or better on the final examination. You are therefore advised to submit all assignments and to sit for the examination.

Course marking scheme

This table clearly lays out how the actual marking is broken down.

Course overview

This table brings together the units, the time taken to complete them, and the assignments that follow them.

This course provides you with a broad coverage of modern economic theories. The first five units cover microeconomics; the last five units cover macroeconomics. Although advanced mathematics knowledge such as calculus is not required, the course's rigour is maintained at a high level.

You will find most of the arguments in this course come with graphical analysis. We strongly encourage you to reproduce, on your own, all the graphs which are related to the units. This is a good way to check how well you understand the course content. You should never try to memorize the mathematical definition of a concept without being able to lay out the definition in your own plain English. If you cannot put a concept or explain a theory in plain English (or Chinese, or any language other than mathematics) mathematics will give you the illusion you have already mastered the theory. As the Nobel laureate Paul A. Samuelson put it, 'A rose is a rose is a rose' — what matters most is the substance, not the form.

However, it is not to say that mathematics is not important. Mathematics (including graphical analysis) helps us to formulate and to find solutions for complex economic problems, which may otherwise be difficult to achieve by simply using plain English. However, you should always have the clear intention of not getting lost in the big forest of mathematical details. Always ask yourself — where? Where am I up to? Where do these concepts fit in the big picture? Where are the concepts leading to? By asking where, you will have a better idea of the links between concepts, and between theories.

One good way to check your economic analysis proficiency is to pay attention to policy issues such as public housing in Hong Kong, and the 1997-8 Asian financial crisis. Media commentators and columnists frequently discuss these issues. Try to use the economic theories you learn about in this course to judge the validity of their arguments. You will find this will help you a lot in understanding the course material.

Tutors and tutorials

Your tutor will closely follow your progress. He or she will read, make comment on and mark your assignments. He or she will answer your questions during the tutorial sections or through telephone tutoring, which is typically arranged in evenings.

To make the most of your contact with your tutor and the tutorials, you should finish each assignment on time, and read the comments on your assignments before coming to the tutorials, especially when you have difficulty doing the problems in the assignments. It is always a good idea to write down your questions before approaching the tutor for an answer. By doing so, you have the chance to go through the points you missed and you will have a better idea of what you understand and what you don't. This will help you ask to-the-point questions and receive helpful answers from your tutor.

Your course developer, Professor Lo Wai Chung, is a former professor at the School of Arts and Social Sciences, Hong Kong Metropolitan University.