Riassunto esame Microeconomics, Prof. Roberti Paolo, libro consigliato Microeconomics, Laibson, Acemoglu

ISABEL FISCHER

Inhalt .......................................................................................................... 2

Chapter 1: The principles and practice of Economics

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Chapter 2: Economic methods and optimization

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Chapter 3: Demand, supply and equilibrium

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Chapter 4: Consumer theory

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Varian 1 .................................................................................................................................................................. 12

Varian 2 .................................................................................................................................................................. 17

Varian 3 ...................................................................................................................................................... 24

Quiz preparation ............................................................................................................................. 25

Chapter 5: Consumers and incentives

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Chapter 6: Sellers and incentives

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Chapter 7: Perfect competition

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Chapter 8: Trade ....................................................................................................................... 45

Chapter 9: Externalities and public goods

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Chapter 10: Taxation and regulation

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Chapter 11: Labor market

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Chapter 12: Monopoly ............................................................................................................................................. 64

Chapter 13: Game theory

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Introduction ........................................................................................................................................................... 73

Normal book ....................................................................................................... 79

Chapter 14: Oligopoly and monopolistic competition

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Chapter 15: Time and risk

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Chapter 16: Information 1

Chapter 1: The principles and practice of Economics

Key Ideas

− Economics is the study of people’s choices

− The first principle of economics is that people try to optimize, they try to choose the best available option

− The second principle of economics is that economic systems tend to be in equilibrium, a situation in which nobody

would benefit by changing his behavior

− The third principle of economics is empiricism (analysis that uses data), Economists use data to test theories and to

determine what is causing things to happen in the real world

The scope of Economics

− Economists study human behavior→ choice, not money, is the unifying feature of all the things that economists

study

− Economic agent= any group or individual that makes choices, such as consumers, firms, parents, politicians, …

− Economics studies the allocation of scarce resources→ scarce resources are things that people want, where the

quantity that people want often exceeds the quantity that is available

− Scarcity exists because people have unlimited wants in a world of limited resources

− Economics studies how agents make choices among scarce resources and how those choices affect society

− Positive economics= describes what people actually do, descriptive (such factual statements can be confirmed or

tested with data)

− Normative economics= recommends what people ought to do, optimal ways to handle scarce goods, advisory;

normative economics is almost always dependent on subjective judgements

− Microeconomics= the study of how individuals, firms and governments make choices and how those choices affect

prices, the allocation of resources and the well-being of other agents

− Macroeconomics= the study of the whole economy

− the opportunity cost= value of the best alternative I am giving up

Three principles of economics

− Optimization= making the best choice possible with given information (choices motivated by calculations of

benefits and costs)

− Equilibrium= when everyone is optimizing; no one would be better off with a different choice

o The Free Rider Problem exists when an individual or group is able to enjoy the benefits of a situation

without incurring the costs→ necessary condition for an equilibrium: no free riding incentives

− Empiricism= analysis that uses data, economists use data to test theories and to determine what is causing things

to happen in the world

Chapter 2: Economic methods and optimization

Key ideas

− A model is a simplified description of reality

− Economists use data to evaluate the accuracy of models and understand how the world works

− Correlation does not imply causality

− Experiments help economists to measure cause and effect

− Economic research focuses on questions that are important to society and can be answered with models and data

The scientific method

− It is composed of 2 steps:

o Developing models that explain some part of the world

o Testing those models using data to see how closely the models matches with what we actually observe

− Model= a simplified description of reality, not perfect replica of reality, all scientific models can be checked with

data

− The median is the value in the middle of a group of numbers and the mean is the average value of the group of

numbers 2

Causation and correlation

− Causation= when one thing directly affects another (example: putting a snowball in a hot oven causes it to melt)

− Correlation= there is a mutual relationship between two things, as one thing changes, the other changes as well

o Positive correlation→ they both change in the same direction

o Negative correlation→ they change in opposite directions (example: people with a high level of education

are less likely to be unemployed)

o Zero correlation→ when two variables are not related

− Why isn’t correlation the same thing as causality?

o Omitted variables→an omitted variable is something that has been left out of a study that, if included,

would explain why two variables are correlated; a correlation might not make sense until the omitted

variable is added

o Reverse causality→ reverse causality is the situation in which we mix up the direction of cause and effect

− How can we tell the difference between causality and correlation?

o Experiments

▪ Controlled→ subjects are randomly put into treatment (something happens) and control (nothing

happens) groups by the researcher; problem: difficult to do with economic studies

▪ Natural→ subjects end up in treatment or control groups due to something that is not purposefully

determined by the researcher

Evidence-based economics and natural experiments

− 2 properties of a good economic question:

o Relevant and important→ economic research contributes to social welfare

o Can be answered→ economic questions can be answered empirically

Chapter 3: Demand, supply and equilibrium

Key ideas

− When an economic agent chooses the best feasible option, he is optimizing

− Optimization using total value calculates the total value of each feasible option and then picks the option with the

highest total value

− Optimization using marginal analysis calculates the change in total value when a person switches from on feasible

option to another and then uses these marginal comparisons to choose the option with the highest total value

− Optimization using total value and optimization using marginal analysis give identical answers

− Do we always make the best choice? Why not?

− Sometimes it is difficult to make choices because

o You have limited information

o Sorting through information can be complicated

o You are inexperienced in dealing with a given situation

− Optimization can be implemented using many different techniques

− We explore how to optimize using two techniques, which yield identical answers

o Total value (net benefit= total benefit – total cost)

o Marginal analysis (the change in the net benefit of one option compared to another)

− Optimization using total value:

o Translate all costs and benefits into common units, like dollars per month

o Calculate the total net benefit of each alternative

o Pick the alternative with the highest net benefit

− Marginal analysis:

o Translate all costs and benefits into common units, like dollars per month

o Calculate the marginal consequences of moving between alternatives

o Choose the best alternative with the property that moving to it makes you better off and moving away

from it makes you worse off 3

− Principle of optimization at the margin→ if an option is the best choice, you will be made better off as you move

toward it, and worse off as you move away from it

Chapter 4: Consumer theory

Key ideas

− In a perfectly competitive market, sellers all sell an identical good or service and any individual buyer or any

individual seller isn’t powerful enough on his own to affect the market price of that good or service

− The demand curve plots the relationship between the market price and the quantity of a good demanded by buyers

− The supply curve plots the relationship between the market price and the quantity of a good supplied by sellers

− Th