Learning objectives
Microeconomics entails the study of choice under scarcity. Scarcity is ever present, even when material resources are abundant. There are always important limitations on time, energy, and the other things we need to pursue our goals.
Course unit content
Much of the economist's task is to try to answer questions of the form "Should I do activity x?" The approach to answering them is disarmingly simple. It is to do x if and only if its costs are smaller than its benefits. Not incurring a cost is the same as getting a benefit.
The cost-benefit model sometimes fails to predict how people behave when confronted with everyday choices. The art of cost-benefit analysis lies in being able to specify and measure the relevant costs and benefits, a skill many decision makers lack. Some costs, such as sunk costs, often seem relevant but turn out not to be. Others, such as implicit costs, are sometimes ignored, even though they are important. Benefits too are often difficult to measure. Experience has taught that becoming aware of the most common pitfalls helps most people become better decision makers.
When the question is not whether to perform an activity but rather at what level to perform it, marginal analysis draws our attention to the importance of marginal benefits and marginal costs. We should increase the level of an activity whenever its marginal benefit exceeds its marginal cost.
The principles of rational choice are by no means limited to formal markets for goods and services. Indeed, some form of implicit or explicit cost-benefit calculation lies behind almost every human action, object, and behavior. Knowledge of the underlying principles casts our world in a sharp new light, not always flattering, but ever a source of stimulating insight.
Student are strongly advised to use intensively the site of the Textbook
http://highered.mcgraw-hill.com/sites/0073375942/information_center_view0/supplements.html
Bibliography
Robert H. Frank
Micro-economics and Behavior (Eighth Edition 2010)
MCGraw-Hill
Assessment methods and criteria
Written Exam (exercise solution)
