University of London

Small Navigation Menu

Primary Menu

Microeconomic principles and policy

M457

This module looks at the principles economists use to model the behaviour of individual agents (firms, consumers, and policy authorities) and the ways in which they interact in a market economy.

This module examines and builds upon core theories of microeconomics, and is structured around:

  • consumer demand
  • theory of the firm
  • pricing and output in competitive and monopolistic markets.

The module explores the economic principles that underpin the influence of market structures – whether markets are competitive or monopolistic – on consumers and firms, how these principles can be applied to economic problems, and their implications for policy.

There are two narratives, or theoretical approaches, running through this module. The first is the traditional neoclassical approach, which is based on the assumption that all economic actors behave rationally to improve their own self-interest in markets that are competitive. The second narrative covers alternative approaches that have been developed to analyse economic behaviours.

Topics covered

Unit 1: Introduction to Microeconomics

  • 1.1 Introduction
  • 1.2 Markets
  • 1.3 Supply and Demand
  • 1.4 Elasticity
  • 1.5 Conclusion

Unit 2: Theories of Consumer Behaviour

  • 2.1 Introduction
  • 2.2 Traditional Approach of Utility Theory
  • 2.3 Limitations of the Consumer Theory
  • 2.4 Behavioural Approach
  • 2.5 Policy Issues
  • 2.6 Conclusion

Unit 3: Theory of Production and Costs

  • 3.1 Introduction
  • 3.2 Types of Resources Used in Production
  • 3.3 Production and Costs
  • 3.4 Production Decisions
  • 3.5 Analysing Costs and Production
  • 3.6 Conclusion

Unit 4: Markets and Competition

  • 4.1 Introduction
  • 4.2 Perfect Competition
  • 4.3 Non-Competitive Market Structures – Monopoly
  • 4.4 Monopsony
  • 4.5 Non-Competitive Market Structures – Monopolistic Competition
  • 4.6 Conclusion

Unit 5: Oligopoly and Other Noncompetitive Markets

  • 5.1 Introduction
  • 5.2 Oligopoly models of output decision-making
  • 5.3 Oligopoly models of price competition
  • 5.4 Game theory
  • 5.5 Collusion by firms
  • 5.6 Prohibiting collusion
  • 5.7 Case study – China's airline markets
  • 5.8 Conclusion

Unit 6: Markets for Resources – Labour, Capital and Other Inputs

  • 6.1 Introduction
  • 6.2 Labour Markets
  • 6.3 Manufacture, Natural and Social Capital Markets
  • 6.4 Finance Capital
  • 6.5 Conclusion

Unit 7: Industry Structures, Pricing Behaviour and Globalisation

  • 7.1 Introduction
  • 7.2 Alternative Theories of Firms' Behaviour
  • 7.3 Big Business
  • 7.4 Pricing Behaviour
  • 7.5 Globalisation
  • 7.6 Conclusion

Unit 8: Externalities, Public Goods and Environmental Economics

  • 8.1 Introduction
  • 8.2 Externalities and Public Goods
  • 8.3 Direct Public Provision: the changing role of State Owned Enterprises
  • 8.4 Environmental Economics
  • 8.5 Conclusion

Learning outcomes

When you have completed your study of this course you will be able to:

  • explain the principles underlying consumer demand from different perspectives
  • discuss what economists mean by the 'theory of the firm'
  • spell out the implications of competitive and noncompetitive market structures on the firm's pricing and output decisions
  • evaluate how firms respond to the pricing and output decisions of other firms in the market
  • debate the importance of the markets for inputs or factors of production, such as labour, capital and natural resources
  • analyse how firms expand and the implications for market structure
  • discuss how globalisation has influenced the firm's behaviour and the implications for pricing and output decisions.

Assessment

  • Two assignments (30%)
  • One three-hour examination in September/October (70%)

Essential reading

  • Pindyck, R & D Rubinfeld (2015) Microeconomics, 8th Edition, Pearson.
  • Goodwin N, J Harris, JA Nelson, B Roach & M Torras (2014) Microeconomics in Context, 3rd Edition, Routledge.