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Course 5EN912 – Microeconomics III

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Aims of the course:

To extend the knowledge of the microeconomic models of the consumer, producer and market equilibrium and to provide PhD students with techniques that are used in solving advanced microeconomics models.

Language: English


Course contents:

Lesson 1: Comparative statics (implicit function theorem)


  • consumer’s optimal responses to changes in the budget constraint
  • changes in equilibrium prices and quantities due to external shocks

Lesson 2: Differentiating under the integral sign


  • sorting/selection models
  • optimal sanctions

Lesson 3: Quantifying welfare in a supply-demand framework


  • changes in welfare due to government interventions
  • rationing

Lesson 4 & 5: Choice under uncertainty

Expected utility, risk aversion, measures of risk aversion, optimal choice of risk


  • tax evasion
  • demand for insurance

Lesson 6: Asymmetric information


  • – moral hazard and incentives
  • – signaling

Readings – selected materials from textbooks:

  • Gravelle, H., and Rees R.: Microeconomics, 3rd edition, 2004.
  • Mas-Collel, A., Whinston, M, and Green, J. Microeconomics Theory, Oxford University Press 1995.
  • Varian, Hall. 2010. Intermediate Microeconomics
  • Kevin M. Murphy: Lecture Notes for Graduate Microeconomics
  • Vinogradov, V. Mathematics for Economists: Made Simple. Karolinum 2012


  • Rosen, S.. The Theory of Equalizing Differences, in Handbook of Labor Economics, Chapter 12, 1987.
  • Polinsky, A.M. and Shavell, S. The Theory of Public Enforcement of Law, in Polinsky A.M. and Shavell S., Handbook of Law and Economics, Chapter 6, Elsevier 2007.
  • * Allingham, M.G. and A. Sandmo: Income tax evasion: A theoretical analysis, Journal of Public Economics 1972.
  • Murphy, K., Shleifer, A., and R. Vishny: The transition to a market economy: Pitfalls of partial reform, Quarterly Journal of Economics, 1992.
  • Glaeser, Edward, and Erzo Luttmer: Misallocation of housing under rent control, American Economic Review September 2003.


  • Problem sets (100%), 5 or 6 problem sets in total. The solutions will be discussed on TA sessions

Class times:

  • November 3, 11:00 AM
  • November 10, 11:00 AM
  • November 24, 11:00 AM
  • December 8, 11:00 AM
  • January 12, 11:00 AM
  • January 19, 11:00 AM