This course starts discussing the the role of incentives in decision making by households, and the opportunity cost of these decisions. After this brief introduction, since markets are one the most important elements of any economy, the course analyzes the forces that shapes them: supply and demand. The course follows analyzing market efficiency and different sources of market failures, such as public goods, externalities and natural monopolies. After this, it will discuss imperfect competition and the economic inefficiencies they could create, together with the measures the state can take in order to reduce these inefficiencies. The course closes with an analysis of the problems that come along when there is asymmetric information. The course contents are as follows:
1. Introduction. The basic economic problem: scarcity and pure interchange. Microeconomics and Macroeconomics.
Normative and positive economics. Opportunity cost and comparative advantage.
2. The demand function. Marginal utility and individual demand. The aggregated demand. Movements along and
shifts of the demand curve.
3. The supply curve. Marginal costs and supply of products by the individual firm. Aggregate supply. Movements
along and shifts of the supply curve. Elasticity of demand and supply.
4. Market equilibrium. Efficiency and equity in the market: consumer and producer surplus.
5. Market intervention and effects on welfare: price controls, quantity controls, taxes and subsidies.
6. The Economics of International Trade. Determinants of Trade. Winners and loser. The economics of trade restrictions
7. Market failures: Imperfect competition (monopoly and monopolistic competition).
8. Oligopolies and Cooperation.
9. Market failures: externalities, public goods and common resources.
10. Moral hazard and adverse selection.
11. Labor Markets