Microeconomic Analysis

Dr. Elisabeth Gugl

Department of Economics, University of Victoria
Victoria, B.C., CANADA

BEC 384         

(250) 721 8538          

Course Description and Objectives

This is a course in advanced microeconomic theory. We start out with a single economic agent (individual or firm) and the decisions she has to make, and work our way through all the assumptions that are necessary to make a competitive equilibrium Pareto efficient.


ECON 500 emphasizes the value added of a formal treatment of economics as opposed to an informal treatment by means of examples and stories. We’ll still use the stories and examples to get a first grasp at an issue, but the rigorous treatment presented along with them will add clarity.


Economic arguments expressed by means of an example can sometimes be misleading: For example, using quasi-linear utility to capture people’s preferences and finding that the equivalent variation, compensating variation, and the change in consumer surplus are the same, you may wonder: “Does the same conclusion hold if we use a different utility function/draw different indifference curves?” In this course you will learn that the answer to this question is “no” and also understand under what circumstances the consumer surplus is a good approximation to a measure of welfare changes.


Understanding how economists build their formal models will help you read economic journal articles and will enable you to follow the academic discussions. Even in pursuing a career outside academia, evaluating academic research may very well be part of your job description. Sound economic policy is based on a sound understanding of economics!


Although the field of microeconomics is fascinating by itself, the formal treatment of consumer, producer theory and general equilibrium theory presented here will help you understand how theories in general are built from a set of axioms. The same logic carries over to other fields of study.


1. Course Outline (including office hours, exam dates, grading policies)


Please scroll down for lecture notes, problem sets and practice exams!

2. Lecture Notes:

Consumer Theory

·  Lecture 1: From Utility Maximization to Testable Restrictions on Consumer Demand

·  Lecture 2: Welfare Analysis

Exchange Economy

·  Lecture 3

Producer Theory

·  Lecture 4

General Equilibrium Analysis

·  Lecture 5: General Equilibrium with Production

Choice under Uncertainty

·  Lecture 6


3. Problem Sets and Answer Keys:

·  Problem Set 1 (pdf file)

·  Answer Key to Problem Set 1 (pdf file)

·  Problem Set 2 (pdf file)

·  Answer Key to Problem Set 2 (pdf file)

·  Problem Set 3 (pdf file)

·  Answer Key to Problem Set 3 (pdf file)

·  Problem Set 4 (pdf file)

·  Answer Key to Problem Set 4 (pdf file)

·  Problem Set 5 (pdf file)

·  Answer Key to Problem Set 5 (pdf file)

·  Problem Set 6 (pdf file)

·  Answer Key to Problem Set 6 (pdf file)

·  Problem Set 7 (pdf file)

·  Answer Key to Problem Set 7 (pdf file)

·  Problem Set 8 (pdf file)

·  Answer Key to Problem Set 8 (pdf file)

·  Problem Set 9 (pdf file)

·  Answer Key to Problem Set 9 (pdf file)

·  Problem Set 10 (pdf file)

·  Answer Key to Problem Set 10 (pdf file)


4. Practice Midterm Exams and Answer Keys:

·  Practice Exam for Midterm 1 (pdf file)

·  Answer Key to Practice Exam for Midterm 1 (pdf file)

·  Practice Exam for Midterm 2 (pdf file)

·  Answer Key to Practice Exam for Midterm 2 (pdf file)


5. Practice Exam for Final Exam and Answer Key:

·  Practice Exam for Final (pdf file)

·  Answer Key to Practice Exam for Final (pdf file)


6. Midterm Exams and Answer Keys

·                    Midterm 1 exam; answer key

·                    Midterm 2 exam; answer key



Web Resources:

·                   3-D models of CES Functions:

·                   and Cobb-Douglas Functions:

·                   These models also include a 3-D analysis of Utility Maximization and Expenditure Minimization.


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·                   Choice under Uncertainty: Problems Solved and Unsolved