"Microeconomic Foundations I" develops the choice, price, and general equilibrium theory topics typically found in first-year theory sequences, but in deeper and more complete mathematical form than most standard texts provide. The objective is to take the reader from acquaintance with these foundational topics to something closer to mastery of the models and results connected to them. This title provides a rigorous treatment of some of the basic tools of economic modeling and reasoning, along with an assessment of the strengths and weaknesses of these tools. It complements standard texts. It covers choice, preference, and utility; structural properties of preferences and utility functions; basics of consumer demand; revealed preference and Afriat's Theorem; choice under uncertainty; dynamic choice; social choice and efficiency; competitive and profit-maximizing firms; expenditure minimization; demand theory (duality methods); producer and consumer surplus; aggregation; general equilibrium; efficiency and the core; GET, time, and uncertainty; and other topics. It features a free web-based student's guide, which gives solutions to approximately half the problems, and a limited-access instructor's manual, which provides solutions to the rest of the problems. It contains appendixes that review most of the specific mathematics employed in the book, including a from-first-principles treatment of dynamic programming.
Preface xiii Chapter One. Choice, Preference, and Utility 1 1.1. Consumer Choice: The Basics 1 1.2. Proving Most of Proposition 1.2, and More 5 1.3. The No-Better-Than Sets and Utility Representations 7 1.4. Strict Preference and Indifference 9 1.5. Infinite Sets and Utility Representations 10 1.6. Choice from Infinite Sets 15 1.7. Equivalent Utility Representations 17 1.8. Commentary 18 Bibliographic Notes 23 Problems 23 Chapter Two. Structural Properties of Preferences and Utility Functions 30 2.1. Monotonicity 31 2.2. Convexity 32 2.3. Continuity 35 2.4. Indifference Curve Diagrams 38 2.5. Weak and Additive Separability 39 2.6. Quasi-linearity 43 2.7. Homotheticity 44 Bibliographic Notes 45 Problems 45 Chapter Three. Basics of Consumer Demand 50 3.1. The Consumer's Problem 50 3.2. Basic Facts about the CP 52 3.3. The Marshallian Demand Correspondence and Indirect Utility Function 54 3.4. Solving the CP with Calculus 56 Bibliographic Notes 63 Problems 64 Chapter Four. Revealed Preference and Afriat's Theorem 67 4.1. An Example and Basic Ideas 67 4.2. GARP and Afriat's Theorem 70 4.3. Comparative Statics and the Own-Price Effect 74 Bibliographic Notes 77 Problems 78 Chapter Five. Choice under Uncertainty 79 5.1. Two Models and Three Representations 79 5.2. The Mixture-Space Theorem 89 5.3. States of Nature and Subjective Expected Utility 101 5.4. Subjective and Objective Probability and the Harsanyi Doctrine 108 5.5. Empirical and Theoretical Critiques 110 Bibliographic Notes 116 Problems 116 Chapter Six. Utility for Money 123 6.1. Properties of Utility Functions for Money 123 6.2. Induced Preferences for Income 134 6.3. Demand for Insurance and Risky Assets 138 Bibliographic Notes 140 Problems 140 Chapter Seven. Dynamic Choice 148 7.1. The Standard Strategic Approach 149 7.2. Dynamic Programming 152 7.3. Testable Restrictions of the Standard Model 153 7.4. Three Alternatives to the Standard Model 156 Bibliographic Notes 161 Problems 161 Chapter Eight. Social Choice and Efficiency 166 8.1. Arrow's Theorem 166 8.2. What Do We Give Up? 172 8.3. Efficiency 175 8.4. Identifying the Pareto Frontier: Utility Imputations and Bergsonian Social Utility Functionals 176 8.5. Syndicate Theory and Efficient Risk Sharing: Applying Proposition 8.10 184 8.6. Efficiency? 192 Bibliographic Notes 194 Problems 194 Chapter Nine. Competitive and Profit-Maximizing Firms 197 9.1. The Production-Possibility Set 198 9.2. Profit Maximization 199 9.3. Basics of the Firm's Profit-Maximization Problem 201 9.4. Afriat's Theorem for Firms 207 9.5. From Profit Functions to Production-Possibility Sets 211 9.6. How Many Production-Possibility Sets Give the Same Profit Function? 213 9.7. What Is Going On Here, Mathematically? 216 9.8. Differentiability of the Profit Function 219 9.9. Cost Minimization and Input-Requirement Sets 222 9.10. Why DoWe Care? 228 Bibilographic Notes 229 Problems 229 Chapter Ten. The Expenditure-Minimization Problem 233 10.1. Defining the EMP 233 10.2. Basic Analysis of the EMP 235 10.3. Hicksian Demand and the Expenditure Function 236 10.4. Properties of the Expenditure Function 238 10.5. How Many Continuous Utility Functions Give the Same Expenditure Function? 240 10.6. Recovering Continuous Utility Functions from Expenditure Functions 247 10.7. Is an Alleged Expenditure Function Really an Expenditure Function? 248 10.8. Connecting the CP and the EMP 254 Bibliographic Notes 255 Problems 255 Chapter Eleven. Classic Demand Theory 258 11.1. Roy's Identity and the Slutsky Equation 258 11.2. Differentiability of Indirect Utility 262 11.3. Duality of Utility and Indirect Utility 269 11.4. Differentiability of Marshallian Demand 274 11.5. Integrability 279 11.6. Complements and Substitutes 283 11.7. Integrability and Revealed Preference 284 Biblio Be the first to write a customer review
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