Effects of a Price Change What happens when a commodity's price decreases? Substitution effect(替代效应):the commodity is relatively cheaper, so consumers substitute it for now relatively more expensive other commodities

Structure Describe preferences Indifference curves(无差异曲线) Well- behaved preferences Marginal rate of substitution(边际替代率)

Contents Dominant strategy Nash equilibrium Prisoner's' dilemma and repeated games Multiple equilibria and sequential games Pure and mixed strategies

Structure Market equilibrium Quantity tax and equilibrium Tax incidence税收分担) Deadweight loss(额外净损失)

Structure Market environments Market demand for a competitive firm Short-run- supply decision Upward sloping MC curve Shut- down condition Long -run- supply decision Comparing long-run- and short--run decisions Producer's' surplus and profits

Structure Economic profit Short-run- profit maximization -Comparative statics Long- run profit maximization Profit maximization and returns to scale Revealed profit maximization

Structure Definition When to provide a public good Efficient provision Private provision: free-riding Variable quantities of public good -Efficient amount Free-riding problem How to provide public goods? Demand revelation

The Theory of Economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine. an apparatus of the mind, a technique of thinking which helps its possessor to draw correct conclusions John Maynard Keynes

Structure State contingent consumption(依情 形而定的消费) Preferences under uncertainty Attitudes toward risk State-contingent- budget constraint Choice under uncertainty Diversification and risk spreading

Information in Competitive Markets In purely competitive markets all agents are fully informed about traded commodities and other aspects of the market. What about markets for medical services, or insurance, or used cars?