Course Description

This course will cover the basic microeconomic concepts needed to successfully complete other
courses in the
Master of Energy Economics (MEECON) program. Applications of the concepts will focus on
contemporary and
important issues in the energy sector.
Topics covered will include the basis of demand and supply analysis, market equilibrium and
different market
structures, international trade, investment and capacity expansion, risk and the fundamental
microeconomic concepts
underlying corporate finance, and economic analysis of public policy, including environmental
policy.
Objectives
The primary objective of this course is to give students the necessary background in
microeconomics to complete
the remaining courses in the MEECON program. Since students entering the MEECON program
need not have
studied economics previously, the course will cover basic concepts and analytical tools used in
economic analysis.
The focus will be on tools and concepts especially relevant to energy economics.
To provide value to the students in the class who have studied economics previously, the
material will go beyond
what is normally covered in an undergraduate introduction class. Students who have not studied
any economics
previously will need to work outside of class to assimilate some of this more advanced material.
Expected Learning Outcomes
At the conclusion of this course, students should understand how to apply basic economic
concepts and tools to
analyze issues in the energy industry. They should also be prepared to better understand the other
courses they are
taking in the MEECON program.
Reading
The required texts for this course are:
Basic Economics: A Common Sense Guide to the Economy, Thomas Sowell, 5th edition, 2014,
Basic Books,
ISBN 978-0-465-06073-3, e-book ISBN 978-0-465-05684-2
Introduction to Economic Analysis, R. Preston McAfee, Tracy Lewis, Donald J. Dale, available
online here.
Price Theory: An Intermediate Text, David D, Friedman, South-Western Publishing Co.,
available online here.
Students may also find it useful to consult the following textbook:
Energy Economics, Subhes C. Bhattacharyya, Springer, ISBN 978-0-85729-267-4
The topics that we will cover, and the order we will cover them are as follows:
Demand
Basic Economics Chapters 2, 1315
Introduction to Economic Analysis Chapters 2, 3, 12, 13
Price Theory Chapters 14, 13
1. Budget set, real income and relative prices
2. Indifference curves
3. Income and substitution effects
4. Consumer surplus
5. Market demand
6. Uncertainty and expected utility
6. Uncertainty and expected utility
Supply
Basic Economics Chapters 26
Introduction to Economic Analysis Chapters 2, 9, 10
Price Theory Chapters 5, 9, 11
7. Production functions and cost minimization
8. Cost concepts
9. Industry supply curves
10. Producer surplus and input markets
11. Households as producers
12. Theory of the firm
Markets
Basic Economics Chapters 29, 19
Introduction to Economic Analysis Chapters 2, 3, 5, 14, 15
Price Theory Chapters 611
13. Market equilibrium
14. Markets and efficiency
15. Monopoly and oligopoly
16. Taxes
Trade
Basic Economics Chapters 2123
Introduction to Economic Analysis Chapter 6, 14
Price Theory Chapter 6
17. Gains from trade
18. Non-traded and traded goods
19. Policies affecting trade
Investment
Basic Economics Chapters 1315
Introduction to Economic Analysis Chapter 11
Price Theory Chapter 12, 13
20. The consumption versus savings decision
21. Asset pricing
22. Investments in physical capital
23. Real options and investment
24. International capital flows
Public policy
Basic Economics Chapter 18
Introduction to Economic Analysis Chapters 7, 8
Price Theory Chapters 1519
25. Public goods
26. Externalities
27. Political failure versus market failure
28. Concluding comments: Key ideas