Welcome to ECMA04H – Introduction to

Microeconomics: A Mathematical Approach!

Prof. Gordon Cleveland

Office: MW-364, Phone: 416-287-7317
E-mail: cleveland@utsc.utoronto.ca
Office Hours: Monday 1 p.m.
Wednesday 1 p.m.

Website: www.utsc.utoronto.ca/~cleveland
This is the website for this course, with lots of
materials. And current information. Use it!

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The course:
Microeconomics – the study of individual markets
in the economy (demand and supply, determining
price and quantity). How decisions are made,
through markets, to allocate society’s economic
resources to alternative possible uses.

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Topics:
- Opportunity Cost and Production Possibility
Frontiers
- Demand and Elasticity
- Costs and Supply
- How perfectly competitive markets allocate
resources in the short and long run
- How monopoly markets allocate resources
- Competition and Monopoly compared;
regulation
- Market Failures: externalities and public
goods
- Trading in international markets: good or
bad?

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Tests
Mostly multiple choice
First test (week 5?) – 20%
Second test (week 9?) – 30%
Final exam (December 10th?) – 50%

No doctors’ notes; no make-up tests

Special Offer!
If you do better on the final, you can wipe
out lower mark on first test, second test, or
on both of them.

Course is based on:

- knowledge of basic economic theory
- ability to do problems using theory + math

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Is this a tough course?

Judge for yourself…

Last year 840 students
A (80 or more): 151 = 18%
B (70-79): 138 = 16%
C (60-69): 145 = 17%
D (50-59): 149 = 18%
F (below 50): 195 = 23%
Dropped: 62 = 7%

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How do I succeed in this course?

a. work hard and work now

b. go to tutorials; love your T.A.
c. buy the handbook; do the problems
d. look at the website; get familiar with old
tests
e. come to class; take notes; think; don’t
talk
f. expect both theory and math to be tested
g. don’t cheat

Do I need university math?

Not for this course…but for the next one
MATA27H if you want to stop here
MATA30H and MATA37H if you want to go on

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What is Economics?
“Economics is the study of the use of scarce
resources to satisfy unlimited human wants”

Resources (factors of production):

Land
Labour
Capital
Technical Knowledge
Entrepreneurship

Scarce?

Alternative uses

Choices

Economize

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Basic economic decisions

What?

How?

For whom?

How does a market economy make these

decisions?

Command economy
Mixed economy

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Opportunity Cost

The cost of using a resource in one way is the

value of what it would have produced if you had
used the resource in an alternative way

Fundamental concept

Opportunity cost = value of the alternative

foregone

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Robert Frost
1. The Road Not Taken

TWO roads diverged in a yellow wood,

And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth; 5

Then took the other, as just as fair,

And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same, 10

And both that morning equally lay

In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back. 15

I shall be telling this with a sigh

Somewhere ages and ages hence:
Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference. 20

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What is the opportunity cost of going to
university?

(what do you “give up” when you go to

university?)

What is the opportunity cost of getting

married?

What is the opportunity cost of taking a month-

long vacation? Does it depend on when you take
it?

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Does opportunity cost really matter? Do we
make decisions according to opportunity cost?

Why are you young?

Why do “adults” take evening courses?

Why do senior citizens take holidays?

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The point is that…

When resources are scarce, choices must be

made about how those resources will be used.

And then, the real cost of using the resources

in one way will be that you give up the “output”
you might have gotten by using them in an
alternative way

Economics focuses on how choices are made, and

what the consequences of those choices are. In
a market economy, individuals make choices
(about demand and supply) and then markets
bring those individual decisions together.

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 A model (our first)

Production Possibilities Frontier – will help us

think about issues like choices, opportunity
costs, and economic efficiency

Good #2

P.P.F.

14 Good #1
We often use abstract models

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On this diagram:
Allocation of resources to alternative uses
Choices
Attainable region, unattainable region
Economically efficient and inefficient allocations
Opportunity cost
Shape of the curve: linear, convex (bowed
outwards)

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Opportunity Cost (of X) = OCX = -dY/dX

Opportunity Cost (of Y) = OCY = -dX/dY

= -1/(dY/dX)

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