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Chapter 1. Introduction 1

1-1. The Role of Theory 1

1-2. Microeconomics 2

1-3. The Role of Mathematics 4

Chapter 2. The Theory of Consumer Behavior 6

2-1. Basic Concepts 8

2-2. The Maximization of Utility 12

2-3. The Choice of a Utility Index 16

2-4. Demand Curves 20

2-5. Income and Leisure 23

2-6. Substitution and Income Effects 24

2-7. Generalization to n Variables 30

2-8. The Theory of Revealed Prefcrence 32

2-9. The Problem of Choice in Situations Involving Risk 34

2-10. Summary 38

Chapter 3. The Theory of the Firm 42

3-1. Basic Concepts 43

3-2. Optimizing Behavior 49

3-3. Cost Functions 55

3-4. Homogeneous Production Functions 62

3-5. Joint Products 67

3-6. Generalization to m Variables 72

3-7. Linear Programming 75

3-8. Summary 82

Chapter 4. Market Equilibrium 85

4-1. The Assumptions of Perfect Competition 86

4-2. Demand Functions 87

4-3. The Derivation of Supply Functions 89

4-4. The Equilibrium of a Commodity Market 95

4-5. Applications of the Analysis 101

4-6. Factor-market Equilibrium 107

4-7. The Stability of Equilibrium 109

4-8. Dynamic Equilibrium with Lagged Adjustment 117

4-9. Summary 123

Chapter 5. Multimarket Equilibrium 126

5-1. Pure Exchange 128

5-2. Production and Exchange 134

5-3. The Numeraire, Money, and Say's Law 140

5-4. Multimarket Stability 146

5-5. Solutions 153

5-6. The Input-Output System 157

5-7. Summary 161

Chapter 6. Monopolistic Competition 164

6-1. Monopoly 166

6-2. Duopoly and Oligopoly 175

6-3. Product Differentiation: Many Sellers 192

6-4. Monopsony 195

6-5. Summary 198

Chapter 7. Welfare Economics 201

7-1. The Efficiency of Perfect Competition 202

7-2. The Efficiency of Monopolistic Competition 208

7-3. External Effects in Consumption and Production 212

7-4. Social Welfare Functions 217

7-5. Summary 222

Chapter 8. Optimization Over Time 225

8-1. Basic Concepts 226

8-2. Multiperiod Consumption 229

8-3. Time Preference 234

8-4. Multiperiod Production 240

8-5. Investment Theory of the Firm 243

8-6. Interest-rate Determination 250

8-7. Summary 251

Appendix: A Note on the Length of the Investment Period 253

Appendix. Mathematical Review 257

A-1. Simultaneous Equations and Determinants 257

A-2. Calculus: Functions of a Single Variable 262

A-3. Calculus: Functions of Many Variables 268

A-4. Integrals 277

A-5. Difference Equations 279

Index 285