Fundamentals

• Basic Supply and Demand is the most important model in economics.  It shows how free markets are able to allocate resources without instructions from a central authority.
   
• Two Goods - Two Prices explains the origin of the demand curve for a good.  This analysis is the foundation for the Theory of the Consumer.
   
• Perfect Competition and Monopoly and Monopolistic Competition explore the foundation for the supply curve for a good.  These models are the central elements of  the Theory of the Firm.

Advanced Supply and Demand

• Who Pays a Sales Tax? is an interesting application of basic supply and demand principles.  It emphasizes thinking like an economist and directs attention to the importance of considering the slopes of the supply and demand curves.
   
• The Cobweb Model and Inventory-Based Pricing examines the basis for asserting that the equilibrium with  supply equal to demand is stable.

Industrial Organization

• Price Discrimination, which is presented in terms of  Why Give Students an Educational Discount?, analyzes the nature of a market where firms maximize profits by offering different prices to different customers.

Labor Economics

The supply and demand for labor reverse the roles of utility maximizing behavior and profit maximizing behavior so that utility maximization explains the supply function and profit maximization explains the demand function.

• The Demand for Labor arises from properties of the production function seen earlier in the explanation of the supply curve for goods.
   
• Labor Supply, Income Taxes, and Transfer Payments introduces a labor-leisure tradeoff in a variation on the Two Goods - Two Prices Model that is central to the Theory of the Consumer. 

Macro Foundations

• Intertemporal Substitution applies the Two Goods - Two Prices Model to consumption in the present and consumption in the future.  This provides a framework for discussing interest rates.  Incorporating production possibility frontiers extends the analysis to include the decision to invest in education and the decision to save for retirement.

References

Jack Hirshleifer, Price Theory and Applications.

Hal R. Varian, Microeconomic Analysis.

Hischleifer is a classic intermediate micro text.  Varian will appeal to readers interested in the equations behind the models.

 

Classic Economic Models

    Contents

Microeconomics

Introduction
    Overview of Micro Models

Supply and Demand
    Basic Supply and Demand
    Who Pays a Sales Tax?
    The Cobweb Model and
        Inventory-Based Pricing

Theory of the Firm
    Perfect Competition
    Monopoly and
        Monopolistic Competition
    Price Discrimination
    The Demand for Labor

Theory of the Consumer
    Two Goods - Two Prices
    Intertemporal Substitution
    Labor Supply, Income Taxes,
        and Transfer Payments

Macroeconomics

Introduction
    Overview of Macro Models

Models in Chronological Order
    The Classical Model
    The Simple Keynesian Model
    The Keynesian IS/LM Model
    The Mundell-Fleming Model
    Real Business Cycles
    The IS/MP Model
    The Solow Growth Model

Financial Markets
    Utility-Based Valuation of Risk
    Mean-Variance Analysis:
        Risk vs. Expected Return
    Fixed Income Securities:
        Mortgage/Bond Calculator
    Growth Investments:
        Present Value Calculator

Resources