Principles of Microeconomics

Course Description: Principles of Microeconomics

Principles of Microeconomics introduces students to the fundamental economic principles used to analyse the behaviour and decision-making of individuals, households, firms and markets. The course begins with the central economic problem of scarcity, choice and opportunity cost, and develops the tools required to understand how scarce resources are allocated through markets and other institutional arrangements.

Students are introduced to demand and supply analysis, market equilibrium, price determination and the effects of changes in market conditions. The course then examines elasticity, including price, income and cross elasticity of demand and elasticity of supply, with emphasis on their application to business decision-making and public policy.

The course further develops the theory of consumer behaviour, including utility, budget constraints and consumer choice, before progressing to the theory of the firm. Students examine production, productivity, the law of diminishing marginal returns, economies of scale, short-run and long-run costs, revenue and profit maximisation.

A substantial component of the course focuses on the behaviour of firms under alternative market structures. Students analyse perfect competition, monopoly, monopolistic competition and oligopoly, including firm equilibrium, pricing behaviour, entry and exit, product differentiation, barriers to entry, collusion, cartels, strategic interdependence and game-theoretic decision-making.

The course also examines circumstances in which markets may fail to achieve socially desirable outcomes. Topics include externalities, public goods, common resources, merit and demerit goods, information failure, market power and government intervention. Students evaluate policy instruments such as taxation, subsidies, regulation, public provision, property rights and competition policy.

Attention is also given to factor markets and income distribution. Students study the demand and supply of labour, marginal revenue product, wage determination, human capital, wage differentials, monopsony, trade unions, minimum wages, economic rent and the distribution of factor incomes. The final part of the course explores income inequality, poverty and redistribution, including Lorenz curves, Gini coefficients, poverty measurement, progressive taxation, social transfers and the potential trade-off between equity and efficiency.

Throughout the course, economic theory is applied to Zimbabwean and wider developing-economy contexts, enabling students to relate microeconomic principles to practical issues involving households, businesses, labour markets, public policy, competition, poverty and resource allocation.

Course Aim

The course aims to equip students with a sound understanding of the principles and analytical tools of microeconomics so that they can explain and evaluate the behaviour of economic agents, the operation of markets, firm decision-making, market failure and government intervention.

Course Learning Outcomes

By the end of the course, students should be able to:

  1. Explain the concepts of scarcity, choice, opportunity cost and resource allocation.
  2. Apply demand and supply analysis to determine and interpret market equilibrium.
  3. Calculate and interpret the major measures of elasticity.
  4. Explain consumer choice using utility and budget-constraint analysis.
  5. Analyse production, productivity, costs, revenue and profit.
  6. Apply marginal analysis to firm decision-making and profit maximisation.
  7. Compare the characteristics and outcomes of perfect competition, monopoly, monopolistic competition and oligopoly.
  8. Analyse strategic behaviour in oligopoly using concepts from game theory.
  9. Identify major sources of market failure and evaluate alternative government interventions.
  10. Explain the operation of labour and other factor markets and the determination of factor rewards.
  11. Analyse wage differentials, labour-market power and minimum-wage policies.
  12. Explain and measure income inequality and poverty using appropriate microeconomic tools.
  13. Evaluate taxation, transfers and other redistribution policies in terms of equity, efficiency and incentives.
  14. Apply microeconomic theory to contemporary economic issues in Zimbabwe and other developing economies.
  15. Interpret economic diagrams, numerical information and simple microeconomic models in examination and real-world contexts.

Indicative Course Content

The course covers thirteen major thematic areas:

Lecture 1: Introduction to Microeconomics, Scarcity, Choice and Opportunity Cost
Lecture 2: Demand, Supply and Market Equilibrium
Lecture 3: Elasticity of Demand and Supply
Lecture 4: Consumer Behaviour and Utility Analysis
Lecture 5: Production and the Theory of the Firm
Lecture 6: Costs of Production, Revenue and Profit
Lecture 7: Perfect Competition
Lecture 8: Monopoly
Lecture 9: Monopolistic Competition
Lecture 10: Oligopoly and Game Theory
Lecture 11: Market Failure, Externalities and Government Intervention
Lecture 12: Factor Markets, Wage Determination and Income Distribution
Lecture 13: Income Inequality, Poverty, Redistribution and Government Policy

Teaching and Learning Approach

The course uses a combination of lectures, economic diagrams, worked numerical examples, Zimbabwe-focused applications, class discussions, case analysis, problem-solving exercises and tutorials. Students are expected to develop both conceptual understanding and the ability to apply economic reasoning to practical situations.

Recommended Core Texts

Key texts supporting the course include:

  • Mankiw, N. G. Principles of Economics. Cengage.
  • Sloman, J. and Wride, A. Economics. Pearson.
  • Bamford, C. and Grant, S. Cambridge International AS and A Level Economics Coursebook. Cambridge University Press.
  • Pindyck, R. S. and Rubinfeld, D. L. Microeconomics. Pearson.
  • Varian, H. R. Intermediate Microeconomics: A Modern Approach. W. W. Norton.
  • McConnell, C. R., Brue, S. L. and Flynn, S. M. Economics: Principles, Problems, and Policies. McGraw-Hill.

For Zimbabwean applications, students should also consult current material from ZIMSTAT, the Reserve Bank of Zimbabwe, ZIMRA, the Competition and Tariff Commission, relevant sector regulators and government ministries.

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