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The University of Southampton

ECON2003 Microeconomics of Markets

Module Overview

This module is intended to provide students with a firm grounding in the analytical methods of microeconomic theory and a clear understanding of the role of the price mechanism in organising economic activity. The objective is to analyse the role of prices and the market mechanism in allocating scarce resources and to evaluate the outcome. Co-requisites: ECON2033 One of the pre-requisites for ECON3004 and ECON3015 Pre-requisite for ECON3009

Aims and Objectives

Learning Outcomes

Learning Outcomes

Having successfully completed this module you will be able to:

  • Use the tools of microeconomic theory in modelling actual economic phenomena and in evaluating the performance of various economic institutions
  • Find consumer demand as the solution to the utility maximisation problem given various frequently used preferences (Cobb-Douglas, Perfect complements and perfect substitutes, ...)
  • Demonstrate knowledge and understanding of the expected utility model and apply it to simple applications like investing in risky assets or buying insurance
  • Use the Slutsky equation to understand analyse changes in demand
  • Analyse the choices of a profit maximising form (profit maximisation problem, cost minimisation problem)
  • Understand the concept of equilibrium given different market institutions
  • Discuss the welfare properties of general equilibrium
  • Analyse consumer's behaviour in problems of intertemporal choice (saving) and asset markets


The module begins with a careful analysis of the choice behaviour of consumers and firms in the market place. These ideas are then used to analyse the formation of prices within markets. While some of the material will be familiar from the first year modules, the method of analysis is more rigorous in this module. Course Outline: Consumer Theory - Introduction - Budget Constraint - Preferences and Utility - Choice and Demand Theory of the Firm - Production and Technology - Cost Function and Cost Minimization - Supply in Competitive Markets Equilibrium with Perfect Competition - Partial Equilibrium - General Equilibrium (Exchange Economy) - Welfare Properties of a Competitive Equilibrium (Exchange Economy) Capital Markets - Intertemporal Choice - Assets Markets - Uncertainty - Risky Assets Asymmetric Information - Adverse Selection - Signaling

Learning and Teaching

Teaching and learning methods

Lectures and problem classes

Independent Study122
Total study time150

Resources & Reading list

Hal Varian (2014). Intermediate Microeconomics With Calculus: A Modern Approach. 

Varian (2014). Intermediate Microeconomics. 


Assessment Strategy

Assessment in this module is through coursework in form of problem sets (15%), successful participation in class in eg. online quizzes and an end of semester take-home exam (70%).


MethodPercentage contribution
Assignment 70%
Class participation 15%
Coursework 15%


MethodPercentage contribution
Assignment  (2 hours) 100%


MethodPercentage contribution
Assignment 100%

Repeat Information

Repeat type: Internal & External

Linked modules

Pre-requisites: (ECON1001 or ECON1003 or MANG1024) and (ECON1007 and ECON1008) or (MATH1058 and MATH1059)


Costs associated with this module

Students are responsible for meeting the cost of essential textbooks, and of producing such essays, assignments, laboratory reports and dissertations as are required to fulfil the academic requirements for each programme of study.

In addition to this, students registered for this module typically also have to pay for:

Books and Stationery equipment

Recommended texts for this module may be available in limited supply in the University Library and students may wish to purchase reading texts as appropriate.


Obtaining the textbook is strongly advised, it is available in the library.

Please also ensure you read the section on additional costs in the University’s Fees, Charges and Expenses Regulations in the University Calendar available at

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