Microeconomics and Investment Science

Microeconomic analysis of consumer behavior; cost of production and competitive supply; analysis of competitive markets; pricing with market power; monopolistic competition and oligopoly; government interventions and welfare analysis; game theoretic concepts.
Investment, time and capital markets; expected utility and risk aversion; the net present value criterion for capital investment decisions. Repeated investments, optimal replacement schedules, depreciation and taxation (treated briefly). Bonds; annuities and perpetuities; portfolio investment (The Markowitz and CAPM model). Investment under uncertainty.

Position and function within the study program:
The course is compulsory in the 3. year of the MTIØT program. The course shall contribute to fulfilling learning objective 2.3 in the detailed list of learning objectives for MTIØT, where broad and sound basic knowledge in administrative and economic areas are demanded.

The course will provide knowledge to understand basic theory, models, methods, and concepts within microeconomics and investment science:
- theory about consumer behavior under conditions of certainty and uncertainty and implications for demand
- models for the decisions of firms in different market structures
- theory about market equilibrium and its implications for social welfare
- quantitative methods for analyzing and valuing investments and the theory about the pro and cons of each method - the concepts of risk and utility in economic and financial theory
- the concept of investment portfolio, the Markowitz model and the connections between expected return, risk and the correlation between investment options

By the end of the course, the students should be able to use economic theory and quantitative methods from microeconomics and investment science to analyze real problems like
- calculate the optimal price, quantity and profit for firms in different market structures
- give sound advice regarding strategies for firms based on economic concepts and models
- quantify a potential investment by constructing its cash flow stream and do calculations to assess its profitability
- construct a portfolio fulfilling given requirements regarding expected rate of return and risk by combining different investment options Besides this the course should give: General knowledge about how quantitative methods and models can provide support for economic decisions.

Lectures and weekly exercises. Exercises will be evaluated and a minimum number of points must be gathered to qualify for the exam. If there is a re-sit examination, the examination form may change from written to oral. The course will be taught in English (but the exams, and part of the exercises will be available in Norwegian).