Notes in Micreconomics Theory

Lecture Notes in
Microeconomic Theory

This is a revised version of the book, last updated June 16th, 2013.
Please e-mail me any comments and corrections.
Ariel Rubinstein [e-mail] Lecture Notes in
Microeconomic Theory
The Economic Agent
Second Edition

Ariel Rubinstein

PRINCETON UNIVERSITY PRESS
PRINCETON AND OXFORD

Copyright c 2012 by Princeton University Press
Published by Princeton University Press, 41 William Street, Princeton,
New Jersey 08540
In the United Kingdom: Princeton University Press, 60 Oxford Street,
Woodstock, Oxfordshire OX20 1TW press.princeton.edu All Rights Reserved
Library of Congress Cataloging-in-Publication Data
Rubinstein, Ariel.
Lecture notes in microeconomic theory : the economic agent /
Ariel Rubinstein. – 2nd ed.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-691-15413-8 (pbk. : alk. paper)
1. Microeconomics. 2. Economics. I. Title.
HB172.R72 2011
338.5–dc23
2011026862
British Library Cataloging-in-Publication Data is available
This book has been composed in Times.
Printed on acid-free paper. ∞
Typeset by S R Nova Pvt Ltd, Bangalore, India
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1

Contents

Preface

vii

Introduction

ix

Lecture 1. Preferences
Problem Set 1

1
10

Lecture 2. Utility
Problem Set 2

12
20

Lecture 3. Choice
Problem Set 3

23
42

Lecture 4. Consumer Preferences
Problem Set 4

46
59

Lecture 5. Demand: Consumer Choice
Problem Set 5

61
74

Lecture 6. More Economic Agents: a Consumer Choosing Budget Sets, a Dual Consumer and a Producer
Problem Set 6

76
88

Lecture 7. Expected Utility
Problem Set 7

93
104

Lecture 8. Risk Aversion
Problem Set 8

107
119

Lecture 9. Social Choice
Problem Set 9

121
127

Review Problems

130

References

149

Preface

This is the second edition of my lecture notes for the first quarter of a microeconomics course

References: 153 Yaari, M. E. (1985). “On the role of ‘Dutch Books’ in the theory of choice under risk.” Nancy Shwartz Memorial Lecture, reprinted in Frontiers of Research in Economic Theory: The Nancy L. Shwartz Memorial Lectures, 1983–1997 ed. D. P. Jacobs, E. Kalai, M. I. Kamien, N. L. Shwartz, P. Hammond, and A. Holly. New York: Cambridge University Press. Yaari, M. E. (1987). “The dual theory of choice under risk.” Econometrica 55: 95–115.