Financial Times
Hugh Gravelle / Ray Rees  
Total pages
June 2004
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This is a standard text for upper level undergraduate/postgraduate microeconomics. The book begins at the intermediate level and ends at a level appropriate for the graduate student. Updated and revised, this is a new edition of one of the best-selling advanced microeconomics texts to be published in Europe. This well informed book provides a comprehensive exposition of modern microeconomic theory, covering many of the issues currently being researched and debated. The book offers very rigorous, mathematical treatment of the topics discussed making it appropriate for graduate as well as able intermediate level students. The writing style is clear and concise and the book is particularly liked for the thoroughness with which the concepts are dealt.


  • Comprehensive coverage of Microeconomics
  • Clear and careful mathematical treatment of economics theory
  • Introduces the student to cutting edge research
  • Takes a problem - solving approach encouraging the student to apply the theory through regular questioning material and activities
  • Provides the students with a good understanding of the separate elements of the theory and how they interact

New to this Edition

  • Thoroughly updated to include recent developments and research
  • Increased coverage of game theory
  • Improved pedagogy, including more applied exercises and questions, boxed case studies/applications. The rigorous intellectual approach of the book will not be compromised by the inclusion of extra pedagogical features.

Table of Contents

1 The nature and scope of microeconomics
A Concepts and methods
B The economic and social framework
2 The theory of the consumer
A The preference ordering
B The feasible set
C The consumption decision
D The comparative statics of consumer behaviour
E Offer curves and net demand curves
Appendix 1 : The lexicographic ordering
Appendix 2 : Existence of a utility function
3 Consumer theory : duality
A The expenditure function
B The indirect utility function, Roy's identity and the Slutsky equation
C Measuring the benefits of price changes
D Composite commodities, separability and homotheticity
4 Further models of consumer behaviour
A Revealed preference
B The consumer as a labour supplier
C Consumption and the allocation of time
D Households
5 Production
A Introduction
B The production function
B Variations in scale
C Variations in input proportions
D The multi-product case
6 Cost
A Introduction
B Long-run cost minimization
C Short-run cost minimization
D Cost minimization with several plants
E Multi-product cost functions
7 Supply and firm objectives
A Long-run profit maximization
B Short-run profit maximization
C The multi-product firm
D The profit function and comparative statics
E The entrepreneurial firm
F Labour managed firms
8 The theory of a competitive market
A Short-run equilibrium
B Stability of equilibrium
C Long-run equilibrium
9 Monopoly
A Introduction
B Price and output determination under monopoly
C Price discrimination
D Monopoly welfare loss
10 Input markets
A Demand for inputs
B Monopsony
C Unions as monopoly input suppliers
D Bilateral monopoly
11 Capital markets
A Introduction
B Optimal consumption over time
C The optimal investment decision
D Capital market equilibrium under certainty
E Extensions to many periods
12 General equilibrium
A Introduction
B Walrasian equilibrium of a competitive economy
C Existence of Walrasian equilibrium
D Stability of Walrasian equilibrium
E Edgeworth exchange theory
F Exchange, equilibrium and the core
13 Welfare economics
A Introduction
B Pareto efficient resource allocation
C Welfare functions and the Pareto criterion
D Pareto efficiency and competitive markets
E Distribution and markets
F Arrow's impossibility theorem
14 Market failure and government failure
A The causes of market failure
B Instances of market failure
C Theory of the second best
D Government failure
15 Game theory
A Introduction
B Game representation and solutions
C Imperfect and incomplete information
D Mixed strategies
E Cooperative bargaining
F Non-cooperative bargaining
G Delay and disagreement in bargaining
16 Oligopoly
17 Choice under uncertainty
A Introduction
B A formalization of 'uncertainty'
C Choice under uncertainty
D Properties of the utility function
E Risk aversion and indifference curves
F Measures of risk
G Comparative statics under uncertainty
18 Production under uncertainty
A Introduction
B Competitive firm under uncertainty
C Production with futures markets
19 Insurance, risk spreading and risk pooling
A Introduction
B The insurance decision
C Incomplete insurance markets
D Risk spreading: the Arrow-Lind Theorem
E Risk pooling
F Asymmetric information in insurance markets : adverse selection
G Asymmetric information in insurance markets : moral hazard
20 Agency and contract theory
21 General equilibrium under uncertainty and incomplete markets
A Introduction
B Complete markets in state contingent claims
C State contingent commodities
D Efficiency with production
E The stock market
F Incomplete stock markets
Further reading
Mathematical Appendices
A Structure of optimisation problems
B Solutions: questions and concepts
C Existence of solutions
D Local and global optima
E Uniqueness of solutions
F Interior and boundary optima
G Location of the optimum: method of Lagrange
H Concave programming and the KuhnTucker conditions
I Second order conditions and comparative statics
J The envelope theorem
K Fixed point theorems
L Bayes rule

Back Cover

"Comprehensive, well informed and a joy to read. It was hard to put the book down once I had started to read it. In terms of the coverage, it will be hard to find a matching text"

Dr Sanjit Dhami, University of Leicester


This highly regarded text is one of the best-selling advanced microeconomics books to be published in Europe. Updated and revised, the new edition provides a comprehensive exposition of modern microeconomic theory, covering many of the issues currently being researched and debated.

As in previous editions, the third edition offers rigorous treatment of the topics discussed, with the major emphasis placed on giving the student an intuitive understanding of microeconomic models and theories. This book provides the student with a good understanding of the nature and purpose of microeconomic theories and the way the theories interrelate to form a coherent whole. Students are encouraged, with the use of the exercises which are integral to the book, to develop the ability to apply microeconomic theories in solving problems.


Key Features

  • New!
  • Chapter on game theory.
  • New! Chapters on uncertainty and asymmetric information have been extended and restructured.
  • Microeconomic concepts are dealt with rigorously, comprehensively and in depth.
  • Numerous exercises throughout form an integral part of the book.
  • The writing style is clear and concise.
  • Discussions of literature and suggestions for further reading are in an extensive set of notes at the end of the book.
  • Mathematics of optimization is included in a number of short appendices at the end of the book.

Beginning at the intermediate level and ending at a level appropriate for the graduate student, this is a core text for upper level undergraduate and taught graduate microeconomics courses.

Hugh Gravelle is Professor at the National Primary Care Research and Development Center, University of York.

Ray Rees is Professor of Economics, at Ludwig Maximillans University, Germany.

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