NYU Stern School of Business

Undergraduate College

C30.0001.002: MICROECONOMICS

Spring 2011

Instructor Details

Skreta, Vasiliki

vskreta@stern.nyu.edu

: M 3:15-4:15

KMC 7-64

 

Course Meetings

MW, 11:00am to 12:15pm

Tisch T-UC25


Final Exam:

Schedule exceptions
    Class will not meet on:
    Class will meet on:

 

Course Description and Learning Goals

Economics is the study of production and allocation of scarce resources, and how agents make decisions under conditions of scarcity and uncertainty. This course provides a rigorous introduction to economics, with special emphasis on microeconomics. It will introduce you to economics as a discipline and as a way of thinking. It will also provide you with a set of tools, which will be very useful in other economics courses.

 

We will first study the behavior of individual consumers and firms. Then we will give you some insight into how markets work and whether market outcomes are desirable.  We will also look at situations in which the firm is a monopolist, or competes with a limited number of rivals. Some of the key concepts we will introduce include economic incentives, marginal analysis, opportunity cost (which costs matter), market efficiency (what does it mean for a market to work) and strategic behavior (how to predict and respond to your rivals’ decisions).

 

The tools that you will be acquainted with in this class are fundamental for most upper division courses of the Economics major as well as classes in Finance, Accounting and Marketing.

 

Course Pre-Requisites

This course assumes familiarity with multivariate calculus and high school algebra. In addition, we will have a review section on most essential mathematical tools.

 

Course Outline

Week 1:

 

Mon Jan 24:  Introduction and Preliminaries: what is Economics?  The study of how a society uses its limited resources to produce, trade and consume goods and services.

            Chapter 1

           

Wed Jan 26:The Basics of Supply and Demand. The demand Curve describes consumers’ choice, while the Supply Curve describes how much firms will produces. Equilibrium of Supply and Demand through price.

§                     Chapter 2, pp. 21-33 and 58-61.

 

Week 2:

 

MonJan 31:  Consumer Behavior (1): Preferences

§                     Chapter 3, pp. 67-78

§          

Wed Feb 03:The Basics of Supply and Demand. The demand Curve describes consumers’ choice, while the Supply Curve describes how much firms will produces. Equilibrium of Supply and Demand through price.

§                     Chapter 2, pp. 21-33 and 58-61.

 

T.A. Section: Math Review on Derivatives and Algebra

 

Week 3:

           

Mon Feb 7: Consumer Behavior (3): utility maximization. How do consumers maximize their utility given the budget constraint. The use of utility maximization to derive Marshallian demand curves.

                        Chapter 3, pp. 86-92, pp. 95-100

Wed Feb 9:  Individual Demand: Study how utility maximizing choice of a good varies as Income Changes (Engel Curve), and as the price of the good itself changes (Demand Curve).

                        Chapter 4, pp. 111-125

 

T.A. Section: Solution to Problem Set 1 on Math Tools and Supply and Demand.

 

Week 4:

 Mon Feb 14:Market Demand:add up individual demands to get market demand. Discuss Elasticity of Demand, the responsiveness of demand to price.

Chapter 4, Sections 4.3,4.4,4.6.

Chapter 2, Sections 2.4

 

Wed Feb 16:Production Part I: We introduce firms and how they decide to produce. A firm is described by how it can transform inputs such as labor and capital into outputs, which is called a production function. We also discuss marginal versus average product of labor and capital.

            Sections 6.1, 6.2

 

T.A. Section: Solution to Problem Set 2.

 

Quiz 1 in class Wed Feb 16

 

 

Week 5:

 

            Wed Feb 23:  Production Part II:Production with two inputs. The tradeoff between using more labor or capital is called the marginal rate of technical substitution. As well we discuss returns to scale, i.e. are larger plants more productive?

            Sections 6.3, 6.4

 

T.A. Section: Solution to Problem Set 3.

 

Week 6:

Mon Feb 28:  The Cost of Production: We discuss the difference between sunk costs and fixed costs and costs in the short run versus the long run.

            Sections 7.1, 7.2, 7.3, 7.4, Appendix 7 pages 264-268.

 

Wed Mar 2:Profit Maximization and Competitive Supply. We look at the firm’s decision to produce in a perfectly competitive market. If a firm is maximizing profits, then it sets marginal costs to marginal revenue.

            Sections 8.1, 8.2, 8.3, 8.4, 8.5

 

T.A. Section: Solution to Problem Set 4.

 

Week 7:

           

Mon Mar 7:The Analysis of Competitive Markets. We use the tools of Consumer and Producer Surplus to analyze the effect of a tax or rent control on the efficiency of a market.

            Sections 9.1, 9.2, 9.3, 9.6

 

Wed Mar 9:Midterm Review

 

T.A. Section: Solution to Problem Set 5 and More midterm review questions.

 

Thursday March 10: Midterm at 8-9:30 PM location TBD 

 

March 14-March 20 Spring break

 

 

Week 8:

Mon Mar 21:Externalities and Public Goods. In many situations your actions affect others indirectly. Does this affect market efficiency?  We will talk about the failure of several fisheries due to the externality problem.

            Sections 18.1, 18.2, 18.6, 18.6

 

Wed March 23:  Market Power: Monopoly and Monopsony (I). We analyze firms with market power that do not take the market price as given, but can choose the price of their products.

            Section 10.1 up to page 357

 

 

T.A. Section: Problem 6          

 

 

 

Week 9:

Mon March 28:Monopoly, Market Power and Antitrust (II): The social cost of monopoly and laws against monopoly: the antitrust laws.

            Sections 10.2, 10.3,10.4

 

Wed March 30:Pricing with Market Power. We look at Price Discrimination, the practice of setting different prices for different types of consumers (such as students discounts or quantity discounts).

            Sections 11.1, 11.2

 

T.A. Section: Problem 7          

 

Week 9:

Mon April 4:Choice under Uncertainty. Expected Utility and Risk Preferences. How do we make choices when certain variables such as income and prices are uncertain (making choices with risk)?

            Sections 5.1, 5.2, 5.3

 

Wed April 6:Game Theory (I): Simultaneous moves. We examine strategic decision making, when you are interacting with a competitor. We look at dominant strategies and a solution concept called Nash Equilibrium.

            Sections 13.1, 13,2, 13.3

 

T.A. Section: Problem 8          

 

Week 10:

Mon April 11:Game Theory II: Games Trees, Commitment & Threats. We look at sequential games in this lecture and the strategic role of commitment and threats.

                        Sections 13.5, 13,6, 13.7

Wed April 13:Monopolistic Competition and Oligopoly. We examine how firms set price or quantity when they have a single competitor (Bertrand and Cournot Competition).Part I

            Section 12.2 up to page 455, 12.3      

 

T.A. Section: Problem 9          

 

Week 11:

 

Mon April 18:Monopolistic Competition and Oligopoly. We examine how firms set price or quantity when they have a single competitor (Bertrand and Cournot Competition).Part II

            Sections 12.2 from 455 on

 

Wed April 20:Asymmetric Information I: Adverse Selection & Signaling. Frequently a seller or producer knows more about the quality of the product than the buyer does. How does asymmetric information affect economic outcomes?

            Sections 17.1, 17.2

 

T.A. Section: Problem 10        

 

Quiz 2 in class the week of April 18

 

 

 

 

Week 12:

 

Mon April 25:Asymmetric Information II: Moral Hazard

Sections 17.3, 17.4

 

Wed April 27:Applications of Game Theory: Auctions

             Section 13.8

T.A. Section: Review of Final Pack.

 

 

Week 13:

 

Mon May 2: Applications of Game Theory on Public Goods,

            Section 18.6

 

Wed May 5: Behavioral Economics

 

T.A. Section: Review of Final Pack.

 

Week 14:

 

Mon May 9:Final Review Lecture

 

T.A. Section: Review of Final Pack.

Final Exam: Fri. 05/13 12:00 PM 1:50 PM. Room to be announced.

 

Required Course Materials

Robert S. Pindyck, and Daniel L. Rubinfeld:  Microeconomics(7th Edition), Prentice-Hall Series in Economics.The textbook can be bought at the NYU Bookstore.

 

Assessment Components

Problem Sets                20%

Quiz                             10%

            Midterm                       30%

            Final                            40%

 

Group Projects

Guidelines for Group Projects

Business activities involve group effort. Consequently, learning how to work effectively in a group is a critical part of your business education.

Every member is expected to carry an equal share of the group’s workload. As such, it is in your interest to be involved in all aspects of the project. Even if you divide the work rather than work on each piece together, you are still responsible for each part. The group project will be graded as a whole:   its different components will not be graded separately. Your exams may contain questions that are based on aspects of your group projects.

It is recommended that each group establish ground rules early in the process to facilitate your joint work including a problem-solving process for handling conflicts. In the infrequent case where you believe that a group member is not carrying out his or her fair share of work, you are urged not to permit problems to develop to a point where they become serious. If you cannot resolve conflicts internally after your best efforts, they should be brought to my attention and I will work with you to find a resolution.

You will be asked to complete a peer evaluation form to evaluate the contribution of each of your group members (including your own contribution) at the conclusion of each project. If there is consensus that a group member did not contribute a fair share of work to the project, I will consider this feedback during grading.

 

Grading

At NYU Stern we seek to teach challenging courses that allow students to demonstrate their mastery of the subject matter.  In general, students in undergraduate core courses can expect a grading distribution where: 

Note that while the School uses these ranges as a guide, the actual distribution for this course and your own grade will depend upon how well you actually perform in this course.

 

Re-Grading

The process of assigning grades is intended to be one of unbiased evaluation. Students are encouraged to respect the integrity and authority of the professor’s grading system and are discouraged from pursuing arbitrary challenges to it.

If you believe an inadvertent error has been made in the grading of an individual assignment or in assessing an overall course grade, a request to have the grade re-evaluated may be submitted. You must submit such requests in writing to me within 7 days of receiving the grade, including a brief written statement of why you believe that an error in grading has been made.

 

Professional Responsibilities For This Course

Attendance

 

Participation

In-class contribution is a significant part of your grade and an important part of our shared learning experience. Your active participation helps me to evaluate your overall performance.
You can excel in this area if you come to class on time and contribute to the course by:

 

Assignments

 

Classroom Norms

 

Stern Policies

General Behavior
The School expects that students will conduct themselves with respect and professionalism toward faculty, students, and others present in class and will follow the rules laid down by the instructor for classroom behavior.  Students who fail to do so may be asked to leave the classroom. 

 

Collaboration on Graded Assignments
Students may not work together on graded assignment unless the instructor gives express permission. 

 

Course Evaluations
Course evaluations are important to us and to students who come after you.  Please complete them thoughtfully.

 

Academic Integrity

Integrity is critical to the learning process and to all that we do here at NYU Stern. As members of our community, all students agree to abide by the NYU Stern Student Code of Conduct, which includes a commitment to:

The entire Stern Student Code of Conduct applies to all students enrolled in Stern courses and can be found here:

Undergraduate College: http://www.stern.nyu.edu/uc/codeofconduct
Graduate Programs: http://w4.stern.nyu.edu/studentactivities/involved.cfm?doc_id=102505

To help ensure the integrity of our learning community, prose assignments you submit to Blackboard will be submitted to Turnitin.  Turnitin will compare your submission to a database of prior submissions to Turnitin, current and archived Web pages, periodicals, journals, and publications.  Additionally, your document will become part of the Turnitin database.

 

Recording of Classes

Your class may be recorded for educational purposes

 

Students with Disabilities

If you have a qualified disability and will require academic accommodation of any kind during this course, you must notify me at the beginning of the course and provide a letter from the Moses Center for Students with Disabilities (CSD, 998-4980, www.nyu.edu/csd) verifying your registration and outlining the accommodations they recommend.  If you will need to take an exam at the CSD, you must submit a completed Exam Accommodations Form to them at least one week prior to the scheduled exam time to be guaranteed accommodation.

 

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