: M 3:15-4:15
MW, 11:00am to 12:15pm
Class will not meet on:
Class will meet on:
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.
This course assumes familiarity with multivariate calculus and high school algebra. In addition, we will have a review section on most essential mathematical tools.
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.
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.
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
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.
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
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.
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.
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
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
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
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
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
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
Mon April 25:Asymmetric Information II: Moral Hazard
Sections 17.3, 17.4
Wed April 27:Applications of Game Theory: Auctions
T.A. Section: Review of Final Pack.
Mon May 2: Applications of Game Theory on Public Goods,
Wed May 5: Behavioral Economics
T.A. Section: Review of Final Pack.
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.
Robert S. Pindyck, and Daniel L. Rubinfeld: Microeconomics(7th Edition), Prentice-Hall Series in Economics.The textbook can be bought at the NYU Bookstore.
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.
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