TR, 9:30am to 10:45am
Final Exam: Friday 11 May 2012
Final Exam: Friday 11 May 2012
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.
Tuesday 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.
Sections 1.1, 1.2
Thursday 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.
Sections 2.1, 2.2, 2.3, 2.4, 2.5
Tuesday Jan 31: Consumer Behavior (1): preferences and their representation by a utility function. How do consumers make a decision given the alternatives that are available?
Sections 3.1, 3.2, 3.3, 3.4, 3.5
Thursday Feb 2: Consumer Behavior (2): Budget Constraints.
Sections 3.1, 3.2, 3.3, 3.4, 3.5
Tuesday 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.
Thursday 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).
Sections 4.1, 4.2 page 122, Appendix to Chapter 4 pages 149-155
Tuesday Feb 14: Market Demand:add up individual demands to get market demand. Discuss Elasticity of Demand, the responsiveness of demand to price.
Sections 4.3, 4.6
Tuesday 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
Tuesday Feb 21: 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
Thursday Feb 23: 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.
Quiz 1 in class the week of Feb 20
Tuesday Feb 28 1: 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
Thursday March 1: 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. Pareto Efficiency.
Sections 9.1, 9.2, 9.3, 9.6
Tuesday March 6: Topics Left over.
Thursday March 8: Midterm Review Lecture.
Thursday March 8: Midterm at 8-9:30 PM location TBD
March 12-March 16 Spring break
Tuesday March 20: 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,
Thursday March 22: 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
Tuesday March 27: 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
Thursday March 29: 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
Tuesday April 3: 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
Thursday April 5: 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
Tuesday April 10: 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
Thursday April 12: 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
Tuesday April 17: 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
Thursday April 19: 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
Quiz 2 in class week of the 16th of April
Tuesday April 24: Asymmetric Information II: 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 17.3, 17.4
Thursday April 26: Applications of Game Theory: Auctions Section 13.8
Tuesday May 1: Applications of Game Theory on Public Goods, (or topics left over depending on the time we have left)
Thursday May 3: Final Review Lecture
Robert S. Pindyck, and Daniel L. Rubinfeld: Microeconomics (7th Edition), Prentice-Hall Series in Economics.
Problem Sets 20%
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.
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