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August 24, 2015 draft
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Economics 2101 Intermediate Microeconomic Theory
Fall semester 2015
Section 14 (CRN 63096)
Tu/Thur 2:20 to 3:30 Gov 101
Joann M. Weiner
Department of Economics, Monroe 370
2115 G St., NW, Washington, DC 20052
[email protected]
@DCEcon
You should follow me on twitter. I’ll use #gwu2101 for messages
meant for our class
Thursday from 3:45 to 5:00 and by appointment
COURSE DESCRIPTION
This course applies the tools of microeconomic analysis: (1) to analyze household
economic behavior, including spending, saving, and working; (2) to analyze firm behavior,
including pricing, output and input decisions; (3) to examine supply and demand
interactions under perfect competition and other market structures; (4) to develop tools to
evaluate economic outcomes and policies; and (5) to analyze economic behavior in a single
market using the tools of partial equilibrium analysis; (5) to understand the basic principles
of game theory and how to calculate the time value of money. The course emphasizes the
use of data to conduct empirical analysis of theoretical questions.
COURSE PREREQUISITES
All students should have taken a basic economics course that covers the principles of
microeconomics. The economics department requires calculus for this course, and you
should have taken one semester of calculus, such as Math 1221, 1231, 1252 or the
equivalent, before taking Economics 2101.
You should review the document on Blackboard that covers the basic calculus concepts
used in microeconomics and you must know how to do these calculations to succeed in this
course. If you need additional help, you should review the online material at
glsmicro.com/appendices and in the “Math Review Appendix” at the end of the text.
Several chapters have material in the text and online that cover the mathematical tools that
help you understand the economic analysis. Developing good math skills will make you a
better economist than if you haven’t developed these skills.
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TEXT
Austan Goolsbee, Steven Levitt, and Chad Syverson, Microeconomics 1st ed. Worth
publishers, 2013 (ISBN 0-7167-5975-6).
I’m using this textbook because I like the approach that the authors --- one is a former
chairman of the Council of Economic Advisors and another is a co-author of the popular
Freakonomics book and blog --- take. As the authors explain, their book shows the reality
behind the theory and uses empirical studies to illustrate the theory. The book shows how
economics can be useful for policy and in everyday life, and the authors use current and
vivid examples to help students see “the beauty, power, utility, and practicality of economic
thinking.” The book refers to articles that show how economists use economic concepts to
analyze real-world problems. These articles will form a key part of the course.
You will need to have access to the book to work on the questions for the problem sets.
The book provides numerous resources to help you learn the material, including Figuring
it out problems, Make the Grade essays, and end-of-chapter study aides. There are
numerous online appendices that show how to use calculus to solve economic problems.
I am using a program called nClass to stimulate interactive discussion in class. Please
install the app on your smartphone so you can participate in the discussion.
LEARNING OUTCOMES
Students will learn to use microeconomic tools such as constrained optimization,
equilibrium analysis, and comparative statics to analyze the economic behavior of
individual economic decision-makers, such as consumers, workers, firms, and managers.
The course has a practical focus and many topics come from current events. For example,
we’ll analyze how the Uber car service illustrates key principles of supply and demand,
why it’s profitable for Starbucks to replace workers with robots, whether studying at GWU
has a positive net present value, and how game theory helps us understand why Intel and
AMD charge the same price for micro computer chips.
GRADING
 Homework/Attendance/Participation
 Quizzes
 Midterm
 Final
10%
20%
30%
40%
Quizzes: I’ll give three short quizzes to verify that you’re learning the material. I’ll drop
the lowest quiz score when determining the overall quiz grade. I do not give make up
quizzes, so make sure that you are in class for at least two of the quizzes.
Midterm: The midterm will cover the material covered in the syllabus up to the midterm.
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Final exam: The final is NOT cumulative – it will only cover the material from the
midterm through the end of the course (with exceptions for material that carries over
throughout the semester). University policy restricts the number of final exams that
students may take on a single day. If you know that you will have a conflict with the final
exam, please let me and your other professors know as soon as possible so that we can
reach a mutually acceptable solution to the conflict.
CLASS POLICIES
Attendance: I will use the Smartphone-based NClass program from the GetNClass startup
to take attendance each day. You should make sure that you log in to the program when
you arrive in class so that you receive credit for attendance. If you know that you will miss
a class, please let me know so that I can make that note in NClass. This is a great program
for taking attendance, giving quizzes, and providing real-time feedback in class.
Instructions for how to install the NClass App on your Smartphone, laptop, tablet or related
devices are in the SYLLABUS folder on Blackboard. You may go to this site listed below
for more information on installing the program.
 http://www.getnclass.com/
Homework: Problem sets are due as indicated in the syllabus. Attendance, class discussion
and participation on the blog form part of your homework grade. I encourage you to attend
class since you will learn more from hearing the material presented in class than from just
reading the text book and doing problems. Students who don’t come to class tend to do
relatively poorly not just in terms of their grade but also in terms of understanding
economics. We discuss a lot of material in class that isn’t in the book.
 You should spend about three hours studying for each hour of class time.
Study Groups and Individual assignments: To assist your learning, I’ll divide the class
into study groups, and each group will be responsible for completing the homework each
week. Each group will choose a leader and that person will upload the problem set for the
group. I expect that all members of the study group will contribute to completing the work
and the group will receive credit for uploading the problem sets. You won’t get credit for
homework if you don’t contribute to the group’s effort, and I will ask the group leader to
indicate if any member didn’t participate. I will ask groups to present selected answers
from the homework and will grade you on how well you answer the questions.
Students will receive individual credit for their blog discussions.
Late work: Students won’t receive credit for late homework assignments. For the problem
sets, make sure that someone in your group is responsible for uploading the problem set
before the due date. For the blogs, make sure you contribute to the blog discussion before
the due date.
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Readings: The syllabus contains a number of readings that provide practical applications
of microeconomics. These readings enhance your understanding of the material and help
you become a better economist than if you don’t read them. Questions based on the
readings may be included on the quizzes and exams.
Make-up exams: I generally don’t give make-up exams.
THE PROFESSOR
I have been teaching in the Economics Department and in the Graduate Schools of Business
and Public Policy at GWU since 2006. I have a Ph.D. in Economics from Harvard
University and a B.S. in Business Administration from the University of California at
Berkeley. I wrote my dissertation on how taxes affect where companies invest and I
published a book titled Company Tax Reform in the European Union (Springer Business +
Media: New York) in 2006 that is based on my thesis.
I am also the Director of the Master’s program in Applied Economics. Please come see
me if you would like to learn more about that program.
Office Hours: I encourage you to meet with me either during office hours or at a mutually
convenient time to discuss any questions you have about the course or about your career
as an economist. I hope that students will make time to have coffee with me during the
semester so that I can get to know you. I’m happy to write letters of recommendation for
you.
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UNIVERSITY POLICY ON RELIGIOUS HOLIDAYS
1. Students should notify faculty during the first week of the semester of their
intention to be absent from class on their day(s) of religious observance;
2. Faculty should extend to these students the courtesy of absence without penalty
on such occasions, including permission to make up examinations;
3. Faculty who intend to observe a religious holiday should arrange at the beginning
of the semester to reschedule missed classes or to make other provisions for their
course-related activities
For GW’s teaching policies, see http://www.gwu.edu/~academic/Teaching/main.htm
ACADEMIC INTEGRITY
I personally support the GW Code of Academic Integrity. It states: “Academic dishonesty
is defined as cheating of any kind, including misrepresenting one's own work, taking credit
for the work of others without crediting them and without appropriate authorization, and
the fabrication of information.” Please note that allowing another student to copy your
work is defined as cheating under the Academic Integrity code. For the remainder of the
code, see: http://www.gwu.edu/~ntegrity/code.html
SUPPORT FOR STUDENTS OUTSIDE THE CLASSROOM
DISABILITY SUPPORT SERVICES (DSS)
Any student who may need an accommodation based on the potential impact of a disability
should contact the Disability Support Services office at 202-994-8250 in the Marvin Center,
Suite 242, to establish eligibility and to coordinate reasonable accommodations. For
additional information please refer to: http://gwired.gwu.edu/dss/
UNIVERSITY COUNSELING CENTER (UCC) 202-994-5300
The University Counseling Center (UCC) offers 24/7 assistance and referral to
address students' personal, social, career, and study skills problems. Services for students
include:
- crisis and emergency mental health consultations
- confidential assessment, counseling services (individual and small group), and
referrals
http://gwired.gwu.edu/counsel/CounselingServices/AcademicSupportServices
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ECONOMICS 2101 Intermediate Microeconomics
COURSE PLAN - This schedule of topics and assignments may change as the class
progresses. Read the instructions carefully for the problem sets. The readings marked
with “***” are required readings, with the number of *s indicating the importance of the
readings, while other articles are provided to enhance your understanding of the material.
Many of the readings are available on Blackboard.
Homework assignments are due by Friday at noon on the week they are assigned.
Sometime during the first week of class, please write a couple of paragraphs telling me
why you are taking this class, what is your major and why you chose it, what you hope to
get out of the class, and anything else you’d like to tell me about yourself. Please tell me
if there is anything specific you’d like me to know. Bring this note to class.
Except for problem set 1, which I would like each student to work on individually, please
choose one member of your study group to UPLOAD the solutions to the questions
assigned from the text to Blackboard.
Each student should upload INDIVIDUALLY to the BLOG the assignments that are
marked as individual assignment.
Week 1: Ch 1 Adventures in Microeconomics and ch 2 Supply and Demand
Reading:
*** Dan A. Black, Seth Sanders, and Lowell Taylor, “The Economic
Reward for Studying Economics,” Economic Inquiry 41, no. 3 (2003):
365–377.
*** http://www.payscale.com/best-colleges/degrees.asp
** Federal Reserve Board of Governors, Washington, D.C., Report on the
Economic Well-Being of U.S. Households in 2013,
July 2014
**** Study the Math Review Appendix in the Goolsbee text
PSET 1:
Ch. 2: Problems 4, 8, 11, 17, 18 and the questions below
Read the article on “The Economic Reward for Studying Economics” and
look at the payscale data and the Education section in the “Report on the
Economic Well-Being of U.S. Households in 2013”
Write a 300-word analysis of the study and identify why the study may be
misleading. How would you decide whether your college education is
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“worth it?” Your analysis should use solid economic reasoning to support
your analysis.
Week 2
Ch 3 Using supply and Demand
Reading:
*** Annie Lowrey, “Is Uber’s surge-pricing high-tech gouging? Or
market efficiency?” The New York Times January 12, 2014.
http://www.nytimes.com/2014/01/12/magazine/is-ubers-surge-pricing-anexample-of-high-tech-gouging.html?_r=0
Glenn Ellison and Sara Ellison, “Search, Obfuscation, and Price
Elasticities on the Internet,” Econometrica, Vol. 77, No. 2 (March 2009):
427-52. (Read the first few pages to get an idea of how sensitive demand
is to price changes on the internet)
PSET 2:
Study the document “The calculus of equilibrium and elasticities”
With your STUDY GROUP, write a 300-word essay on one feature of
Uber’s pricing strategy. You may use additional sources to supplement
your analysis. I will grade you on the quality of this essay, so please make
sure you proofread, check for grammar errors, and logical consistency.
Each INDIVIDUAL student should make at least one comment on the
Blackboard blog about Uber. Students should also feel free to comment on
each other’s blog posts.
Week 3
Ch. 4 Consumer behavior
Reading:
** Read “The calculus of utility maximization and Expenditure
Minimization” in the appendix to Chapter 4.
David M. Cutler and Jonathan Gruber, “Does Public Insurance Crowd out
Private Insurance?” Quarterly Journal of Economics 111, No. 2 (1996)
*** Jonathan Gruber and Kosali Simon, “Crowd-out 10 years later: Have
recent public insurance expansions crowded out private health
insurance?,” Journal of Health Economics, 27 (2008): 201-17.
For information on the Affordable Care Act (ACA), see the web pages on
health reform provided by the Kaiser Family Foundation at
http://kff.org/health-reform/
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** For a summary of the Affordable Care Act, see http://kff.org/healthreform/fact-sheet/summary-of-the-affordable-care-act/
PSET 3:
Ch. 3. Problems 9, 13, 14 and the question below
Read the articles on public-sector crowding out of private insurance. With
your STUDY GROUP and using what you know about the Affordable
Care Act, analyze whether you think that the authors’ analysis, which was
conducted a decade ago, holds today? Have government-sponsored health
exchanged crowded out private insurance companies? Provide evidence
for your analysis.
Week 4
Ch. 5 Individual and market demand
Reading:
None
PSET 4:
Ch. 4. Problems 1, 6, 8, 19
Ch. 5. Problems 6, 8, 12
Each INDIVIDUAL should make a blog post that describes how you
would choose between two goods, say going to a soccer game and going
out to dinner. Be sure to specify your marginal utilities and prices.
Week 5
Ch. 6. Producer Behavior
Reading:
***Daron Acemoglu and Amy Finkelstein, “Input and Technology
Choices in Regulated Industries: Evidence from the Health Care
Sector,” Journal of Political Economy 116, no. 5 (2008): 837 – 880.
Russell W. Cooper and John C. Haltiwanger, “On the Nature of Capital
Adjustment Costs,” Review of Economic Studies, 73, no. 3 (2006): 611-33.
***Ch. 6 Appendix: The Calculus of Cost Minimization
PSET 5:
Ch. 6 problems 3, 5, 10, 17, 19
INDIVIDUAL STUDENTS write a blog post giving your views on how
the results from the study by Acemoglu and Finkelstein illustrate why
companies may replace workers with robots. Make sure to comment on
each other’s blogs.
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Week 6
Ch 7. Costs
Reading:
Stefano DellaVigna and Ulrike Malmendier, “Paying Not to Go to the
Gym,” American Economic Review 96, no. 3 (2006): 694–719.
*** Read the piece in chapter 7 on “Paying for Papers: The Economics of
Cheating”
*** Read the appendix to ch 7 on “The Calculus of a Firm’s Cost
Structure”
PSET 6:
Ch. 7 problems 1, 6, 10, 16
INDIVIDUAL STUDENTS after reading the piece on “the economics of
cheating,” write a blog post explaining how to increase the cost to
cheating (i.e., reduce the incentive to cheat). Make sure to comment on
each other’s blogs.
Week 7
Ch. 8 Supply in a competitive market
Reading:
Read the box in Ch 8 on “Entry and Exit at Work in Markets --Residential Real Estate” that is based on the article by Chang-Tai Hsieh
and Enrico Moretti, “Can Free Entry be Inefficient? Fixed Commissions
and Social Waste in the Real Estate Industry,” Journal of Political
Economy, 111, no. 5 (2003): 1076-1122.
* Ali Hortacsu and Steven Puller, “Understanding strategic bidding in
multi-unit auctions: A case study of the Texas electricity spot market,
RAND Journal of Economics, 39, No. 1 (2008): 86-114
PSET 7:
Ch. 8 problems 3, 9, 15, 16, 18
INDIVIDUAL STUDENTS Read the application in Ch 8 on “The
Increased Demand for Corn” comment on the blog on the unintended
consequences of the U.S. Energy Policy Act and its impact on the demand
for corn. The piece concludes with the comment “Time will tell if our
prediction holds.” Identify that prediction and, using current data, answer
that question.
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Week 8
Ch. 9 Market Power and Monopoly
Reading:
*** Read the appendix to chapter 9 on the calculus of profit maximization
*Jean-Pierre Dube, “Product Differentiation and Mergers in the
Carbonated Soft Drink Industry,” Journal of Economics and Management
Strategy 14, no. 4 (2005): 879-904.
PSET 8:
Ch. 9 problems 2, 5, 11, 17
INDIVIDUAL STUDENTS – read the application on “Market Power
versus Market Share” that is based on the Dube paper and comment on the
implications of the Lerner index for the two products.
WEEK 9
MIDTERM on chapters 1-9
Week 9
Ch. 10 Market Power and Pricing Strategies
Reading:
Pinelopi K. Goldberg and Frank Verboven, “Cross-country Price
Dispersion in the Euro Era: A Case Study of the European Car Market,”
Economic Policy, 19, No. 40 (December 2004): 483-521
PSET 9:
INDIVIDUAL STUDENTS should comment on the blog about the
discussion on how eTrade would like to segment the part to set its prices.
Are you more likely to be an “uninterested trader” or an “obsessed
trader”?
Week 10
Ch. 10, Market power and pricing strategies, cont’d
PSET 10:
Ch. 10 problems 3, 6, and 12 and the question below:
INDIVIDUAL STUDENTS Using the process described in the paper by
the Hamilton Project, calculate the net present value of the earnings that
you will make, given your college degree and education, taking into
account the opportunity cost of going to college. When doing your
calculations, indicate the salary that you expect to make each year and
how much you expect to spend on your college education.
Explain why college is worth it. Upload your analysis to Blackboard and
make a brief comment on the Blog.
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Week 11
Ch. 11 Imperfect Competition
Reading:
PSET
None
None
Week 12
Ch. 11 Imperfect Competition, cont’d
Reading:
None
PSET 11
Ch 11 problems 1,3,5,8
Week 13
Quiz 3 and Thanksgiving break
Reading:
PSET
None
None
Week 14
Ch 12, Game Theory
Reading:
Pierre-Andre Chiappori, Tim Groseclose, and Steven Levitt, “Testing
Mixed-Strategy Equilibria When Players Are Heterogeneous: The Case of
Penalty Kicks on Soccer.” American Economic Review 92, no. 4
(September 2002): 1138–1151.
PSET 12
Ch 12 problems 2, 13
Week 15
Ch. 13 Investment, Time, and Insurance (through Section 13.3)
Reading:
*** Read the paper by the Hamilton project on how to calculate the value
of your lifetime earnings by college major.
PSET 13:
Ch 13 problems 3, 7, 8, 18
INDIVIDUAL STUDENTS Using the process described in the paper by
the Hamilton Project, calculate the net present value of the earnings that
you will make, given your college degree and education, taking into
account the opportunity cost of going to college. When doing your
calculations, indicate the salary that you expect to make each year and
how much you expect to spend on your college education.
Explain why college is worth it. Upload your analysis to Blackboard and
make a brief comment on the Blog.
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Summary: Economics 2101 Class Schedule (subject to change)
Text: Goolsbee, Levitt, Syverson, Microeconomics 1st edition.
Week
1
2
3
3
4
5
6
6
7
8
9
10
11
12
13
13
13
14
15
Topic
Introduction: Adventures in Microeconomics
Demand and Supply analysis
Consumer behavior
QUIZ 1
Individual and market demand
Producer behavior
Costs
QUIZ 2
Supply in a competitive market
Monopoly
MIDTERM (Tuesday, 10/27)
Market power and pricing strategies
Market power and pricing strategies, cont’d
Imperfect competition
Imperfect competition, cont’d
QUIZ 3
Thanksgiving
Game Theory
Investment, Time and Insurance
Chapters
1-2
3
4
1-3
5
6
7
4-6
8
9
1-9
10
10
11
11
10-11
12
13
The final will be cumulative and will held during the regularly scheduled time during finals
week.
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