Download ECON 2010-200 Principles of Microeconomics

;
PRINCIPLES OF MICROECONOMICS
Econ 2010
Sec. 200
Spring 1994
Room: Geol 121
Professor de Bartolome
Office Hours:
Office: Econ 202.
Recitation instructor:
Recitation time :
Recitation place:
Textbook:
Stiglitz, J .E ., (1993), Principles o/Microeconomics. New York: Norton.
Study Guide: Martin, L.W., (1993), Study Guide for Principles of Microeconomics . New York: Norton.
Course description: Microeconomics is about what goods get produced and sold at what prices. The
course explores how "the magic of the market" coordinates the decisions of individuals as to what
goods to buy and as to how hard to work, and of firms as to what inputs to use to produce what goods.
In addition, the course considers such questions as: Why is competition socially desirable? Is
competition likely? How do firms behave in the absence of competition?
The course is an introductory course . No previous knowledge of economics is assumed . The
student is, however, assumed to be able to solve simultaneous equations both graphically and
algebraically.
Grading: The grade of the student will be principally determined by his/her performance in the three
exams. A small percentage of the final grade will be determined by performance in a game, and by
some data collection exercises to be given out in class.
Course outline:
Date
Aug 25.
Aug 30.
Sept 1, 6.
Topic
WHAT IS ECONOMICS?
The role of markets.
The use of models.
Positive v normative economics.
Talking like an economist
- reading graphs.
- rational agents.
- price-taking.
- property rights.
- opportunity set.
- trade-offs.
- trade-off: efficiency v. equality.
- marginal analysis.
THE GAINS FROM TRADE
- absolute advantage and comparative advantage.
- gains from specialization.
- interdependence.
Chapter
1
2
3
Sept 8, 13 , 15.
LAW OF SUPPLY AND DEMAND
- the coordinating role of prices.
- individual demand curve.
- market demand curve.
- individual supply curve.
- market supply curve.
- equilibrium.
- the paradox of value.
- shifts in the demand curve.
- shifts in the supply curve.
Sept 20, 22.
Applications of supply and demand
- price elasticities.
- short-run and long-run elasticities.
Identification.
Sales Taxes.
Price-ceiling and price-floors.
Sept 27.
EXAM
Sept 29.
Intertemporal markets
- interest rate as a price.
- present discounted value.
Oct 4, 6, 11.
Oct 13.
CONSUMER CHOICE
Goods choice. The objective:
- utility and indifference curves
as a measure of well-being.
- marginal utility.
- diminishing marginal utility.
- private marginal benefit.
The constraint:
- budget constraint.
- derivation of the demand curve.
- "price = private marginal benefit" rule.
Every decision is a marginal decision.
Shifts in the demand curve.
- normal goods.
- income and substitution effects.
- substitutes and complements.
- substitutes and elasticity.
Consumer surplus as a measure of welfare gain ..
Savings decision.
- interest rate as a price.
- trade-off: consumption now v. consumption later .
- do you save more as the interest rate increases ?
- tax policies.
4
5
6
omit pp. 149-165
8
9
omit pp. 236 - 244.
Oct 18, 20.
Oct 25.
Oct 27.
Nov 1.
Nov . 3.
Nov 8, 10.
Nov 15 ,17.
Labor supply decision
- labor supplied is leisure sold.
- wage as a price.
- trade-off: leisure v. consumption.
- labor supply curve.
- do you work harder if your wage increases?
- market labor supply.
- tax policy.
- participation.
- retirement.
FIRM CHOICES
- production and costs.
- marginal revenue.
- "marginal revenue = marginal cost" rule.
COMPETITIVE FIRMS
Output decision:
- "price = marginal cost" rule .
- entry and exit: "price = minimum average cost" rule .
- firm supply curve.
- market supply curve.
11
omit pp. 292-303.
12
13
pp. 341 -353.
EXAM
COMPETITIVE FIRMS
Output decision (cont):
- short run and long-run supply curves.
- accounting v. economic profits.
- economic rents.
13
pp. 353 -367.
Factor demands
- value of marginal product.
- "value of marginal product = factor price" rule.
- firm factor demand curve.
- market factor demand curve.
COMPETITIVE GENERAL EQUILIBRIUM
Circular flow of funds .
- example: taxes.
- example: adjustment to technical change.
Pareto-efficiency.
- utility possibility frontier.
- exchange efficiency:
"equal marginal rate of substitution" rule.
- production efficiency:
"equal marginal rate of technical substitution" rule.
- product-mix efficiency:
"equal marginal rate of transformation" rule.
14
- First Fundamental Welfare Theorem.
- Second Fundamental Welfare Theorem.
Nov 22, 29.
Dec 1.
Dec 6.
IMPERFECT COMPETITION
- market structure.
Monopoly
- "marginal revenue = marginal cost" rule.
- price discrimination .
Imperfect competition
- firm concentration - four firm ratio.
- product differentiation.
- barriers to entry.
Monopolistic competition.
Oligopoly
- collusion
- self-enforcement.
- tacit collusion.
- threat of entry.
- deterring competition
GOVERNMENT POLICY
TOWARDS IMPERFECT COMPETITION
The problem: why imperfect competition is bad:
- consumer surplus loss.
- managerial slack.
- research and development issues .
- rent-seeking.
The solution:
- taxes and subsidies.
- nationalization.
- regulation.
- stimulating competition.
- antitrust.
- curbing restrictive practices.
15
16
omit p. 427.
17