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Syllabus
Introduction to Political Economy: Microeconomics
Summer 2002, MTWThF 11:00 a.m. - 12:45 p.m.
INSTRUCTOR:
Nina Baranchuk
OFFICE HOURS
MTWThF
E-MAIL:
[email protected]
PHONE:
(314) 367-9036 (home)
(314) 935-5670 (economics department office)
p.m. or by appointment, at Eliot 214
Course Description
The goal of this course is to introduce students to the subject of microeconomics, its
central concepts and methods of analysis. The emphasis will be on teaching students
economic way of thinking that provides a new perspective on human behavior and
interaction as well as helps to solve every-day problems such as how much income to
spend, how much of it to save and invest. Topics covered include consumer choice
problem; competitive markets, basic concepts of game theory; monopoly and oligopoly;
labor markets and the economics of public sector.
Readings
The course textbook is” Principles of Microeconomics”, 2nd edition, by Gregory Mankiw.
In class we will also discuss articles from “The Armchair Economist” by Steven E.
Landsburg. This book is a fun collection of essays on economics in our life. I will
distribute copies of the required articles, although I highly recommend you to buy this
book. Questions about the articles will appear in the homeworks. The reading material
however is not a substitute for lectures. I will discuss topics not presented in the textbook
and you should expect questions about these topics on exams.
Course calendar and Grading
There will be homeworks every other day, 10 homeworks total; 5-minute in-class
quizzes, one midterm exam on 25th of June, and a final exam on the last day of class, 12th
of July. The grade will be a weighted average of the homeworks, midterm and final exam
grades, with the following weights: homeworks: 20%; quizzes: 10%; midterm: 30% final:
40%
Course Outline
1. Introduction
What is Economics about?
Economics as a social science: questions considered in economics, economic
approach to solving them. First models: Circular Flow Diagram, Production
Possibility Frontier. Notion of Opportunity Cost.
Readings: chapter 1,2 p. 3-43; chapter 3 p. 45-56.
2. Supply and Demand
a. Forms of markets. Behavior of Buyers.
Consumer choice: budget constraint, consumer preferences, consumer optimal
choices. Law of individual demand. Demand schedule and demand curve.
Market demand vs. individual demand.
Readings: chapter 4 p. 61 - 69; chapter 21 p. 447 - 472.
b. Behavior of producers. Supply.
Total revenue, total cost, and profit. Production function. Fixed and variable
cost, average and marginal cost. Firm supply schedule and supply curve.
Market supply vs. firm supply
Readings: chapter 4 p. 70 - 74; chapter 13 p. 263 - 279.
c. Demand and Supply together
Equilibrium, changes in equilibrium
Readings: chapter 4 p. 74 - 85.
d. Elasticity
Price elasticity and income elasticity of demand. Price elasticity of supply.
Readings: chapter 5 p. 89 - 109.
3. Efficiency
a. Consumer surplus, producer surplus. Efficiency.
Measuring consumer and producer surplus. Evaluation of market equilibrium,
efficient equilibrium.
Readings: chapter 7 p. 133-151.
b. Price control. Taxation.
Government policies (price control and taxation) and their effects on
efficiency. Dead Weight Loss.
Readings: chapter 6 p. 111 - 128; chapter 8 p. 155 - 170.
Review;
Midterm.
4. Strategic Behavior. Industrial Organization
a. Competitive markets
Competition. Profit maximization for a competitive firm. Long Run and Short
Run supply.
Readings: chapter 14 p. 283 – 301
b. Monopoly.
Natural monopoly, government-created monopoly. Profit maximization for
monopoly. Efficiency in monopolistic market
Readings: chapter 15 p. 303 – 323
c. Price Discrimination
Types of discrimination. Ability to discriminate and efficiency implications.
Readings: chapter 15 p. 323 – 333
d. Introduction to Game Theory
What is Game Theory. Prisoners Dilemma and cooperation.
Readings: chapter 16 p. 345 - 354
e. Oligopoly
Market with a few sellers. Equilibrium for an oligopoly. Public policy with
respect to oligopoly
Readings: chapter 16 p. 337 - 359
f. Externalities. Public Goods
Negative and positive externalities. The Coase theorem. Examples of public
goods (do they exist?) Property rights and public goods.
Readings: chapter 10, 11 p. 199 - 234
5. Factors of Production: Labor and Capital
Firm’s demand for labor. Marginal product of labor. Labor supply and
equilibrium. Other factors of production
Readings: chapter 18 p. 383 - 399
6. International Matters
Closed economy. International Trade and comparative advantage. Government
policy and its implications.
Readings: chapter 9 p. 173 - 193
Review;
Final Exam
Final exam will take place on July 12 during hour usual class time. It will last 1.5
hours.