Download Micro Lecture Outline

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Micro Lecture Outline
6/27/2017
I.
Chapter 1: The Scope and Method of Economics
A.
economic way of thinking-1.
Rational self-interest
2.
Opportunity costs
3.
Marginalism and sunk costs
B.
Efficient markets
C.
Why study economics:
1.
Understand society
2.
Understand global affairs
3.
Informed voter
D.
Scope of Economics
1.
Macro versus microeconomics
2.
Positive versus normative economics
E.
Economics as a Science
1.
Models and deduction
2.
tests of a model
a)
consistency
b)
assumptions
c)
predictability
3.
empirical tests
4.
Occam's razor
5.
Statistics, econometrics, and induction
F.
Economic Fallacies
1.
post hoc ergo propter hoc
2.
fallacy of composition
3.
fallacy of misplaced concreteness
G.
Subjective element in economic theorizing
H.
Economic policies
1.
Efficiency
2.
Equity
3.
Growth
4.
stability
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Micro Lecture Outline
6/27/2017
II.
Chapter 2: The Economic Problem: Scarcity and choice
A.
Economic goods and bads (outputs)
B.
Production (output) and productive resources (inputs)
C.
Scarcity
D.
Scarcity, Choice and Opportunity Cost
E.
three questions
1.
production possibilities curve (or frontier)
2.
assumptions
3.
off the frontier
F.
efficiency
G.
law of increasing relative costs
H.
Marginal rate of transformation
I.
Society's choices: guns versus butter
J.
Economic growth
K.
Trade-off between the present and the future
L.
Downsizing the military: economic growth and military spending
M.
Economic systems
1.
Traditional
2.
Command
3.
Market system
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Micro Lecture Outline
6/27/2017
III.
IV.
Chapter 3 Demand, supply, and Market equilibrium
A.
Markets
1.
circular flow
2.
households and firms
3.
output and input markets
B.
law of demand
1.
demand curve
2.
market demand curve
3.
non-price determinants
4.
distinction between a shift in demand and a change in quantity demanded
C.
law of supply
1.
supply curve
2.
market supply curve
3.
non-price determinants
4.
distinction between a shift in supply and a change in quantity supplied
D.
equilibrium,
1.
shortages, surpluses
2.
excess demand
3.
excess supply
4.
Changes in equilibrium
Chapter 4: The price system
A.
Price rationing
1.
function of prices
2.
role of information
3.
Different types of rationing
a)
Queuing
b)
Favored customer
c)
Ration coupons
B.
Prices and the allocation or resources:
1.
Price ceilings
2.
Price floors
C.
Market efficiency
1.
consumers surplus
2.
producers’ surplus
3.
competitive markets maximize the sum of producers and consumers surplus
4.
Deadweight loss from under and overproduction
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Micro Lecture Outline
6/27/2017
V.
Elasticity
A.
Price elasticity of demand
1.
point elasticity
2.
midpoint elasticity
3.
ranges of elasticity
4.
elasticity and total revenue
5.
elasticity along a demand curve
B.
Other types of elasticities
1.
income elasticity
a)
normal good
b)
inferior good
2.
cross elasticity
a)
complements
b)
substitutes
3.
price elasticity of supply
VI.
Chapter 5 Foundations of Consumer choice
A.
Utility and utilitarianism (cardinal utility)
1.
Total utility, Marginal utility
2.
Law of diminishing marginal utility
3.
Consumer surplus
4.
Consumer equilibrium
a)
Maximizing utility (consumers’ surplus)
b)
Equilibrium condition: 1 good: MU = Market price
B.
Assumptions of Perfect competition:
1.
Each firm is small that it is unable to affect price (Price taker)
2.
homogenous products
3.
Perfect knowledge
4.
Free exit and entry
C.
Determinants of Household Demand
1.
Budget constraint
2.
Tradeoffs
3.
Price changes
D.
consumer equilibrium: 2 or more goods: balancing marginal utilities
1.
MUa/Pa=MUb/Pb
2.
Effects of price changes:
E.
Paradox of value: diamond water paradox
F.
Labor-leisure tradeoff
G.
Present-future tradeoff
H.
Problems of rational choice:
1.
uncertainty and imperfect information
2.
moral dilemmas
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Micro Lecture Outline
6/27/2017
VII.
Ch 7 The Behavior of Profit-Maximizing Firms and the Production Process
A.
Firm:
1.
Profits = revenues minus (economic) costs
2.
two types of economic costs
a)
transformation costs—costs of production
b)
transactions costs—costs of making the transaction, e.g., information, etc.
for the present, we assume transactions costs=0
B.
Production function:
C.
Assumptions underlying perfect competition
D.
economic versus accounting profits
1.
economic profits:
a)
revenues minus economic costs
b)
economic costs=explicit + implicit costs (opportunity costs of capital,
which is the Normal rate of return)
c)
accounting profits: revenues minus explicit costs
E.
Basis of the economic decision
1.
price of output
2.
price of input
3.
production techniques
F.
Production process
1.
labor intensive
2.
capital intensive
G.
Short run versus long run
H.
Production in the short run
1.
Production function: One variable input
2.
TP, MP, & AP
3.
diminishing returns
I.
Production in the long run: two variable inputs
1.
minimizing costs
2.
Decision rule:
3.
Isocosts and isoquants
a)
minimizing costs given output
b)
maximizing output given costs
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Micro Lecture Outline
6/27/2017
VIII.
Ch 8 Short Run Costs and Output Decisions:
A.
Costs in the short run
1.
Total costs (TC), variable costs (VC), and fixed costs (FC)
2.
Average Total costs (ATC), Average variable costs (AVC), and Average fixed
costs (AFC),
3.
marginal costs (MC)
4.
Marginal costs (MC) and diminishing returns
B.
relation between production and costs
C.
Total Revenue (TR) and marginal Revenue (MR)
1.
TR: P*Q
2.
MR: change in revenue from one more unit
D.
Profit Maximization
1.
Profits: total revenue minus total costs
2.
Profit maximization conditions:
a)
MC-MR rule
b)
MC cuts MR from below
E.
short-run supply curve
IX.
Ch 9 Costs in the Long run
A.
Short run conditions and long-run directions
1.
Maximizing profits--Long-run implications
2.
Minimizing losses--Long-run implications
B.
Short-run industry supply curve
C.
Long-run industry supply curve
D.
Long-run costs and LRATC
1.
increasing returns to scale (economies of scale)
2.
constant returns to scale
3.
decreasing returns to scale (diseconomies of scale)
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Micro Lecture Outline
6/27/2017
X.
Ch 10 Input Demand: The Labor and Land Markets
A.
input markets
B.
inputs: complements of substitutes
1.
Marginal product (MP), Marginal revenue product (MRP)
2.
One variable factor of production
3.
equilibrium condition: W = MRPL
C.
comparing MRP and MC to maximize profits
D.
deriving input demand
E.
Two variable factors of production
1.
substitution effect
2.
output effect (this is analogous to the income effect)
F.
Land markets and Pure Rent
G.
The firm’s profit maximization condition in input markets
H.
Input demand curves
1.
Shifts in input demand curves:
2.
Elasticity
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Micro Lecture Outline
6/27/2017
XI.
Ch 12General Equilibrium
A.
General Equilibrium Analysis
B.
Technological advance: calculators
C.
A shift in consumer preferences
D.
Allocative Efficiency and General Equilibrium
1.
Pareto Optimality
2.
Efficiency of perfect competition
3.
Efficiency and consumers’ surplus
E.
Perfect competition as an ideal
F.
Perfect competition versus reality
G.
Sources of market failure
1.
Imperfect markets
2.
public goods
3.
externalities
4.
imperfect information
H.
Evaluating the market mechanism
XII.
Ch 13: Monopoly and Antitrust Policy
A.
Concept of the Industry
B.
Barriers to entry
C.
Price and output decisions in monopoly
1.
marginal revenue and market demand
2.
profit maximization, price, and output
D.
Monopoly in the long and short run
E.
Comparing perfect competition and monopoly
F.
Social costs of monopoly
G.
Rent seeking behavior
H.
Price discrimination
I.
Antitrust Policy
1.
Sherman antitrust act
2.
Rule of reason
3.
Clayton Act
J.
Natural Monopoly
XIII.
Ch 14: Monopolistic competition and oligopoly
A.
Monopolistic competition
1.
Assumptions
2.
product differentiation and advertising
3.
Price and output in monopolistic competition
a)
Short run
b)
Long run
4.
Economic efficiency
B.
Oligopoly
1.
Assumptions
2.
Kinked demand curve model
3.
Game theory:
C.
Role of Government
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Micro Lecture Outline
6/27/2017
XIV.
XV.
Ch 15: Externalities, Public Goods, Imperfect Information
A.
Externalities
1.
Marginal social cost and marginal cost pricing
2.
Private choices and external effects
3.
Internalizing externalities
B.
Public Goods
1.
characteristics
2.
income distribution as a public good
3.
public provision of public goods
4.
optimal provision of public goods
C.
Imperfect information
1.
adverse selection
2.
moral hazard
3.
market solutions
4.
government solutions
D.
Social Choice
1.
voting paradox
2.
government inefficiency
3.
rent-seeking revisited
Chapter 16: Income Distribution and Poverty:
A.
Inequality in distribution of income
B.
Geni coefficient