ECON - 0100: Introduction to Microeconomic Theory

Fall 2013 Prof: Glenson France FOB 104 glf6@pitt.edu Meeting times Tu & Th 8:30 - 9:45am Office hours: M, W & F 12AM 12:50PM Class Room: Powers Hall 115
COURSE DESCRPITION

This course introduces students to the way in which a free market economic system resolves the basic social questions of what goods and services to produce, how scarce resources are organized to produce these goods, and to whom the goods are distributed once they are produced. Students are introduced to the components of the market system, supply and demand, and how they interact under conditions ranging from perfect competition to monopoly. LEARNING GOALS Explain scarcity in terms of trade-offs, choice, and opportunity cost. 1. Identify the determinants of demand, and be able to explain conceptually and graphically what happens to equilibrium price and output when these determinants change. 2. Identify the determinants of supply, and be able to explain conceptually and graphically what happens to equilibrium price and output when these determinants change. 3. Explain the meaning of economic efficiency in terms of marginal benefits and marginal costs. 4. Explain how price floors and price ceilings affect market outcomes 5. Define fixed, variable, total, and marginal costs. 6. Explain why profits are maximized when marginal revenue equals marginal costs. 7. Explain the factors that influence price elasticity and what happens when demand is elastic or inelastic. 8. Explain the impact of competition on price, output, profits and consumer surplus. 9. Explain the impact of monopoly (market) power on price, output, efficiency, profits and consumer surplus. SPECIFIC OBJECTIVES 1. Explain the laws of supply and demand 2. Differentiate between shifts in and movements along supply curves and demand curves 3. Discuss the factors that cause a demand curve to shift 4. Discuss the factors that cause a supply curve to shift 5. Define short-run and long-run market equilibrium 6. Discuss how markets respond to changes in supply and demand 7. Explain how shortages and surpluses affect the analysis of equilibrium prices 8. Explain how the invisible hand principle works 9. Explain the effects of price ceiling and price floors 10. Contrast the economic efficiency of a black market with the economic efficiency of a market operating within the legal system 11. Define the incidence of a tax 12. Distinguish between the actual and statutory incidence of a tax 13. Discuss how elasticities of supply and demand influence the incidence of a tax 14. Explain consumer choice in an economic framework

15. Calculate and interpret price and income elasticity of demand 16. Discuss the determinants of price and income elasticity of demand 17. Describe the relationships among total revenue, total expenditures, and price elasticity of demand 18. Explain why the price elasticity of demand tends to increase in the long-run 19. Distinguish between (1) explicit costs and implicit costs, (2) economic profit and accounting profit, and (3) the short run and the long run in production 20. Define opportunity costs, sunk costs, fixed costs, variable costs, marginal costs, and average costs 21. Differentiate between economic costs and accounting costs 22. State the law of diminishing returns, and explain its impact on a companys costs 23. Describe the shapes of the short-run marginal cost, average variable cost, average fixed cost, and average total cost curves 24. Define economies and diseconomies of scale, and explain how each is possible, and relate each to the shape of a companys long-run average total cost curve 25. Describe the factors that cause cost curves to shift 26. Distinguish between price takers and price searchers 27. Discuss the conditions that characterize a purely competitive (price taker) market 28. Explain how and why price takers maximize profits at the quantity for which marginal cost, price, and marginal revenue are equal 29. Calculate and interpret the total revenue and the marginal revenue for a price taker 30. Explain the decision by price takers with economic losses to continue to operate, temporarily shut down, or go out of business 31. Describe the short-run supply curves for a company and for a competitive markets 32. Contrast the role of constant-cost, increasing cost, and decreasing cost industries in determining the shape of a long-run market supply curve 33. Describe the conditions that characterize competitive price searcher markets 34. Explain how price searchers choose price and output combinations 35. Summarize the debate about the allocative efficiency of price-searcher markets with low barriers to entry, including the implications of contestable markets and entrepreneurship 36. Discuss entry barriers that may protect companies against competition from potential market entrants 37. Differentiate between a monopoly and an oligopoly 38. Describe how a profit maximizing monopolist sets prices and determines output 39. Describe government policy alternatives that are intended to reduce the problems stemming from high barriers to entry 40. Explain how and why the market system fails when externalities and public goods exist (Optional) STRUCTURE OF THE COURSE During my lectures, I will emphasize material discussed in the textbook. Some of my lectures however, may cover material that is not covered in the text. Thus, it is important to attend every class and take lots of notes. If needs be, I will provide you with any extra reading material that covers anything that is not addressed by your textbook. RECITATIONS There are no recitations for this class. PREREQUISITES

This course has no specific pre-requisites. Students should however be able to read and understand graphs. A suggested reading is Applying Graphs to Economics in the appendix to chapter 1 of Parkin. THE TEXTBOOK AND SOFTWARE: The textbook for this course is: MICROECONOMICS 10th edition by Michael Parkin. Choose one of the following purchase options: 1. A physical copy of the textbook (new) bundled with a student access code from the bookshop - $193.25 ($144 for used copy if available). 2. An electronic version of the textbook with a student access code online at pearsonmylabandmastering.com when registering for the course - $110. 3. A stand-alone access code kit when registering for the course - $55. If you choose this option, you will need a textbook of some kind to go along with it. INFORMATION NEEDED TO REGISTER FOR MYECONLAB Course Name: Econ 0110: Introduction to Microeconomic Theory Course ID: france40176 HOMEWORK ASSIGNMENTS There will be a total of 7 - 10 homework assignments. If you are late with your homework, you may lose those points (see missing a homework assignment below). DATES FOR HOMEWORK ASSIGNMENTS The assignment date and due date for each homework assignment will be announced in class, email, or via the course website. Homework assignments will be assigned via pearsonmylabandmastering.com unless otherwise stated in class. See the document on how to register for pearsonmylabandmastering.com under the syllabus folder on blackboard via the University of Pittsburgh. Once you have registered for course compass, all further blackboard usage will be via pearsonmylabandmastering.com. Pop Quizzes Pop quizzes will be administered during/throughout this course. Date of quizzes will be unannounced prior to being given and can be given at any point during a class session at the Instructors discretion. Exam Dates (Subject to Change) Mid-term: 10/17/2013 (In class) Final Exam: 12/9/2013 (In our regular classroom at 10:30am 12:20pm)

Fall Semester Breaks Fall break: 10/14/2013. Monday classes will meet on Tuesday according to Monday schedule. We do not meet on 8/15/2013. Thanksgiving break is from 11/27/2013 to 12/1/2013. MISSING A HOMEWORK ASSIGNMENT, OR EXAM If you miss a homework assignment or an exam without a valid excuse, you will lose those points. If you have a valid reason to miss an exam or be late with a homework

(serious illness, death in the family, etc.) contact me before the exam is given or the homework is due. Contact me in advance so that we can make a suitable arrangement. If you cannot contact me in advance, do so as soon as is humanly possible. GRADING SYSTEM: Homework Assignments: Mid-term exam Final exam Pop Quizzes 20% 30% 35% 15%

GRADING SCALE: A+ = 96% and above A = 90% - 95% A- = 86% - 89% B+ = 81% - 85% B = 76% - 80% B- = 71% - 75% C+ = 66% - 70% C = 61% - 65% C- = 56% - 60% D = 51% - 55% F = 50% and below PUSH POINT Attendance each class will count towards 1/X point (X being the number of times the register is taken). Thus, there will be a total of 1 point that counts as push points. That is, if you have for example a total of 80% from all exams, pop quizzes and homework assignments combined, and you have attended at least 24 of 28 classes, your grade will be bumped up from a B to a B+.

ALTERNATIVE or SUPPORTING TEXTBOOKS: Mankiw, N.G. (2008). Principles of Economics, 5th Edition, South-Western Cengage Learning.. Case, Fair, and Oster (2012). Principles of Economics, 10th Edition, Prentice Hall Irvin B. Tucker (2010). Microeconomics for Today, 7th Edition, South-Western College Pub.

OTHER REFERENCES / SOURCES OF DATA: The Short Run http://www.theshortrun.com Economist Magazine http://www.economist.com

Economist Glossary - http://www.economist.com/research/Economics/ The Dismal Scientist http://www.dismal.com Notice to Students with Disabilities If you have a disability for which you are or may be requesting an accommodation, you are encouraged to contact both your instructor and the Director of the Learning Resources Center, Dr. Lou Ann Sears, Room 240 Millstein Library Building (724) 836-7098 (voice) as early as possible in the term. Learning Resources Center will verify your disability and determine reasonable accommodations for this course. In July and August, students interested in disability services should get in touch with Mr. Gawain Emanuel in the Millstein Library Building: 724-838-8027 voice or gwe@pitt.edu. How to do well in this class The easiest way to do well is to keep up with the material presented in class. This means reviewing class material the same day that they are presented. Reading the material prior to class is also helpful. Pay close attention to graphs, tables and calculations. Attend class and ask questions. Do all the assigned problems and make sure you understand how and why you arrive at the answers. Failure to do all of the assigned problems may result in poor overall performance. Visit me during office hours. Start early in the semester. A lot of what you will learn in the initial stages of the course will be required for the remainder of the course. Try to apply the concepts discussed in class to real world applications. Obligations By taking this course, students are agreeing to the conditions and requirements outlined in the syllabus and course outline. Students are also agreeing that the work that they submit is their own work, and they are not knowingly allowing other students to copy it, or to use it in any way that would give them a grade advantage.

ECON 0100-Introduction to Microeconomic Theory Fall 2013, Course Outline

The material presented here is subject to change with notice given in class or on the course website. Note, all homework assignment dates will be announced in class.

Section 1: Introduction to Economics

Date 8/27/13 Topic The Economic Perspective Scarcity and Choice Readings (Chapter(s)) 1

 What is Economics Branches of Economics Economic Questions The Economic Model Positive v. Normative Economics Why Study Economics Reading: Applying Graphs to Economics (Not covered in class)

8/29to 9/10

Production Possibilities & Opportunity Cost Economic Questions Scarcity, Choice and Opportunity Cost Marginal Analysis Production Possibilities Curve Law of Increasing Opportunity Cost Absolute and Comparative Advantage Specialization and Trade

Section 2: Fundamentals
9/12 to 10/15 Demand and Supply Theory Demand Defined Demand v. Quantity Demanded Factors Affecting Demand Supply Defined Supply v. Quantity Supplied Factors Affecting Supply Demand, Supply and Market Equilibrium Consumer Surplus, Producer Surplus and Market Efficiency Complex Shifts of Demand and Supply Government Intervention Mid-term Exam 3,5, & 6

10/17/2013

10/22 to 11/5

Quantitative Demand and Supply Analysis Elasticity Defined Price Elasticity of Demand Elasticity and Revenue Factors Affecting Price Elasticity of Demand Income and Cross Price Elasticity of Demand

Price Elasticity of Supply

11/7 to 11/14

The Costs of Production Costs and Profit Short Run v. Long Run Production Function and Productivity Short Run Total, Average and Marginal Costs Cost Relationships Long Run Production Costs

11

Section 3: Market Structures

11/19 to 11/26 What is a Market Structure? Perfect Competition Characteristics of Perfect Competition Short Run Profit Maximization Loss Minimization: Short Run Shut Down Decision Short Run Supply Curve Long Run supply Curve 12

12/3 to 12/6

Monopoly Characteristics of Monopoly Pricing and Output Decisions Short Run Profit Maximization Short Run Shut Down Decision Long Run Adjustments

13

12/9/2013

Final Exam: 10:30AM-12:20PM (In regular

classroom)