EC0 100Fall 2011Henry FarberPage 1 of 6Introduction to MicroeconomicsProfessor Henry Farberemail: [email protected]: 107 Fisher HallOffice Phone: (609)258-4044Office Hours: Monday and Tuesday 1:30-3:00Lecture: M/W 11:00-11:50 – McCosh 50Organizer: Qi Ge ([email protected])Course Description: Economics is the study of how individuals, firms, and the institutions ofan economy (e.g., markets) produce and allocate scarce resources. We will examine 1) the decisionmaking of individuals regarding what and how much to consume, 2) the decision making of firmsregarding what and how much to produce, 3) how these decisions are coordinated (for better andfor worse) through market and other institutions, and 4) the role of public policy.Classes: There are two lectures and one precept each week. Lectures start promptly at 11AM.Please be seated on time. All changes of precept must be arranged through the organizer.Required Text: Parkin, Michael. Microeconomics, tenth edition. The text is available atLabyrinth Books. An earlier edition (or even another microeconomics text) will almost surelysuffice, although you will be on your own to figure out the relevant readings. Other reading assign-ments will be made as needed during the term.Course Requirements and Grading:Final Examination 40%Mid-Term Examination 30%Problem Sets & Participation in Precepts 30%• The midterm examination is scheduled for the evening of Tuesday October 25.• The final examination will take place during the final examination period at end of term.• There will be eleven problem sets (one per week other than mid-term week) during the term.These problem sets will be graded on a 0,√−,√,√+ scale. I will drop the one problem setwith the lowest grade.• Problem sets must be turned in at the beginning of lecture in the lecture hall on the due date.Late problem sets or problem sets turned in elsewhere will not be graded. No excuses.Other Important Points:• We will be covering a lot of material, and it will pay to not fall behind.• In order to reduce your note-taking burden and to allow you to focus on the lecture, I willpost lecture notes on Blackboard.• The pos ted lecture notes will not always include all material covered in lecture, and you willbe responsible for all material.• I will not always cover all of the slides in lecture. Some will be covered in precept and someyou will study on your own.• I do not closely follow the text. The text and the lectures are complementary resources.• You will get more out of this course if you discuss the lectures, readings, and ideas with yourclassmates (and others). You are also encouraged to share ideas regarding the problem sets,but the work you turn in must be your own and prepared by you alone.EC0 100Fall 2011Henry FarberPage 2 of 6Course OutlineLecture #1. Introduction – What is economics I? – Parkin, ch 1, ch 2.• What is economics?• What does it mean to think like an economist?• Economics as a Social Science• Using Resources Efficiently: Marginal Analysis• The production possiblities frontier2. What is economics II? – Parkin, ch 2, ch 3.• Division of Labor• Comparative advantage• Competitive Markets and Efficiency• Efficiency vs. Equity• Demand and supply• Market Equilibrium3. Consumer Choice: Utility as the Foundation of Demand. – Parkin, ch.8, pp. 179-186; ch. 9,pp. 203-210.• The convenient notion of utility• Marginal utility• Opportunity cost• Budget constraints and indifference curves• Consumption Choice as the result of utility maximization4. Consumer Choice: Derivation of Demand Curves – Parkin, ch 8, pp. 187-198; ch 9, pp.210-218.• Individual demand curves• Income and substitution effects of price changes• Market demand curves• Consumer Surplus5. Decision Making Under Uncertainty – Parkin, ch 20, pp. 465-471.• Incomplete information• Probabilistic outcomes.• Expected Utilty• attitudes toward risk• insuranceEC0 100Fall 2011Henry FarberPage 3 of 66. Decision Making Under Uncertainty, continued; Elasticity I – Parkin, ch 4, pp.83-90.• Risk seeking behavior: gambling• Elasticity Defined• Elasticity Calculated• Price elasticity of Demand7. Market Demand and Elasticity – Parkin, ch 4. pp. 91-99.• Income elasticity• Cross elasticity: What is a market?• Substitutes and complements• Movements along versus shifts in demand curves.8. Foundations of Supply. – Parkin, ch 10, pp. 227-233; ch 11, pp. 251-256.• The Firm and its goals• Accounting profit vs. economic profit• Production functions• Cost functions.• Total, average, and marginal products• The law of diminishing marginal returns9. Foundations of Supply, cont’d. – Parkin, ch 11.• Short run costs• Long run costs• Economies of scale• Equivalence of profit maximization and cost minimization10. Perfectly Competitive Markets – Parkin, ch 11, pp. 239-259.• Firm-level decisions in a competitive market• Short-run equilibrium for the firm• The importance of free entry and exit• Long-run equilibrium of the firm• Long-run equilibrium of the industry• Competition and Efficiency11. Question and Answer Session before Midterm Examination.EC0 100Fall 2011Henry FarberPage 4 of 612. Welfare Economics – What’s so good about competitive markets? – Parkin, ch 5; ch 12, pp.290-291.• Maximizing quantity: efficient resource allocation• Consumer surplus, producer surplus, and total surplus• The invisible hand: the role of prices• The role of information• What about equity?13. Imperfect Markets I: Monopoly – Parkin, ch 13.• Market power• Marginal revenue of a monopolist• Pricing of a monopolist• Output of a monopolist and welfare loss• Natural monopolies Are they common?14. Imperfect Markets II: Monop olistic Competition and Oligopoly – Parkin, ch 14; ch 15, pp.341-355.• Monopolistic competition and differentiated products• Price and output levels under monopolistic competition• Oligopoly – When a few large firms dominate• Models of strategic interaction – game theory– Nash equilibrium– The prisoner’s dilemma (is everywhere)15. Government Regulation of Markets and Anti-Trust Policy – Parkin, ch. 15, pp. 356-359; ch.10, pp. 237-241.• Maximizing surplus: consumer surplus, producer surplus, or total surplus?• Government intervention in markets: Can economics inform the p olitical proce ss ?• Regulating markets• Anti-competitive activities of firms•