INTRODUCTION TO MICROECONOMICS ECON Summer 2018

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1 INTRODUCTION TO MICROECONOMICS ECON Summer 2018 Course Instructor: Eugenio Rojas Barros Course Please direct all course related questions to the Class Meetings: MTWRF 9:00AM - 10:45AM, Room TBA Office Hours: Monday and Wednesday, 4:45PM - 5:45PM, MCNB 383 Introduction and Objectives: This course provides students with the basic understanding and tools of microeconomics. We will cover two broadly defined topics. On the one hand, we will think about the economic agents firms, households, and the government) and consider the tradeoffs they face when making decisions. On the other hand, we will study the environments in which they act and make these decisions. We will not study these two issues separately and thus we will work on understanding why and how they are related to each other. At the end of this course, I expect students to be able to understand and apply basic economic concepts and tools to the analysis of the decisions of firms and households, the determination of prices in a market economy, and the welfare implications of market outcomes and economic policies. Students should also be able to acknowledge the advantages and limitations of the models used to analyze these issues. The analysis in this course will be mathematically based. College math (e.g. calculus) is not required but I will assume that you are totally comfortable with arithmetic, algebra, and basic geometry. Main Textbook: The textbook used is: Parkin. Microeconomics (12th edition) from Addison Wesley. Class Format: Each session is scheduled to last one hour and forty-five minutes. We will usually have a ten-minute break towards the middle of the session. Roughly, three fourths of class time will be devoted to lectures. The remaining time will be used to solve problems and exercises based on previously covered topics and problem sets. Students are highly encouraged to participate during lectures via asking questions relevant to the content being taught or by answering or providing some insights on the concepts learned in class. 1

2 Class Schedule: All the relevant dates for this course will be including lectures, midterm exams, quizzes and due dates for problem sets are included in a calendar that will be posted in Canvas. Make sure you can access and see the information with no problem. Important dates: June 28th: First Day of Class. July 16th: Midterm. August 3rd: Final. Topics Covered 1. Introduction (a) Opportunity Cost Dollar vs. Economic Costs (b) Using Graphs in Economics Reading a graph Movement of a curve vs. movement along a curve Slope of straight and curved lines Maximum and minimum points 2. Origins of Trade (a) Scarcity and Choice Production Possibilities Frontier Opportunity Cost Efficiency Growth Marginal Benefit and Marginal Cost (b) Comparative Advantage and the Gains from Trade Absolute and Comparative advantage Specialization Trade Consumption Possibilities Frontier 3. Markets for Trading (a) Supply & Demand Demand Curve Supply Curve Movement Along vs. Shifts of Curves Market Equilibrium 2

3 Law of Supply & Demand (b) Elasticity Price Elasticity of Demand (elastic, inelastic) Income Elasticity (normal, inferior) Cross-Price Elasticity (complements, substitutes) Price Elasticity of Supply (c) Efficiency and Equity Efficiency Consumer Surplus Producer Surplus Deadweight Loss Equity (d) Applications of Supply & Demand Price Controls (Floors & Ceilings) Taxes Subsidies Trade in the global market 4. The Building Blocks of the Demand Curve (a) Consumer Choice Utility Indifference Curves Marginal Rate of Substitution The Budget Line Substitution & Income Effects Application: The Supply of Labor 5. The Building Blocks of the Supply Curve (a) Production Production Inputs Total (Physical) Product Short Run & Long Run Average Product Marginal Product Law of Diminishing Returns Economies of Scale (b) Economies of Scale Total, Average & Marginal Cost Curves Fixed & Variable Costs Short Run & Long Run Costs 6. Perfect Competition and Monopoly 3

4 (a) The Supply Function in the Perfectly Competitive Market Profit Maximization Perfect Competition Firm as a Price Taker Firm Supply in Short & Long Run Entry & Exit Industries Supply in Short & Long Run (b) The Supply Decision for the Monopoly Monopoly Monopoly as a Price Setter Marginal Revenue Supply in Short & Long Run Price Discrimination Regulation of Monopoly 7. The Distribution of Income (a) Inputs and their Prices Marginal (Physical) Product Marginal Revenue Product Derived Demand for Inputs (b) Poverty & Discrimination Poverty Inequality Lorenz Curve 8. Market Failures (a) Externalities Positive and Negative Externalities Internalizing Externalities Markets for Externalities (b) Public Goods Private Goods Public Goods & Free Riding 2 2 Nash Equilibria 4

5 Canvas: Canvas is the official website for this course. All the material such as slides, problem sets, additional study material and your grades will be included in Canvas. Please make sure you are able to log on to this course site. If you have are not able to log in, you should contact me immediately via to the course address. Departamental course policies: All Economics Department course policies are in force in Econ 001 even if not explicitly listed on this syllabus. Please see the link below for full details: Academic Integrity: All suspected violations of the code of academic integrity, as set forth in the Pennbook will be reported to the Office of Student Conduct. Confirmed violations will result in failure for the course. Cheating is considered a serious offense to your classmates, to the University and to the instructor. I have a zero tolerance policy for cheating in this class and I will not make any exception. I will check identification cards at exams so please be sure to bring yours. Class Attendance: Class attendance is expected and any material covered during the lecture is subject to evaluation. Please note that lectures will differ from the textbook. If for any reason you need to miss a class please submit a Course Absence Report by logging on to Penn In Touch and choosing the Course Absence Report option from the menu on the left. Assignments and Grading The Final Grade is composed by 4 different elements, which are: Problem Sets, 15% of Final Grade Quizzes, 25% of Final Grade Midterm, 30% of Final Grade Final, 30% of Final Grade If necessary, I will curve final course grades (not individual assignments) so that approximately 20-30% fall in the A-range, 40-50% fall in the B-range, and the bulk of the remaining 20-40% fall in the C-range. I reserve grades below a C-minus for those rare cases in which a student fails to attain a minimum level of basic competence in statistics, an absolute rather than relative standard. 5

6 If you are in danger of failing to meet this minimum standard, you will receive a course problem notice. I will only curve the course in your favor, so the most stringent possible grade boundaries are: A-range = , B-range = 80-89, C-range = 70-79, D-range = (In this case, the top two points of each range would be a plus and the bottom two points a minus ). During the exams: Calculators are not allowed during the exams. Cell-phones and any other electronic devices must be turned off during the exams. Re-grading: Sometimes mistakes are made during the grading procedure. If you believe that your exam was graded incorrectly, you may ask for the exam to be graded again. To request a re-grade, you must return your exams with a written explanation of why you think the exam was graded incorrectly. I will then grade the whole exam again. The new score might be higher, lower, or equal to the original one. In order to submit re-grade requests, it is mandatory to attend to the corresponding class where the exam solution is presented. Re-grading requests must be submitted no more than a week later than the day when the graded test became available. Exam attendance: Exam attendance is mandatory. Of course, every now and then unforeseen circumstances might legitimately prevent one of you from attending an exam. If a midterm exam is missed due to valid reasons (see below for guidelines on what is considered a valid reason) you will be assigned the grade for the midterm you took for both midterms. Examples of valid reasons: Documented illness/health emergencies, religious observance, UPenn Business that takes you away from Campus, documented disabilities that allow you to take the exam under other circumstances, a death in the family. Examples of reasons that are NOT valid: Job interviews, job internships, traveling plans, end of semester/term early flights, or any other reason you would prefer not to be at the university when the exam is scheduled. The complete list of policies defining reasons that are considered valid when missing an exam and other rules can be found in the Economics Department Webpage: Problem Sets: Every Friday (starting June 29th), students will receive an assignment with problems and exercises for a total of five problem sets. Problem sets will be due the following Monday at the beginning of class. The problem sets will evaluate all of the topics covered during that week and thus students are strongly encouraged to work every day on the part of the problem set re- 6

7 lated to the topic covered that same day. You are encouraged to work in groups but you should hand in your own problem set. If you work on groups in addition to your name you should write the name of the people with whom you worked. You can submit a physical copy of your homework at the start of the corresponding class or by Canvas. No late submissions are allowed and there will be no exceptions. Quizzes: Every Thursday (starting July 5th) I will administer a short quiz (20 minutes) at the beginning of the second section of the lecture for a total of 5 quizzes. We will grade the quiz during class. The content of the quiz is related to the material taught during class and a reading I will distribute. Attendance to quizzes is mandatory and under no circumstance I will allow a student to take a quiz at a different time. Take into account, however, that the lowest quiz grade will not be taken into account when computing your final grade. Exams: The Midterm and Final will typically include some multiple choice questions and some short answer questions (similar to the exercises in the problem sets). 7

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