SYLLABUS 80A INTERMEDIATE MICROECONOMICS SPRING 2016 Course Description: This course aims to provide a fuller understanding of microeconomic principles, including (1) developing deeper intuition than in introductory economics courses, and (2) employing mathematical modeling to more precisely answer economic questions. One of the main goals of the course is to prepare students with modeling skills which, when later combined with statistics/econometrics, can be used to understand markets and make informed decisions based on data. The skills acquired may be useful to CEOs, managers, entrepreneurs, policymakers, lawyers, voters, and citizens, among others. The material is also crucial for more advanced classes in economics. Prerequisites: Math requirement: You MUST have either (a) successfully completed Math 10A (C- or higher), (b) attained at least a 4 on the AP Math AB test, (c) received at least a 3 on the AP Math BC test, or (d) passed the calculus placement exam that is administered by the Economics Department. Economics requirements: You must have either (a) taken Econ 10A, or (b) taken Econ 2A and received a B+ or higher. Learning Goals and Objectives: The first goal of the course is to provide students with a solid understanding of the analytical tools of microeconomics and skills to apply them to novel problems. The second goal is to be able to critically evaluate the arguments made by others (e.g. politicians). The third goal is to 1
grasp why certain assumptions are made when formulating economic models. These goals are intentionally vague the hope is that the skills acquired can be applied to new problems one might face in the future. The objectives are to be able to write down a mathematical model capturing the important aspects of firms and consumer payoffs, and then solve for the equilibrium outcomes. We will focus on particular problems. Examples include consumer utility maximization and optimal pricing by firms in imperfectly competitive markets. By applying these methods to many different topics and questions, I hope students become familiar enough to extend these skills to novel problems. Course Meeting Times: Mondays and Wednesday 3:30-4:50 (Section I) or 5:00-6:20 (Section II), Pollack 001 Recitation: Mondays, 6:30PM to 8:20PM (First 40 minutes sometimes required), Pollack 001 Electronics in the Classroom: Laptops are permitted in the front row only. Even then, surfing the internet is prohibited it is distracting to other students and to me, the professor, thus impacting the learning environment. Cellphones are not permitted and should be off or in airplane mode (buzzing on silent mode is distracting to me, the professor). If you have any related special accommodation requests (for example are awaiting an important medical-related call), please come see me before the class, and we will find a solution. Materials and Communications: Course materials will be posted on LATTE. You can add to the course calendar, available at this link: course calendar, to your own online calendar, by clicking on the + Google Calendar button at the bottom right of the webpage. The course calendar includes important due dates, and any changes to dates will be reflected in this calendar. Communication will administered through LATTE. 2
Course Materials: Textbook: Goolsbee, Levitt, and Syverson, Microeconomics, (Worth Publishers, 2012). The textbook for this course is available for purchase at the Brandeis Bookstore. Other Materials: Any other, supplementary materials will be made available on LATTE, or via links on the syllabus (this document). Course Requirements/Evaluation: Success in this four- credit course is based on the expectation that students will spend a minimum of 9 hours of study time per week in preparation for class (readings, papers, discussion sections, preparation for exams, research, etc.) The grade is out of 500 points. If you receive the following number of points, you are guaranteed at least the following grade: Get 460 or above Guaranteed at least A- 420 or above At least a B- 380 or above At least a C- A curve will be applied to increase grades only if the grade distribution is lower than department standards. A curve will not reduce grades below the guarantee above. The grade is comprised of the following components. 1. Problem sets (25 points [5% of grade]) There will be a problem set associated with each topic. You are advised to work out the problem sets on paper. However, answers are ultimately submitted online for grading. If the answer entered is wrong, the student will be informed and may resubmit a new answer up to two additional times. Once the right answer has been entered, the student will receive full credit on the problem, regardless of the times they had answered the question. The lowest problem set is dropped. All 3
remaining problem sets count equally. My policy regarding cooperative work on these problem sets is discussed on the next page; please read it carefully, and note that working somewhat independently on problems sets is a crucial step in learning the material. 2. Six quizzes (150 points [30% of grade]) held during the beginning of recitation. The lowest quiz grade is dropped. Hence the remaining five count for 30 points each. 3. Midterm exam (150 points [30% of grade]) 4. Final exam (150 points [30% of grade]) to be held during the final exam period 5. Class attendance (25 points [5% of grade]). Up to two absences from class will have no effect on the grade. Further absences will incur a loss of 3 points each. The instructor reserves the right to, at his discretion, remove further points for conduct which harms the learning environment and impacts other students. This includes using laptops/cellphones to surf the internet, text, and make phone calls, or willfully making disruptive comments and/or demonstrations, etc. Please note that there will be NO make-up exams given. Absence from an exam will be excused only for a serious illness or bereavement (which must be documented). A student who is unable to take the final exam for a legitimate reason MUST obtain advance authorization from the Office of Undergraduate Academic Affairs. There are NO EXCEPTIONS to these rules. Special Accommodations: If you are a student with a documented disability on record at and wish to have a reasonable accommodation made for you in this class, please see me immediately. Please keep in mind that reasonable accommodations are not provided retroactively. Academic Integrity: You are expected to be honest in all of your academic work. Please 4
consult Rights and Responsibilities for all policies and procedures related to academic integrity. Students may be required to submit work to TurnItIn.com software to verify originality. Allegations of alleged academic dishonesty will be forwarded to the Director of Academic Integrity. Sanctions for academic dishonesty can include failing grades and/or suspension from the university. Citation and research assistance can be found at LTS - Library guides. POLICIES FOR PROBLEM SETS 1. Problem sets are designed to help you learn how to apply the material presented in lectures and the textbook. You are permitted and indeed encouraged to discuss course material, including homework, with other students in the class. Discussion with others is intended to clarify ideas, concepts, and technical questions. But more importantly, struggling through the problems independently is a crucial step in learning the material. If you rely on others for problem sets (even unintentionally), my experiences from previously classes suggest that you won t learn the material well. If you do the work independently, you will become a good economist. For this reason, there is not penalty for submitting a wrong answer, so long as you eventually submit the correct answer for the problem (up to three tries per problem, in total). Beware: if you cannot answer the problem yourself on the problem set, you likely will also struggle on the quizzes, midterm, and final. Since problem sets only count for 5% of the grade, they should be viewed and treated as practice for the other components which have more weight. 2. Solutions are entered online and provide immediate feedback. 3. Problem set solutions will be posted. 5
EXAM POLICIES During exams, you may consult the instructor/proctor administering the exam if you need clarification of exam questions. No discussion or other form of communication with anyone else will be permitted after the exams have been handed out, until all students have turned in their exam books. Students found to have cheated or engaged in any other unethical behavior will be given a grade of 0 on the examination involved, and will be turned over to the appropriate disciplinary committees within for further action. Bathroom breaks during weekly quizzes and the midterm are not permitted. If you have any questions regarding these policies, please raise them with the instructor. 6
EXAM DATES TO REMEMBER Feb 1 Feb 8 Feb 22 Mar 14 Mar 21 Apr 4 Apr 18 TBD Quiz 1, beginning of recitation (6:30 PM) Quiz 2, beginning of recitation (6:30 PM) Midterm, during recitation (6:30PM) Quiz 3, beginning of recitation (6:30 PM) Quiz 4, beginning of recitation (6:30 PM) Quiz 5, beginning of recitation (6:30 PM) Quiz 6, beginning of recitation (6:30 PM) Final exam Jan 13 COURSE OUTLINE Lecture 1. Intro. Introduction to the course, a discussion of markets, and review of concepts. Read: GLS, Chapter 1 Read: Brooks, David. The Structures of Growth - Learning Is No Easy Task. The New York Times. June 16, 2014. Jan. 18 No Class Martin Luther King Day 7
Jan 20 Lecture 2. Supply and Demand I. Review of elasticities, cross price elasticities. Using demand and supply curves. Read: GLS, Chapters 2 and 3. Jan 25 Lecture 3. Supply and Demand II. Consumer and producer surplus. Government interventions. Jan 27 Feb 1 Lecture 4. Math Boot Camp. Review of calculus concepts used in later parts of class. Quiz 1 in Recitation Lecture 5. Consumer Demand 1. Introduction to consumer demand analysis. Preferences, utility functions, MRS, budget constraints, optimal consumption. Read: GLS chapters 4 and 5 Feb 3 Feb 8 Lecture 6. Consumer Demand II. Deriving demand functions. Income and substitution effects. Quiz 2 in Recitation Lecture 7. Supply Side Theory and Firm Decision Theory. functions, isocost lines, production with 1 input, 2 inputs. Production Read: GLS chapter 6 Feb 10 Review for Midterm 8
Feb 15 Feb 17 No Class Spring break I No Class Spring break I Feb 22 Midterm in Recitation Class time will be used as extra review session. I, Professor Shiller, will explain any questions requested by students. Feb 24 Feb 29 No Class Break after midterm Return midterm exam in class Mar 2 Lecture 8. Costs. Brief review of production economics and profit maximization. Cost concepts: fixed, variable, and sunk; total average, and marginal cost in the short run and long run. Accounting cost vs. economic cost. Learning curves, returns to scale, and economies of scale Read GLS chapter 7 Last day to drop class without a W on transcript Mar 7 Lecture 9. Perfect competition and Monopoly. The firm s problem. Assumptions of perfect competition. Where supply curves come from. Introduction to monopoly Read: GLS, Chapter 8 and 9. 9
Mar 9 Lecture 10. Market Power Monopoly and Monopsony. Markets with only one firm. Reading: Thiel, Peter. Competition is for Losers. The Wall Street Journal, September 13, 2014. Mar 14 Quiz 3 in Recitation Lecture 11. Price Discrimination. Non-uniform pricing strategies for firms with monopoly power. Read: GLS chapter 10 Mar 16 Lecture 12. Price Discrimination II Read: Ozinek, Adam, Will Big Data Bring More Price Discrimination? Forbes. September 1, 2013 Mar 21 Quiz 4 in Recitation Lecture 13. Oligopoly I. Markets with few firms. Quantity setting. Price setting. Sequential vs. simultaneous actions. Read: GLS chapter 11 Mar 23 Lecture 14. Oligopoly II. Markets with few firms. Quantity setting. Price setting. Sequential vs. simultaneous actions. 10
Mar 28 No Class Spring Break II Mar 30 Lecture 15. Collusion and Game Theory Read: GLS chapter 12 Read: Cartels: Just One More Fix. The Economist. March 29, 2014 Apr 4 Quiz 5 in Recitation Lecture 16. Discounting And Choice Under Uncertainty. Expected values. Preferences towards risk: risk aversion, risk neutrality, risk loving behavior. Read: GLS, Chapter 13. Apr 6 Lecture 17. General Equilibrium and Economic Efficiency I. Cross-Market Effects Read: GLS, Chapter 14. Apr 11 Lecture 18. General Equilibrium and Economic Efficiency II. The Edgeworth Box. Equity and efficiency. Efficiency in production. Efficiency of competitive markets. Read: Edsall, Thoma. Just Right Inequality The New York Times. Mar 4, 2014 11
Read: Mankiw, Gregory. When a Scientist is Also a Philosopher. The New York Times, March 22, 2014 Apr 13 Lecture 19. Information. Markets with asymmetric information. Quality uncertainty and the market for lemons. Adverse selection. Moral hazard. Read: GLS chapter 15 Read: Thomas, Katie. Study Find Sicklier Enrollees in Earliest Stage of Health Law. The New York Times. April 9, 2014. Apr 18 Quiz 6 in Recitation Lecture 20. Externalities and market structure. Positive and negative externalities. How markets respond to correct for market failure and forms of government intervention. Property rights and common property resources. Read: GLS chapter 16 Read: Governing the Oceans: The Tragedy of the High Seas. The Economist. Feb 22, 2014 Apr 20 Apr 25 Apr 27 May 2 Lecture 21. Public Goods. Pure public goods. Public vs. private provision of public goods. How much should be provided? Local public goods and the Tiebout hypothesis. The Median Voter theorem. No Class Spring Break III No Class Spring Break III Course Summary and Review 12
TBD Final Exam Summer/Winter Break Suggested Reading: Frakd, Austin. How Spreadsheets Can Confuse, The New York Times, May 26, 2014. Hartford, Tim. Big Data: Are We Making a Big Mistake, Financial Times, March 28, 2014. Yu, Liren, "Silicon Valley's Youth Problem," New York Times Magazine, March 12, 2014. To help understand the importance of causation: Dynarski, Susan, Study on Parental Longevity is Short on Causation, The New York Times, August 6, 2014. On planned obsolescence (a topic in Industrial Organization): Mullainathan, Sendhil, Hold the Phone: A Big Data Conundrum, The New York Times 13