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Principles of Microeconomics
(ECO 202 3.0 Cr)

Arts & Sciences

Course Description

Economics is the study of how people satisfy their wants in the face of limited resources. There are two main branches of economics: macroeconomics and microeconomics. Macroeconomics is concerned with economy-wide factors such as inflation and unemployment. Microeconomics deals with the behavior of individual households and firms. Students will study how households make decisions about what goods to buy, and will also learn how firms make decisions about what to produce and how to produce it. Examining the behavior of households and firms will give students the necessary insight to understand how the interaction between consumers' demands and producers' supplies determines prices in the marketplace.

Economists use what they call “models” to examine various principles of economics. In this course, students will develop economic models that explain how markets determine prices in competitive markets. Students will use these models to analyze the behavior of producers and consumers. Students will also use models of "non-competitive" behavior to explore economic principles such as monopoly and oligopoly, and examine the role that government plays in a mixed economy.

Learning Objectives
After completing this course, students will be able to:

• Explain the role of the market mechanism in determining the prices of goods and services in an economy
• Apply an economic model called supply and demand to individual markets
• Describe the concept of market demand as it pertains to consumer behavior
• Explain the basic constructs of the "theory of the firm," particularly the role of costs of production, and relate them to market supply
• Analyze the extent of price competition in a market competitive and monopoly models
• Assess the effects of "imperfect" price competition on markets for goods and services
• Prepare an argument defending or opposing free international trade
• Analyze public policy issues such as minimum wage laws and rent control legislations using welfare economics
• Design an economic policy related to an important issue, such as the efficient reduction of environmental pollution

Breadth of Assignments
This course uses a variety of methods to explore the Principles of Microeconomics including: textbook reading assignments, online presentations designed to present the material in a way that the textbook cannot, web resources provided to support particularly challenging subject matter, self-assessment quizzes, collaborative projects involving problem-solving or discussions with classmates, individual activities ranging from Java and Flash based interactive exercises to writing assignments and case studies.

Required Resources
Mankiw, N. (2003). Principles of Microeconomics (3rd Edition). South-Western College
Publishers. ISBN 0-32-417188-9
A national/international newspaper or journal of your choice is strongly suggested. The
following are recommended: The Financial Times, The Wall Street Journal, The Economist.

Principles of Microeconomics
Arts & Sciences

Module 1: What is Economics
• The ten basic principles of economics
• Analyzing basic problems the way an economist would
• Constructing simple economic models
• The importance of opportunity cost in making choices among scarce resources

Module 2: Economic Modeling and the Gains from Trade
• Interpreting graphs and calculate slope and elasticity
• The importance of omitted variables in determining causality
• Why economists generally favor free trade
• Comparative advantage

Module 3: Supply and Demand
• The features of a competitive market
• The law of demand
• The law of supply
• How supply and demand determine market price
• How changes in supply and demand affect equilibrium

Module 4: Elasticity
• Demand elasticity
• The factors that influence demand elasticity
• Income and supply elasticity
• How elasticity can be used to formulate sound public policies

Module 5: Government Policy Using Supply and Demand
• How price ceilings affect markets
• How price floors affect markets
• Specific instances of price ceilings and floors
• The effects of the minimum wage
• How taxes affect market outcomes

Module 6: Consumer and Producer Surplus
• Deriving consumer surplus from a demand curve
• The significance and application of consumer surplus
• Producer surplus
• Combining consumer and producer surplus to measure consumer welfare
• How markets maximize welfare

Module 7: International Trade
• Determine market equilibrium with and without trade
• The welfare effects of free trade
• The welfare effects of tariffs
• The arguments for and against free trade

Module 8: Externalities and Public Goods
• Positive and negative externalities
• Why many government policies designed to handle externalities are inefficient
• Designing an efficient strategy to reduce pollution in your community, state or at the national or global level
• Distinguishing a public good from a private good
• Why many enterprises, like public television, are under-funded

Module 9: Costs and Production
• The production function
• The different concepts of costs recognized by economists
• Determining and utilizing marginal cost
• The relationship between short run and long run costs

Module 10: Perfect Competition
• The assumptions of the model of perfect competition
• How competitive firms decide how much to produce
• The short run equilibrium for a perfectly competitive firm
• Predicting firm behavior in a competitive industry where profits are too high or too low

Module 11: Monopoly
• The feature that characterizes all monopolies
• The components that determine the short run equilibrium of a monopolist
• The welfare costs of monopoly
• Regulations designed to control monopolists
• The Microsoft antitrust case

Module 12: Imperfect Competition
• The nature of imperfect competition
• Models of collusion and oligopoly
• Utilizing the prisoner's dilemma model to study collusion
• Monopolistic competition

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