E-mail:mailto:Shepard@mail.lemoyne.edu

Course Description. Economics 113 introduces the principles of microeconomics and develops a theory of resource allocation and pricing for a private market economy. Basic economic concepts are used to analyze choices made by consumers, businesses, institutions, and governments with respect to the allocation of resources, goods and services within the economy. Microeconomics will prove valuable for understanding these choices, and for evaluating the effects of government policies and regulation on households and business. Particular attention will be paid to analyzing alternative competitive market structures, ranging from the very competitive to the pure monopoly.

Goals and objectives: In this course you will develop a working knowledge of the basic principles of economics that govern everyday choices. Fundamental concepts of supply and demand, rational choice, efficiency, opportunity costs, incentives, production, profits, competition, monopoly, externalities, and public goods will help you to understand the world around you. Whether or not you intend to pursue economics or business as a career, a greater understanding of these concepts is useful for evaluating your own choices, such as buying a car or house, financing your education, choosing a career, running a business, or evaluating proposals from candidates for public office.

1. Required Text. William J. Baumol and Alan S. Blinder, Macroeconomics, Principles and Policy, 9th edition, The Dryden Press/Harcourt College Publishers, copyright 2000.

2. The recommended study guide and the required textbook are available at the bookstore.

3. Articles from newspapers and periodicals such as The Wall Street Journal, Business Week, or the Economist, which cover current events, will be identified and assigned as we cover the material in the course. These will be accessible from various web sites, or placed on reserve at the college library. A subscription to the Wall Street Journal is recommended but not required. Orders will be taken in class during the first week.

Classroom Policies and Procedures In order to teach you the basic principles of microeconomics, most classes will be lecture-oriented. To gain practice and familiarity with the material, several films will be shown, and problem sets will be assigned approximately every two weeks. Several classes, or parts of, will be devoted to problem solving or classroom discussions of current events. Regular classroom attendance and careful note taking are important for performing well. If you have difficulty with the material, see me and attend some of the tutoring sessions during the semester. The attendance policy for classes is in the college catalog. If you miss a class it is important to get the notes from a classmate or to see me. If possible let me know beforehand--e-mail, or leave a phone message if I am not in.

Grading. There will be three tests during the semester and a final exam. The two highest grades of the tests will count for 40 percent of your final grade and the final exam will count for 40 percent. (I will not count the lowest score on the three tests). Regular class attendance, participation, and the problem sets will count for 20 percent. The problem sets, when collected, will be graded on a pass/fail basis. Make-up exams will be given if there are valid reasons for missing an exam. See the course schedule for the days of the tests.

Special Challenges: If you have a documented disability and wish to discuss academic accommodations, please meet with me within the first week of class or as soon as possible thereafter. Students who believe that they have a disability that may influence their academic performance, but who have not yet had that disability documented, should immediately contact and meet with the director of the Academic Support Center.

Course outline and schedule.

I. Introduction to economics (Week of Jan. 13 and Jan 20)

1. Economics, definition and scope

2. Production Possibilities

3. Opportunity Costs and economic profits.

4. Economic Efficiency

5. An overview of the economy

Readings: Text, Chapters 1 and 2

* No class on Monday, Jan 20

II. The supply and demand model. (Week of Jan 27)

1. The demand curve

2. The supply curve

3. Equilibrium

4. Factors shifting the demand or supply curves

5. Short run and long run analysis.

Readings: Text, Chapter 3.

* Problem set # 1 is due Friday, Jan 31.

III. Applications of the supply and demand model. (Week of Feb. 3)

1. Price controls.

2. Elasticities of demand and supply

3. Rent controls, price supports, and minimum wages.

4. The war on drugs

5. Elasticities, Revenues, Pricing, and Profits..

Readings: Text, Chapter 5

* Test # 1 Friday, Feb. 7

IV. Household decision making 1: Consumer theory. (Week of Feb. 10)

1. Utility maximization

3. The law of diminishing marginal utility.

4. Budget lines and indifference curves.

5. The optimal purchase rule.

6. The saving decision

Readings: Text, Chapter 4

V. Household decision making 2: The labor market. (Week of Feb. 17)

1. The demand for labor

2. The labor supply decision

3. Equilibrium in the labor market.

4. Incentives and compensation

5. Efficiency wage theory.

Readings: Text, Chapters 6 and 17

* Problem set # 2 is due on Friday, Feb. 21)

VI. Production and Cost (Week of Feb. 24 and Mar 10.)

1. Production functions.

2. The law of diminishing returns.

3. The cost curves

4. Duality of Production and Cost

5. Economies of scale and scope

6. Estimation of production and cost functions

Readings: Text, Chapters 6 and 7

* No classes week of March 3

VII. Profit maximization in the short run (Week of March 17)

1. Revenues, Costs, and Profits

2. The profit maximization hypothesis

3. The perfectly competitive firm.

4. The shut down decision.

Readings: Text, Chapters 8 and 15

• Problem set 3 is due Friday, March 21.

VIII. Profit maximization in the long run (Week of March 24)

1. Perfect competition.

2. Economic efficiency and the competitive firm

3. Contestable markets and workable competition

Readings: Text, Chapter 9

* Test # 2 will be Friday, March 28

IX. Monopoly (Week of March 31 and April 7)

1. Monopolies: pure and natural.

2. Barriers to entry

3. Profit maximization with monopoly pricing.

4. The efficiency of monopoly

5. Anti-trust policies

6. Government regulation of monopoly

Readings: Text, Chapters 10 and 18

X. Other forms of imperfect competition (Week of April 14 and April 21)

1. Monopolistic Competition

2. The excess capacity theorem of monopolistic competition

2. Efficiency of Monopolistic competition

3. Oligopoly models.

4. Game theory.

5. International trade and comparative advantage

Readings: Text, Chapters 11 and 21

*Problem set # 4 due Wed. April 23

** No classes, Fri and Mon, April 18 and 21.

*** Test # 3 will be on Friday, April 25**

XI. Market failure and public policy application (Week of April 28 and May 5)

1. Externalities

2. Public Goods

3. Public policies towards, labor, trade, and the environment

Readings: Text, Chapters 14 and 22.

Classes end May 5

XII. Final exam: The final exam will be in this classroom as shown on the college final exam schedule. Good Luck.