North Carolina State University s4

North Carolina State University Economics 201 H Principles of Microeconomics Spring 2012

Course Syllabus

INSTRUCTOR: Stephen Margolis

COURSE DESCRIPTION: This is an honors introductory course in microeconomics. Microeconomics is concerned decisions of individual consumers and producers and the effects of those decisions in input and product markets. Microeconomics also considers the efficiency of markets and the consequences of competition and monopoly power.

COURSE OBJECTIVE: You should leave this course with a basic understanding of how prices are determined in a market economy and how the markets allocate resources to competing uses. You should also have an understanding of consumer and producer behavior. Your goal should be to understand these principles and be able to apply them to real world situations.

TEXT: Steven Landsburg, Price Theory and Applications, New York: West Publishing. Seventh Edition, 2008. Additional readings on-line and available in the library will be assigned during the course. (Note that this is not the newest edition.)

GRADING: Grades will be based on two midterms, a final exam, problem sets, and class participation. The weights are as follows:

First Midterm 25% Second Midterm 25% Final exam 30% Problem sets 10% Class Participation 10%

PRROBLEM SETS: I expect to assign four or five problem sets. They will be graded on a pass, pass-plus, pass-minus, and unsatisfactory basis.

OFFICE: My office is 4156 Nelson Hall. My phone number is (919) 513-2565. The fax number there is (919) 515-7873. My e-mail address is [email protected]. Office hours are Tuesdays and Thursdays from 3:00 to 4:00 and by appointment. I also encourage questions and discussion by e-mail.

ACADEMIC INTEGRETY: I will assume that you are aware the of NC State Policy on academic intergrety. Unless I explicitly state otherwise, all work submitted in the course is to be your own work. If you are unaware of the academic integrity policy you should consult the University’s policy statement at http://www.fis.ncsu.edu/ncsulegal/41.03-codeof.htm

1 MOBILE PHONES

Please turn your phone off when you come to class. If you must leave class to take a call, please do not return to class.

ELECTRONIC COMMUNICATIONS: I expect that you receive and regularly read e- mail. I will use the university’s e-mail distribution list for this class, so please be sure that the address that you have listed with the university is the one that you regularly read.

GENERAL COMMENTS ON THE READINGS: The text book for this course is an intermediate level text, often used in courses like our Economics 301, and used at NC State in the managerial economics course that is taught for our MBA students. Nevertheless, the book is self contained, which is to say it does not presume any previous study of economics. For the past few years, I have experimented with a number of introductory textbooks, but none of them are as clear and as interesting as Landsburg’s book. I think this book is particularly well suited to an honors introductory class.

The reading assignments are selective, we will skip some chapters and we will read only parts of other chapters. The selections exclude some of the more technical material that are necessary for the intermediate level course, but beyond the scope of most introductory courses. None of the material in the book should be beyond your abilities, so if something that I have excluded looks interesting to you, by all means have a look. I’ll be happy to answer questions—probably outside of class—on any part of the textbook.

You will also see that the reading list indentifies certain end-of-chapter problems from the text. These are not assignments that you will turn in, but are highly recommended exercises to help you develop and check your understanding of the textbook.

EXAMS AND ASSIGNMENTS: All dates shown below are provisioinal. We may get ahead of schedule or fall behind, depending primarily on the amount of class discussion. In particular, the dates for the two midterms are subject to change. You are responsible for staying informed regarding test dates and assignment due dates.

You must attend examinations at the appointed times. Excused absences from exams will be granted for properly documented medical emergencies or emergencies in your immediate family.

The final examination will be held at the time designated by the university. The final examination for this course will be on Tuesday, May 8, at 1:00 p.m.

2 Class Schedule, Reading List and Recommended Problems

First Module: January 10 - 26

Topics: Introduction. An overview of supply and demand. Elements of consumer theory. Characterizing demand.

Readings: Introduction Pages v- xi Chapter 1 Pages 1 - 26 Problems 1 – 6, 8. N1-N3 Chapter 2 Pages 31 - 42 Problems 1, 2 Chapter 3 Pages 45- 46 (top) Chapter 4 Pages 96-102

Be sure to read the introductory pages shown here. I know these ordinarily are just encouragement and promotion. But there is actual content in this introduction that I will cover in class.

Chapter 1 presents an overview of supply and demand. Subsequent chapters will delve into the details of supply and demand, but this overview gives us the platform for much of economics. While the chapter is quite basic, it includes some of the most useful and the most fundamental ideas that economics has to offer.

Chapter 2 introduces gains from trade and the meaning of costs. Gains from trade and opportunity cost are two more fundamental ideas. Some parts of the chapter, however, are concerned with distinctions in terminology about price that are not terribly important for our purposes. You are invited to give this chapter a quick read, but do pay particular attention to section 2.2.

Chapters 3 and 4 present the formal theory of the consumer. For our course, it is important that you understand demand and the foundations of the demand curve. Some of the formalities of these chapters, however, are outside of the scope of this course. As a result, I am recommending only selected pages from these chapters.

Second Module: January 31 – February 14

Topics: The firm, production and cost, cost concepts for decision making.

Readings: Chapter 5 Pages 113 - 131 Problems 1,2, 5, 8 (see comments below) Chapter 6 Pages 135 – 145, 160 - 163 Problems 1- 3

3 Chapter 5 is a generalization of maximization principles that operate in almost every application that we will see. This generalization is an unusual feature of this textbook. Don't bog down in the particulars here: we will see the formal analytics for several special cases later. Read this section for the overall logic of the equimarginal principle.

Chapter 6 presents the core cost concepts that we will use in many different ways in the remainder of this course. In addition to serving as building blocks for the theory that is to come, these cost ideas have important direct application.

FIRST MIDTERM February 16

Third Module: February 21 – March 1

Topic: Competition

Readings: Chapter 7 Pages 179 – 221 Numerical problem N 7, Problems 1 – 6, 10

The economist’s model of a competitive firm is central to much economic analysis. It is, in a sense, our default model, the model that we use to characterize firm behavior in the absense of some compelling argument for using something else. When we talk about supply and demand, we are implicitly using at least some of the basic assumptions of the competitive model.

(Spring Break March 5 – 9)

Fourth Module: March 13 - 20.

Topic: Efficiency and Information

Readings: Chapter 8 Pages 219-38, 250 (Top) Problems 1,2,

Chapter 9 Pages 279-87 Pages 291-93

Chapter 8 develops key ideas in what we call normative economics, which deals with evaluation of economic outcomes. Chapter 9 pays special attention to explaining how markets mobilize information that is widely disbursed in the population. We will also discuss income distribution.

4 Fifth Module: March 22 - April 10 (Spring holiday April 5)

Topic: Monopoly and pricing practices. Single price monopoly, price discrimination and pricing practices, a bit on oligopoly.

Readings: Chapter 10 Pages 313-15 Pages 319-22, 329-42 Problems 15-18 Chapter 11 (Optional, See comment) Handout Pricing Problems Chapter 17 Interest and investment (Selected pages)

While I do not take issue with anything in chapter 11, my emphasis on oligopoly will be quite different from Landsburg's.

SECOND MIDTERM April 12

Sixth Module: April 17 – 26

Topic: Externality, public goods, private property, open access common property, investment and savings. Final Review

Readings: Chapter 13 Pages 417-32 Chapter 14 Pages 455-67 Chapter 17 Selected pages to be announced

This section covers a set of special problems for market economies, problems that are sometimes identified as market failures. We will also cover basics of interest and investment, as time allows.