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1 Economics 1220 Introductory Microeconomics Section 002 Instructor: Donna Park Office: B147c Phone: (checked daily during the week) Office Hours 9:45 10:15 and 12:30-1:00 Monday, Tuesday, Wednesday and Thursday from May 4 th through June 16 th 5:30-6:20 Monday and Wednesday evenings After class as needed (7:55 pm) Monday and Wednesday By appointment. Textbook: Microeconomics, 12 th Canadian Edition, Christopher T.S. Ragan and Richard G. Lipsey, Pearson Addison Wesley, 2008 Workbook: Study Guide for the above textbook, Paul T. Dickinson and E. Kenneth Grant, Pearson Addison Wesley, 2008 Both of the above books are required for the course and I cannot overemphasis the importance of buying the study guide and completing as much of it as possible. In this course it is essential to work through a variety of problems in order to master the material. Course Content: The course is very roughly divided into consumer theory and producer theory. Within consumer theory, we will look at the supply and demand framework and the basics of individual (or consumer) choice. Within producer theory we will look at different types of firm and industry structure (perfect competition, monopoly, monopolistic competition and oligopoly). By the end of this course, you should be comfortable reading a variety of media articles (newspapers and magazines) that focus on individual industries. You should be able to analyze such articles within the context of our course and offer some criticism of the mainstream media. When you hear statements such as oil prices are likely to increase due to increased environmental regulation of oil production, you should be able to construct simple models that help to explain the statement. If you are planning on proceeding into business, it is often essential to have just such a rudimentary grasp of microeconomics. 1
2 Learning Outcomes: 1. Understanding how the concepts of scarcity and choice are central to the study of economics 2. Using the graphical construct of the production possibility boundary to illustrate the concepts of scarcity and choice 3. Recognizing simple linear equations, graphing such equations and being able to find the intercepts and slope 4. Understanding and illustrating how demand can change in response to changes in the price of other goods, income, taste, demographics and expectations 5. Understanding and illustrating how supply can change in response to changes in the prices of inputs, technology, government intervention in the market, prices of other products, expectations and number of suppliers 6. Calculating price elasticity of demand, cross-price elasticity of demand, income elasticity of demand and price elasticity of supply and explaining why such measures are useful 7. Differentiating between short-run and long-run measures of elasticity 8. Understanding how markets work, how shocks to supply and demand can change market outcomes and how government regulation can impact a market with regards to equilibrium outcomes and to changes in both consumer surplus and producer surplus 9. Being able to use marginal utility and prices to determine the optimal consumption bundle for a consumer 10. Graphing and explaining both income and substitution effects of a price change and deriving the demand curve from such changes 11. Graphing and working with budget constraints 12. Distinguishing between economic and accounting profits and determining economic profits of a firm 13. Measuring total, average and marginal products and total, average and marginal costs (and distinguishing between sunk, fixed and variable costs) 14. Understanding how changes in input costs, technology and government regulation can change the cost and product curves of a firm 15. Determining the optimal output level and optimal input mix for a profit maximizing firm with the various industry structures of perfect competition, monopolistic competition, monopoly and oligopoly 16. Understanding the conditions under which free market outcomes may not be optimal and the case for possible government intervention Outline of Topics: Introduction Issues and Concepts ( ) Theories and Data ( ) Demand and Supply The Demand and Supply Curves (3.1, 3.2) The Market and Equilibrium (3.3) Price Elasticity of Demand and Supply ( ) 2
3 Income Elasticity and Cross Elasticity of Demand (4.4) Markets and Government Regulation of Price ( ) Market Efficiency (5.4) Consumer Theory Marginal Utility and Consumer Choice (6.1) Income and Substitution Effects (6.2) Consumer Surplus (6.3) Utility Maximization using Indifference Curves and the Budget Line (6A.1-6A.3) From Income and Substitution Effects to the Demand Curve (6A.4) Producer Theory Production, Costs and Profits in the Short-Run ( ) Producers in the Long-Run ( ) Isoquants and Cost Minimization ((8A.1 8A.2) Competitive Markets Market Structure and Theory ( ) Short-Run Decisions (9.3) Long-Run Decisions (9.4) Monopoly Single-Price (10.1) Cartels (10.2) Price Discrimination (10.3) Imperfect Competition and Strategic Behaviour Industry Concentration and Imperfect Competition (11.1, 11.2) Monopolistic Competition (11.3) Oligopoly and Game Theory (11.4, 11.5) Government in the Market Economy Government Function (16.1) The Case for Free Markets (16.2) Market Failures and other Social Goals (16.3, 16.4) Government Intervention (16.5) Grading There will be two midterms and a final exam at the end of the term. All exams will be cumulative with emphasis on recent material. In addition, there will be several assignments only some of which will be for credit. However, I highly recommend that you complete all of the assignments as they are highly indicative of the types of questions you should expect on exams. 3
4 Students who complete all components of the course will have their final mark calculated two different ways and then receive the higher of the two marks. This will be done automatically and students do not have to indicate which grading system they prefer. Scheme I Homework 15% Midterm 1 20% Midterm 2 30% Final Exam 35% Scheme II Midterm 1 30% Midterm 2 35% Final Exam 35% Letter grades will be assigned as follows: % A % A 85-89% A % B % B 70-74% B % C % C 55-59% C % D <50% F Dates for Exams: Exam Policies Midterm I will take place on Wednesday, June 10 th Midterm II will take place on Monday, July 13th The college sets the date for the final exam. There are very limited opportunities to make-up missed midterm exams. Students who miss an exam due to severe illness must provide a medical certificate as soon as they return to school. Any other reason for absence is likely to result in a grade of zero for that exam. There are a very few exceptions such as observance of religious holidays but you must see me in ADVANCE of the exam. (If you are uncertain about your particular reason for expecting to miss an exam, please talk to me). The midterm exams and final will consist of both multiple choice and short answer questions. They will be strictly closed book (no notes, formula sheets, manuals or books) and there will be a restriction on the use of calculators. It is your obligation to be aware of policies and any policies or procedures announced in class. 4
5 Notes About the Course (1) Failure to Write the Final Exam: Students must write the final exam in order to receive credit for this course. (2) Failure to Attend Classes: Both the college and I expect students to attend classes. In my experience, failure to regularly attend classes is highly correlated with failure in the course. Although I will not take attendance I will expect that all students are attending class regularly and I will assume that students who do not attend regularly are planning to withdraw from the course. (3) Cheating / Plagiarism: Cheating and Plagiarism will not be tolerated. Students caught in such a situation will receive a failing grade for the course and the Dean of Student Support Services will keep a record of the incident (penalties escalate with severity and number of occurrences). For further information concerning Langara s policy on Academic Conduct, please see (4) Re-evaluation of Tests and Quizzes: Students seeking re-evaluation of graded tests should make all such requests the day the material is returned. We will always go over exams in class and requests for re-evaluation should be submitted immediately thereafter with a short note explaining the reason for re-evaluation. I reserve the right to remark the entire exam (except in the case of instructor error such as not marking a question or adding marks incorrectly). Class Cancellations Information regarding class cancellations will be posted in the following designated areas: 1. Registrar s Office (outside reception - east wall) -- B Building 2. Information Booth (main foyer) -- A Building This information is also available on the mylangara homepage. Note: Dates of exams, topics covered and learning objectives are subject to change without notice. It is the students responsibility to be aware of such changes as announced in class. 5
Attendance and Class Participation: Regular class attendance is an important part of this class. Students cannot expect to learn the relevant material
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