JEFFERSON COLLEGE COURSE SYLLABUS ECO102 MICROECONOMICS. 3 Credit Hours. Prepared by: James Watson. Revised Date: February 2007 by James Watson

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1 JEFFERSON COLLEGE COURSE SYLLABUS ECO102 MICROECONOMICS 3 Credit Hours Prepared by: James Watson Revised Date: February 2007 by James Watson Arts & Science Education Dr. Mindy Selsor, Dean

2 ECO102 Microeconomics I. CATALOGUE DESCRIPTION Prerequisite: none 3 semester hours credit Microeconomics is a study of economics from the individual producer s and consumer s standpoint. This course is required of students who wish to transfer to a four-year school, majoring in any field of business, leading to a bachelor's degree. (F,S) II. COURSE GENERAL OBJECTIVES It is the goal of this course to equip students with the necessary vocabulary, concepts and reasoning ability to think critically about the economic forces that affect individual producers and consumers in the society. Students should also be able to recognize how these forces (supply and demand, the law of diminishing returns, etc.) affect their own lives. Upon completion of this course, the student will be able to: A. Create an awareness of society's microeconomic problems, the theories designed to analyze these problems and the alternative solutions to these problems. B. Enlarge the students' ability to reason analytically and objectively concerning economics issues. C. Instill in the students an interest and appreciation for the discipline of economics. D. Integrate information read in the textbooks and heard in class discussion with information read and heard in current news media. III. COURSE OUTLINE A. Graphs 1. Direct Relationships 2. Inverse Relationships

3 B. Demand 1. Law of Demand 2. Determinants of demand 3. Shifting the demand curve versus movements along the demand curve C. Supply 1. Law of Supply 2. Determinants of supply 3. Shifting the supply curve versus movements along the supply curve D. Equilibrium in a market system 1. Determining equilibrium price and quantity 2. Prices below the equilibrium: price ceilings and shortages 3. Prices above the equilibrium: price floors and surpluses 4. Application: The Story of Oil E. Elasticity 1. Elasticity of demand 2. Degrees of price elasticity (price sensitivity) 3. Determinants of elasticity 4. Elasticity and Total Revenue 5. Application: Who Pays the tax? 6. Other forms of elasticity (supply, income, etc.) 7. Application: Elasticity and Total Revenue in analyzing the effects of minimum wage laws, bumper crops and farm income, etc. F. The Marketplace 1. Efficiency and the marketplace a. what to produce and consumer sovereignty b. how to produce and the least-cost method 2. Failures of the marketplace a. monopoly power b. externalities c. public goods d. income distribution G. The Costs of Production 1. Explicit costs versus Implicit costs 2. Fixed costs versus variable costs 3. Short run versus Long run 4. Law of diminishing returns 5. Shape of the Average Cost curve 6. Economies and Diseconomies of Scale: the long run

4 H. An Introduction to Market Structures I. Perfect Competition 1. Characteristics 2. Decisions 3. Long run adjustments 4. Evaluation: consumer welfare J. Monopoly 1. Characteristics 2. Decisions 3. Long run adjustments 4. Evaluation: consumer welfare K. Monopolistic Competition 1. Characteristics 2. Decisions 3. Long run adjustments 4. Evaluation: consumer welfare L. Oligopoly 1. Characteristics 2. Decisions 3. Long run adjustments 4. Evaluation: consumer welfare M. International Trade 1. Basis for international trade a. Absolute advantage b. Comparative advantage 2. Trade Policy a. The case for free trade b. The case against free trade c. Application: The High U.S. Trade Deficit N. International Finance 1. Fixed Exchange Rates 2. A Managed Floating Exchange Rate System 3. Determinants of Exchange Rates 4. Application: The effects of a strong dollar versus a weak dollar

5 IV. UNIT OBJECTIVES A. Graphs 1. Recognize a direct relationship as plotted on a graph between two variables (such as a price and quantity supplied). 2. Recognize an inverse relationship as plotted on a graph between two variables (such as price and quantity demanded). B. Demand 1. Define the Law of Demand and explain how changes in price affects the behavior of buyers. 2. List the forces (price, taste, etc.) that cause buyers to purchase goods and services. 3. Distinguish between how changes in price are shown on a demand curve versus how changes in other determinants (taste, income, etc.) are shown on a demand curve. C. Supply 1. Define the Law of Supply and explain how changes in price affects the behavior of sellers. 2. List the forces (price, technology, etc.) that cause sellers to produce goods and services. 3. Distinguish between how changes in price are shown on a supply curve versus how changes in other determinants (technology, cost of inputs, etc.) are shown on a supply curve. D. Equilibrium in a market system 1. Demonstrate with a graph using the supply and demand model how equilibrium prices and quantities are determined in a market economy. 2. Describe what happens in the marketplace if a price is below or above the equilibrium price and quantity. 3. Describe the effect of a price ceiling in terms of price and quantity of the product on a good or service (such as rent control). 4. Describe the effect of a price floor in terms of price and quantity of the product on a good or service (such as farm price supports). 5. Demonstrate using the supply and demand model why the world price of oil rose so rapidly in the 1970s and fell so dramatically in the 1980s. E. Elasticity 1. Define elastic demand and inelastic demand. 2. Demonstrate how to calculate elasticity of demand from price and quantity data.

6 3. Identify the range for elasticity of demand from perfectly inelastic goods to perfectly elastic goods. 4. List and explain the determinants of elasticity of demand. 5. State the relationship between elasticity of demand and total revenue given price changes in the good or service. 6. Apply knowledge of elasticity of demand to analyze the relative burden of an excise tax on consumers and producers. 7. Describe other forms of the elasticity coefficient such as the elasticity of supply, income elasticity and cross elasticity of demand. 8. Apply knowledge of the elasticity-total revenue relationship to analyze various economic-social issues such as minimum wage laws, the plight of the farm income, etc. F. The Marketplace 1. Describe how a market economy determines what to produce, how to produce (methods of production) and for whom to produce. 2. List and explain instances in which the marketplace fails such as the effect of monopoly power, externalities, etc. G. The Costs of Production 1. Identify the difference between explicit costs versus implicit costs of running a business. 2. Identify the difference between fixed costs versus variable costs of running a business. 3. Distinguish between a short run business decision versus a long run business decision. 4. Demonstrate how to identify the point of diminishing marginal returns given variable input and total output data. 5. Describe and explain the shapes of the Average Variable Cost Curve, the Average Fixed Cost Curve, the Marginal Cost Curve and the Average Total Cost Curve. 6. Compare and contrast the shape of the Marginal Physical Product Curve and the Marginal Cost Curve. 7. Describe the factors leading to economies and diseconomies of scale in the production of a good or service. 8. Describe and explain the shape of the Long Run Average Cost Curve. H. An Introduction to Market Structures 1. List the criteria used to distinguish between the market structures. 2. Compare and contrast the four market structures: perfect competition; monopoly; monopolistic competition; and oligopoly.

7 I. Perfect Competition 1. Describe the characteristics of perfect competition. 2. Describe how perfectly competitive firms determine: how much to produce; if the firm makes a profit or loss; and if the firm is making a loss, should it shut down or continue to produce. 3. Describe the criteria perfect competitors use to decide to expand or contract in the long run. 4. Evaluate the effect perfectly competitive behavior has on the welfare of the consumer. J. Monopoly 1. Describe the characteristics of monopolist. 2. Describe how monopolist firms determine: how much to produce; if the firm makes a profit or loss; and if the firm is making a loss, should it shut down or continue to produce. 3. Describe the criteria monopolists use to decide to expand or contract in the long run. 4. Evaluate the effect monopolistic behavior has on the welfare of the consumer. K. Monopolistic Competition 1. Describe the characteristics of a monopolistic competitor. 2. Describe how monopolistically competitive firms determine: how much to produce; if the firm makes a profit or loss; and if the firm is making a loss, should it shut down or continue to produce. 3. Describe the criteria monopolistic competitors use to decide to expand or contract in the long run. 4. Evaluate the effect a monopolistically competitive behavior has on the welfare of the consumer. L. Oligopoly 1. Describe the characteristics of an oligopolist. 2. Describe how oligopolistic firms determine: how much to produce; if the firm makes a profit or loss; and if the firm is making a loss, should it shut down or continue to produce. 3. Describe the criteria oligopolists use to decide to expand or contract in the long run. 4. Evaluate the effect oligopolistic behavior has on the welfare of the consumer. M. International Trade 1. Distinguish between absolute advantage and comparative advantage as a basis for trade individuals and nations. 2. Compare and contrast the case a for free trade policy versus the case against a free trade policy. 3. List and explain the reasons for the rise in the U.S. trade deficit

8 since N. International Finance 1. List and explain the advantages and disadvantages of the fixed exchange rate gold standard. 2. Describe the Managed Floating Exchange Rate system. 3. Compare and contrast fixed exchange rate systems versus flexible exchange rate systems. 4. List and explain the determinants of exchange rates between countries. 5. Describe the effects of a "strong dollar" versus a "weak dollar" in a country's economy. V. METHOD (S) OF INSTRUCTION A. Lecture/Class Discussion B. Class Discussion- The news and economic principles C. Handouts D. Data (trade deficits over time, elasticity, etc.) E. Videotapes VI. REQUIRED TEXTBOOK (S) WITH PUBLICATION INFORMATION Slavin, Steven. Economics, 8th ed., McGraw-Hill Irwin Publishing, VII. REQUIRED MATERIALS (Students) A. Textbook B. Course Lecture/Study Guide (prepared by the instructor) IX. METHOD(S) OF EVALUATION (Students) A. Exams: Multiple Choice; Essay, Calculations; Written Identifications. B. Quizzes: Multiple Choice; Fill-in-the-blank; Vocabulary C. Take Home Exam (material from the news and the textbook): fill in the blank; short essay; calculations; graphing.