LAHORE UNIVERSITY OF MANAGEMENT SCIENCES SULEMAN DAWOOD SCHOOL OF BUSINESS MECO 111 Principles of Microeconomics Dr. Bushra Naqvi COURSE OUTLINE ACF Fall 2011/12
Instructor: Dr. Bushra Naqvi Email: Bushra.Naqvi@lums.edu.pk Room No: 312 Telephone: Ext:8321 Office Hours: TBA Secretary/ TA TBA COURSE OVERVIEW This course covers the basic principles of microeconomic analysis. Material covered will include decision making processes of economic agents and their interaction facilitated through markets. The outcome of their interaction will depend on the nature of the market, whether it is characterized by competition or monopoly. Markets are also subject to the interventions of the government, are regulated by society and are also subject to various types of failures. To this end, we will study the concept of economic efficiency to provide a basis for the appraisal of market performance and intervention. Although this course focuses on the general principles of microeconomic analysis, applications of these principles to issues of current importance will also be pointed out. Upon completion of the course students should have a better understanding of how a market economy operates and the ways in which imperfect markets hinder the efficient allocation of resources. By the end of this course, students should be able to discuss economic issues, applying critical thinking and rational inquiry to complex real life issues. A good grasp of microeconomics is vital for any student for understanding policy making, managerial decision making, and more generally for comprehending how the modern economy works. RECOMMENDED READINGS Recommended Text: Principles of Microeconomics (3 rd Ed.) by N. Gregory Mankiw Supplementary Text: Microeconomics (7 th Ed.) by R.S. Pindyck, D.L. Rubinfeld & P.L. Mehta COURSE ASSESSMENT Grading Instruments The following instruments of evaluation shall be used to assess individual performance. 1) Attendance and CP 10% 2) Quizzes (5 of 6) 25% 3) Mid term Exam 30% 4) Final Exam 35%
CLASS MANAGEMENT POLICY There will be two 110 minute lectures each week. Students are expected to show up on time; late arrival will not be tolerated. Students arriving more than 5 minutes late will not be allowed to enter and their attendance will not be marked. Students will find it very difficult to score adequately unless attendance is regular. Furthermore, regular participation in class discussions is recommended, not only to score well but also to understand what is being discussed. Microeconomics is a dynamic subject and class discussions are designed to appreciate its relevance and its use outside the classroom. Each lecture will be uploaded on the LMS (https://lms.lums.edu.pk) well before class time. It is recommended to come to class with the lecture slides and having read them before hand. Valuable sources for students can be found on the text website: http://mankiw.swlearning.com. Student performance (quizzes) will be regularly updated on Zambeel (https://zambeel.lums.edu.pk). Any sort of academic dishonesty, such as, plagiarism and cheating will not be tolerated. You should acquaint yourself with the University s policy on academic dishonesty and plagiarism.
MECO 111 Principles of Microeconomics Fall 2011/12 LECTURE BOOK No. 1 2 TITLE OF CASE/LECTURE # READING MATERIAL LEARNING OBJECTIVES Introduction to the course 1 2 Chapter 1 Chapter 2 Fundamental lessons about individual decision making and the economy as a whole The difference between micro and macro economics, positive and normative statements 3 Chapter 3 Understanding the concepts of opportunity costs, absolute and comparative advantages and their implications in decision making 3 The market forces of Demand and Supply 1 Chapter 4 Understand the concepts of demand and supply and what brings about a change in the demand/supply of a product Understand the concept of market equilibrium and the behavior of economic agents in driving towards this equilibrium. Interpret the concept of price as a signal 4 Elasticity and its Applications 1 Chapter 5 Calculate and interpret the elasticity of demand (price, cross and income) and the elasticity of supply and discuss the factors that influence them Calculate the elasticity on a straight line demand curve, differentiate between inelastic, elastic and unit elastic demand, and describe the relationship between elasticity and revenue. 5 Supply, Demand and Government Policies 1 Chapter 6 The effect of market intervention, price ceiling and floors. The incidence of tax and its relationship with price elasticity The distortion of the free market
No. TITLE OF CASE/LECTURE # READING MATERIAL LEARNING OBJECTIVES 6 7 8 Consumers, Producers and the Efficiency of Markets Consumers, Producers and the Efficiency of Markets Efficiency and Failure: the costs of taxation 1 Chapter 7 To understand the concepts of market efficiency and market failure Computing and interpreting consumer surplus and producer surplus 1 Chapter 7 The invisible hand of the market and market efficiency Where markets fail Allocative efficiency 1 Chapter 8 To understand and interpret the concept of deadweight loss and its determinants, Laffer curve and the supply side economics 9 Efficiency and Failure: international trade 1 Chapter 9 The effects and determinants of trade The effects of quotas and tariffs The arguments for and against restricting trade 10 11 The Economics of the Public Sector: Externalities The Economics of the Public Sector: Public goods and common resources 1 Chapter 10 Examine externalities and their impact on market efficiency. Welfare economics introduced Discuss the private solutions to externalities and the Coase theorem 1 Chapter 11 Analyze the difference between private and public goods, common resources, and how governments can improve market outcomes Discuss types and examples of public goods and common resources, and the importance of property rights
No. TITLE OF CASE/LECTURE # READING MATERIAL LEARNING OBJECTIVES 12 & 13 Supply side Economics and the costs of production 1 Chapter 13 Distinguish between short term and long term decision frames Describe the relationships between the total, average and marginal concepts of cost and product Explain the firms production function, short and long term costs, diminishing marginal returns to labor and the economies and diseconomies of scale 14 & 15 16 17, 18 & 19 Firms in Competitive Markets 1 Chapter 14 Describe the characteristics of perfect competition, price takers, and differentiate between individual and market demand curves Describe the profit maximizing output using marginal costs, marginal revenue and economic profit and loss Describe a perfectly competitive firm s short run supply curve and explain the impact of change in demand, entry and exit and changes in firm size Mid term Exam Monopoly 1 Chapter 15 Describe the characteristics of monopoly, factors that allow a monopoly to arise and the price setting strategies used by a monopoly Explain the relationship between marginal cost, marginal revenue and economic profits of a monopoly Explain price discrimination and the requirements of successful and efficient discrimination Explain how producer and consumer surplus is redistributed in a monopoly including the occurrence of a dead weight loss Explain the potential gains from a monopoly and the regulation of a natural monopoly
No. 20 & 21 22 & 23 24 & 25 26 & 27 28 TITLE OF CASE/LECTURE # READING MATERIAL LEARNING OBJECTIVES Oligopoly 1 Chapter 16 Describe the characteristics of oligopoly and factors that allow an oligopoly to arise Explain the relationship between marginal cost, marginal revenue and economic profits of a oligopoly Explain the kinked demand curve model and the dominant firm model Describe oligopoly games including the Prisoner s Dilemma Monopolistic Competition 1 Chapter 17 Describe the characteristics of monopolistic competition Explain the relationship between marginal cost, marginal revenue and economic profits of a firm under monopolistic competition and discuss if the monopolistic competition model leads to efficiency Explain the importance of innovation, product development, advertising and branding under monopolistic competition The Market for Factors of Production 1 Chapter 18 Explain derived demand, differentiate between marginal revenue and marginal revenue product and determine the demand for labor Determine the factors effecting demand for labor and the elasticity of labor demand Describe the factors effecting the supply of labor, including the income and substitution effects The Theory of Consumer Choice 1 Chapter 21 Derive and describe consumer budget constraints, indifference curves and the marginal rate of substitution between goods Understand the application of the theory of consumer choice including upward sloping demand curves Review