COURSE NUMBER: ECO202

COURSE NAME: Microeconomics

TERM: Spring II 2008

INSTRUCTOR:

Jane Sjogren Ph.D.

PHONE:

312-777-7675

EMAIL:


ALT PHONE:

REQUIRED TEXTS:

Title / Microeconomics
Author(s) / Parkin, M.
Copyright / (2005)
Publisher / Addison-Wesley Publishing
ISBN / 0321246047
Edition / 7th

This Course Requires the Purchase of a Course Packet: YES NO

ArgosyUniversity

COURSE SYLLABUS

ECO202

Microeconomics

Faculty Information

Faculty Name: Jane Sjogren Ph.D.

Campus:

Contact Information:

Office Hours:

Short Faculty Bio:

Course description: This course places an emphasis on the study of microeconomics. A descriptive and analytical study of the market economy, it includes market structures, pricing, and distribution of wealth and income.

Course Pre-requisites: ECO201

Required Textbook:

Parkin, M. (2005). Microeconomics. (7/e).Addison-Wesley Publishing. ISBN: 0321246047

Technology: Pentium III CPU/ Windows 98; 128MB RAM printer; Microsoft Office; Adobe Acrobat Reader (full version); Microsoft Internet Explorer 5.5 (PC) 5.0 (MAC) or Netscape Navigator 4.08; Norton Antivirus.

Course length: 7.5 Weeks

Contact Hours: 45 Hours

Credit Value: 3.0

Program Outcomes:

  1. Communication
  2. Communicate business concepts effectively, both written and orally appropriate to the audience
  3. Team
  4. Define the attributes of an effective team member and leader and the characteristics of an effective team in reaching specific business goals
  5. Cognitive
  6. Problem Solving – Given a business problem, select and defend a business solution chosen from specific alternatives
  7. Information Literacy – Given a business research question, access information from a variety of sources, select appropriate sources to respond to a business question
  8. Analysis/Application
  9. Integration – Describe the interrelationship of the functional business areas of statistics, accounting, operations, finance, marketing, and strategy
  10. Ethics/Diversity
  11. Diversity – Identify the issues and challenges related to diversity in current business organizations
  12. Ethics– Identify the issues and challenges related to ethics in current business organizations

Course Objectives:

  1. Understand a working definition of economics. (Program Outcome(s): 1, & 4)
  2. Distinguish between macroeconomics and microeconomics.
  3. Explain the operation of the free enterprise system of market economy.(Program Outcome(s): 1, & 4)
  4. Explain how price regulation interferes with pure competition equilibrium
  5. Explain the equilibrium process under different market forms
  6. Discuss the relationships of pricing, profits, and competition.(Program Outcome(s): 1, & 4)
  7. Discuss the concept of profit maximization
  8. Describe the primary and secondary goals of capitalism.(Program Outcome(s): 1, & 4)
  9. Understand the economic functions of government and their impact upon the private sector of the economy.(Program Outcome(s): 1, & 4)
  10. Describe the mechanism through which government exercises control and facilitate growth in the economy
  11. Explain the condition under which government intervention leads to optimal output.
  12. Describe the circular flow of activity.(Program Outcome(s): 1, & 4)
  13. Discuss the pricing mechanism, supply, and demand.(Program Outcome(s): 1, & 4)
  14. Present an analysis of pure competition, monopolistic competition, oligopoly, and monopoly.(Program Outcome(s): 1, & 4)
  15. Identify the necessary conditions of pure competition
  16. Explain how these necessary conditions relate pure competition to the other market forms
  17. Analyze growth of big business; evaluate the validity of government control.(Program Outcome(s): 1, & 4)
  18. Describe the effect of market conditions and forces on interest rates.(Program Outcome(s): 1, & 4)
  19. Discuss present-day economic transformation within the former Soviet bloc countries of Europe, and contemporary economic transition in China, Japan, and Mexico.(Program Outcome(s): 1, & 4)

Assignment Table

Module / Module Topics / Readings / Assignments
1 /
  • Economics, Macroeconomics, and Microeconomics
  • A Free Market Economy
  • Demand and Supply
/ Parkin
Chapter 1
Chapter 2
Chapter 3 / Discussion Questions:
  1. Recently Morocco has become a major provider of call center services to France. India provides the same type of services to the United States. Do you judge the comparative advantages for the services of all four countries as absolute or comparative? What is the impact on the economies of France and the United States of exporting so many jobs?
  1. Some people in the U.S. advocate the legalization of narcotic drugs. Some parts of Europe have also experimented on legalizing drugs. Based on your readings in Chapter 3, how will you describe a market for narcotic drugs? Analyze the economic impact of legalization. Justify your response.
  1. In a command economy the government owns all the businesses and resources for production. All economic decisions, including what goods and services to provide, are taken by the government. How is the U.S. economy different from a command economy? Can the U.S. economy be called a free market economy? If not then discuss the ways in which the government interacts and regulates our economy.
  1. Despite the rise in the price of higher education, the demand for higher education is increasing over the years. Discuss if this is a violation of the law of demand. Provide three reasons for your answer.
Assignments:
  1. Project 1
Private Consumption – Special Cases
  1. Think of a good that you will buy more of if its price goes up.
  2. To which category does this good belong? Provide reasons for your answer. Develop a demand curve for the good. Also show the condition of market equilibrium for the category of this good?
  3. Compare the demand curve of these goods with the goods that you will buy more off if the price comes down.
  4. Create demand and supply curves in Microsoft Excel, and create a Microsoft Word document to present the analysis based on the curves.
Project 2
Economic Efficiency
  1. The concept of efficiency is essential to economic analysis. What does the statement an economy is operating below the Production Possibilities Curve (PPC) mean? Document your answer in a Microsoft Word document using examples from a private manufacturer and a government agency.
    Also assess the probable motives of private manufacturers and government agencies for improving the efficiency of their operations.
  2. Create the PPC in Excel. Create a Word file to collate your answers.

2 /
  • Elasticity
  • Efficiency and Equity
  • Markets in Action
  • Utility and Demand
/ Parkin
Chapter 4
Chapter 5
Chapter 6
Chapter 7 / Discussion Questions:
  1. The concept of consumer surplus indicates how much consumers gain from consuming at a specified price. However you never hear about a consumer deficit or the loss accrued by consumers — at the other end of the demand curve — who cannot afford to consume at the specified price. Consider that you can impose a surplus tax on the consumer by charging an individual sales tax in addition to the market price to cover the consumer surplus. Also consider that you could compensate an equal number of consumers at the bottom of the demand curve, giving them the opportunity to consume what they otherwise will not have. Will this be a fair tax? Rationalize your position.
  1. Consumer preferences play a key role in determining consumer demand for a product. Advertising seeks to strengthen consumer need for a product. At times advertising companies have tried subliminal messaging, which is subtle advertising that intersperses a frame containing a brand name into every fourth frame in a movie; consumers subconsciously register the brand without realizing that they’ve seen it. This type of advertising has proven effective but the government banned it. Should this be so? Consider that you are given a warning note, before buying a ticket for the movie, saying “This film contains subtle commercials that may subconsciously alter your consumption preferences.” With full disclosure should subtle advertising still be illegal? Provide reasons to support your answer.
  2. Consider that the high plains in Texas are facing crop failures due to drought. Consider a technology is discovered to irrigate these high plains. As a result of this technology production in the high plains has increased. However due to the overuse of groundwater, the high plains are facing the problem of water depletion. Discuss how the groundwater should be regulated for efficient use. Also discuss if the efficiency in the use of groundwater resources will also ensure equitable the distribution of groundwater. Discuss some of the possible ways to address the issue of equitable distribution of groundwater.
  1. Rent ceiling makes it illegal to charge housing rent more than the specified limit. Discuss how such a policy can harm tenants. Also discuss some of the possible solutions to deal with the problems emerging from rent ceiling.
Assignments:
  1. Project 1
Elasticity and Consumer Surplus
  1. Imagine that you invent a portable power generator for residences. This generator can extract energy from tap water. You own a patent on the design and engineering and plan to sell the generator as a monopolist. If you can sell this generator at less than $3,000, the price will make it meaningful and within reach of most homeowners who can almost eliminate utility costs.
  2. Now answer the following questions related to the above scenario:
i)Use the concept of elasticity of demand to explain what the demand for your product will be like.
ii)Apply the concepts of underproduction and consumer surplus to the above case.
iii)Suppose the patent was annulled and the design and engineering were made public. How will this effect elasticity of demand? Will the generator still be under produced? Why?
iv)How will this affect consumer surplus?
  1. Create a report that contains the following:
i)A data file in Excel. Plot the demand curve, supply curve, and PPC to illustrate market equilibrium and inefficiency in production.
ii)A Word document to collate your answers.
Project 2
Utility and Demand
  1. Review your spending over the last few weeks. Sort the expenses by how much utility they have rendered you. Now consider three individuals: a neighbor, a friend, and your boss.
  2. How do you think they would rank the same expenses? Provide reasons for your answer.
  3. Create a report that contains the following:
  4. A table that mentions the sorted expenditure and its utility.
  5. A table showing the ranking of the expenditure by your neighbor, friend, and boss.
  6. The required curves in Excel.
  7. Reasons for the similarities or differences in the ranking of the expenditure by you and your neighbor, friend, and boss.
  8. You can use the template provided in the URL below to collate and submit your answers.
Project 3
Utility, Elasticity, and Demand
  1. Suppose you are in charge of designing a TV commercial campaign for a new shampoo. What will be the goal of the campaign and your methods for achieving the goal? Explain by using the concepts of utility, price elasticity, and demand.
  2. Draw the required curves by using Excel, and prepare a Word document containing the goals and the methods to achieve the goals.

3 /
  • Possibilities, Preferences, and Choices
  • Organizing Production
/ Parkin
Chapter 8
Chapter 9 / Discussion Questions:
  1. In the early 1990s a department store in Ireland wanted to improve cost management. It needed part of its staff to be on call at home and decided that the staff was to be reimbursed only if they were called in to work. The call-ins might be for only a couple of hours or for the entire day. Is this an efficient method to manage costs? Justify your answer. How does this method benefit the long-term stability of the work force? Was this decision motivated by the fact that the employees were already on contract with the store?
  1. Consider the U.S. government raises the excise tax on beer. As a result the price of beer increases. Discuss the impact of taxes in terms of substitution and income effects. Consider that returning the revenue raised through tax to the consumers restores the consumers’ purchasing power to the pretax level. Will the consumers consume the same amount of beer as they did before tax? Why or why not?
Assignments:
  1. Project 1
Profit Maximization
  1. Take a real-life example of a for-profit corporation or small business with which you are familiar. Compare the modus operandi of the firm with the concept of profit maximization.
  2. Use Excel to plot the required curves. Also create a Word document to record the findings based on the curves.
Project 2
Organizing Production
  1. Does a firm know its costs before it knows its revenues? What is the ideal relation between knowledge of costs and knowledge of revenues? Suggest ways in which a firm can obtain the ideal relation.
  2. Create a Word document to collate your answers.

4 /
  • Output and Costs
  • Perfect Competition
/ Parkin
Chapter 10
Chapter 11 / Discussion Questions:
  1. Does an increase in technical efficiency always result in maximizing profit for the producer? Discuss with respect to agricultural goods. Provide reasons for your answer.
  1. Consider a firm increases the wage rate of a worker. The worker supplies fewer hours of work at the increased wage rate. The firm then decides to set the overtime wage rate. The worker increases the supply of labor hours at the overtime wage rate. Discuss the reasons for the worker’s behavior. Justify your reasoning.
Assignments:
  1. Project 1
Budget Constraints
  1. Visit to obtain information about the prices of cell phone services. Visit to obtain information about prices of first-class mail.
  2. Now answer the following questions:
i)Draw the budget constraint for a consumer who spends $50 a month on cell phone services and first-class mail in 2003 and 2004.
ii)Can you identify whether the consumer was better off or worse off in 2002 than in 2000?
iii)Draw some indifference curves for cell phone calls and first-class mail and show the income and substitution effects of the changes in prices that occurred between 2003 and 2004.
  1. Given the budget constraint and the prices of cell phone services and first-class mail that you obtained from the websites, create a report that contains the following:
i)A table containing the different combinations of cell phone services and first-class mail the consumer can buy.
ii)A data file in Excel containing the budget lines and indifference curves.
iii)A Word document to present an analysis based on the graphs.
5 /
  • Monopoly
  • Monopolistic Competition and Oligopoly
/ Parkin
Chapter 12
Chapter 13 / Discussion Questions:
  1. Most European countries have nationalized universities and colleges. Some countries also use the law to ban private colleges. Can higher education be classified as a natural monopoly in European countries and why? Can the professional skills and scholarly achievements that constitute a faculty be classified as large, fixed costs? Can the same reasoning be applied to large, established manufacturers such as General Motors? What about medical drugs corporations? Rationalize your answer.
  1. The invention of the assembly line provided Ford Motor Company with an incredible advantage over its competitors. This method of production may have made Henry Ford a monopolist but competition never quite vanished. Based on your knowledge of market forms, which form was more suitable to describe the position of Ford Motors and why? Which market conditions make any market form preferable to monopoly? Does regulation of monopolies discourage entrepreneurship? Why?
Assignments:
  1. Project 1
Market Forms
  1. Use the Internet to research new passenger cars on the market.
  2. Visit the websites of at least three manufacturers. Collect information on prices, models, and technical data on cars in the price range of $15,000-$18,000. Compare the different models in terms of their interiors, equipment, performance, and other relevant criteria. How would you classify the passenger car market in this price segment in terms of market type? Justify your criteria.
  3. Create a report that contains the following:
i)A table containing a detailed account of the online findings.
ii)An Excel worksheet containing the required graphs.
iii)A Word document to present an analysis based on the table and graphs.
You can use the template provided in the URL below to collate and submit your answers.
Project 2
Oligopoly Market
  1. Under what conditions is selling on an oligopoly market preferable to selling on a perfectly competitive market?
  2. How can a producer sell on an oligopoly market? Should the producer be legally allowed to pursue an oligopoly position?
  3. Plot the required graphs in Excel, and create a Word document to record your answers.

6 /
  • Demand and Supply in Resource Markets
  • Economic Inequality
/ Parkin
Chapter 17
Chapter 18 / Discussion Questions:
  1. Consider two firms X and Y produce identically tasting cold drinks. In order to increase the demand for its cold drink, firm X increases its advertisement outlay. However the advertising does not increase its demand in the long run. Discuss why?
  1. Consider there are three airlines in the U.S. economy: A, B, and C. There is a huge capital cost of setting up airlines. Consider airline A reduces the fare of its economy class. Airlines B and C react to it by reducing fares for all classes. What type of market form are airlines? Consider that in order to end the price war among themselves, the three airlines enter into an agreement to fix their prices and output. However the agreement fails. Discuss some of the reasons for the failure of such an agreement.
Assignments:
  1. Project 1
Perfect and Imperfect Competition
How many choices among gas stations do you have in your neighborhood? How great is the price difference among them? Is there a difference in quality? Based on the above answers draw conclusions about the market form that applies to your local gasoline market.
Plot the required graphs in Microsoft Excel and create a Microsoft Word document to record your answers.
7 /
  • Public Goods and Taxes
  • Regulation and Antitrust Law
  • Externalities
/ Parkin
Chapter 14
Chapter 15
Chapter 16 / Discussion Questions:
  1. The philosopher Robert Nozick made a strong and challenging argument for a minimal state in his book Anarchy, State, and Utopia. He said no state should provide any services beyond law enforcement. This means that all highways, elementary schools, social security, and other services outside police and homeland security should be privatized. Is it reasonable from an economist’s viewpoint to minimize the role of the government in accordance with Nozick’s moral argument? According to you can there be any exceptions to this argument? Which services do you think the government should provide and which services should be privatized? Give reasons to support your answer.
  1. According to several studies many Americans lack health insurance. However the number of people not receiving health care is typically small. Health providers are reluctant to deny treatment to anybody in need. What will you call this group of patients who do not have insurance? Will you prefer to pay for their health care through your private insurance bills or through the tax bill? What according to you are the best means to address the health needs of these patients? What role can the government play in this scenario? Discuss and justify your answer.
  1. How can the microeconomic theory motivate anti-trust laws? Discuss by providing examples.
  1. One of the mechanisms through which the U.S. government controls monopolies is antitrust laws. This protects competition and increases the welfare of the people. Do monopolies always result in lower welfare than competition does? If not then evaluate whether the condition can be used by monopolists as a defense of antitrust laws.
Assignments:
  1. Project 1
Taxes
  1. Suppose you are the owner of a small business struggling to make a profit. Given that all governments have to levy taxes in some way and that firms have to contribute – what type or types of taxes will you prefer the government to levy on your business? Provide reasons in support of your answer.
i)Create a data file in Microsoft Excel and plot the graphs as mentioned in the criteria.
ii)Create a Microsoft Word document to present an analysis based on the graphs.
Project 2
Externality
  1. Prepare a document listing the externalities that you experience in your daily life. In your document explain whether each externality is properly taken care of, paid for, or regulated.
  2. Plot the graphs and create a Microsoft Word document to present an analysis based on the graphs.
Project 3
Public Goods
  1. Imagine that you are an expert on public goods. The mayor of your town asks you to design a way for the city to charge each person walking or driving down a street for his/her consumption of streetlight. What type of solution will you propose? Give reasons for your solution. Will it be an efficient pricing method? Why or why not?
  2. Plot the graphs and create a Microsoft Word document to present an analysis based on the graphs.

8 /
  • Trading with the World
  • Global Stock Markets
/ Parkin
Chapter 20 / Discussion Questions:
  1. In South Africa the party opposing the Apartheid regime asked the free world to enforce trade sanctions as a means to weaken the government. Should trade sanctions be used for such reasons? If so where should we draw the line? Are the U.S. sanctions against Cuba fair? Should the U.S. enforce trade sanctions against China’s violations of human rights? Do you agree with this? Why?
  1. Recently the French President Jacques Chirac proposed a world tax on trade and financial investments to ease the burden of poverty worldwide. Is this a good idea? Is foreign aid a better way to help poor countries than trade? What will you support and why?
  1. Many arguments have been made in favor of easing international patent laws for medical drugs. It is said that this will help poor countries manufacture affordable medical drugs. This will also help countries such as India build an entirely new export industry. Should patent laws be relaxed for either or both these reasons? Discuss.
Assignments:
  1. Project 1
Economic Transformation
  1. Imagine that you are a producer of cereals. One day the government announces that they are going to nationalize all privately owned firms. However they ask the current owners to stay on as leaders of their firms. Do you think that your firm will produce as good products, at as attractive prices, under governmental control? Provide arguments for your answers. Also state the conditions under which governmental control will hamper cereal production?
  2. Create a data file in Microsoft Excel to plot the required graphs. Use a Microsoft Word document to present your answers.

Grading Criteria