Demand (Utility) Theory

TOPIC:        Demand (Utility) Theory

DATE:        TO BE ANNOUNCED

REFERENCE:     http://william-king.www.drexel.edu/top/Prin/txt/MUch/Eco417a.html

1.    The rationality assumption

2.    The water and diamond paradox and the difference of marginal and total utility

3.    Diminishing marginal utility and the optimal purchase rule

4.    Consumer surplus and the derivation of a demand curve

5.    Application: the problem of income distribution

Price Elasticity Lecture

TOPIC:            Price Elasticity

DATE:            Saturday, January 22

TEXT REFERENCES:    Mankiw, Chapter 5

1.    Concept of price elastic and price inelastic demand

    A.    Definitions

    B.    Effects on total revenue

2.    The determinants of elasticity and rationale of each determinants.  

3.    Elasticity coefficient

    A.    Computation

    B.    Interpretation

4.    The perfectly elastic and perfectly inelastic demand cases

    A.    Coefficients and interpretations

    B.    How differs from real world elasticities

5.    Application:    The effect of elasticity on farm revenues in good and bad growing seasons

Supply and Demand Lecture

TEXT REFERENCES:    Mankiw, Chapter 4.  Also see:

• Appendix, Chapter 2, (Reading graphs)
• Figure 1B, p. 115 (Price ceilings)
• Figure 4B, p. 119 (Price floors)

1.    The definition of a market

2.    Law of demand: definition and graphical interpretation

3.    Law of supply: definition and graphical interpretation

4.    The concept of shortages, surpluses and equilibrium price

5.    Shifts in the demand and supply curves and the results of shifts

6.    Demand vs. quantity demanded

        A.    Definition quantity demanded

        B.    Change in quantity demanded

            i.    increase in quantity demanded

            ii.    decrease in quantity demanded

        C.    Definition demand

        D.    Change in demand

            i.    increase in demand

            ii.    decrease in demand

7.    Supply vs. quantity supplied

        A.    Definition quantity supplied

        B.    Change in quantity supplied

            i.    increase in quantity supplied

            ii.    decrease in quantity supplied

        C.    Definition supply

        D.    Change in supply

            i.    increase in supply

            ii.    decrease in supply

8.    Nominal, real, and relative prices and its role in understanding supply and demand analysis

9.    The three fundamental economic questions and how a price/market system solves it

10.    Application of supply-demand analysis: wage-price controls (price ceilings) and minimum wage laws (price floors)

Intro Lecture Outline

DEFINITIONS OF ECONOMICS

1.    Economics, or political economy, is the study of those activities, which, with or without money, involve exchange transactions among people.

2.    Economics is the study of how people choose to use scarce or limited productive resources (land, labor, capital goods such as machinery, technical knowledge) to produce various commodities (such as wheat, beef, overcoats, yachts; concerts, roads, bombers) and distribute these goods to various members of society for their consumption.

3.    Economics is the study of people in their ordinary business of life, earning and enjoying a living.

4.    Economics is the study of how human beings go about the business of organizing consumption and production activities.

5.    Economics is the study of wealth.

6.    Economics is the study of how to improve society and make humane civilization possible.

* Economics is the study of how people and society end up choosing, with or without the use of money, to employ scarce productive resources that could have alternative uses to produce various commodities and distribute them for consumption, now or in the future, among various persons and groups in society.  Economics analyzes the costs and the benefits of improving patterns of resource use.

From Paul Samuelson, ECONOMICS, 11th ed., p. 2.

MICROECONOMICS AND MACROECONOMICS

Microeconomics:  Study of the specific parts of an economic system, behavior of individual households, firms, and industries. (Economics 2100)

Macroeconomics:   Study of the economy as a whole (Economics 2200)

GENERAL THEMES/EXAMPLES OF MICROECONOMICS

Microeconomics is also known as:

* Price Theory

* Value and Allocation Theory

* Neoclassical Economics

1.    Why the price of one good is more expensive (or less expensive) than another

2.    Why having 25 automobile manufacturers in the U.S. competing to sell cars would probably make cars less expensive.

3.    Why "There ain't no such thing as a free lunch" (TANSTAAFL)

4.    What happens when certain types of institutional arrangements try to cover up the TANSTAAFL principle.

In short, microeconomics is the study of how both business firms and consumers behave in the marketplace.  The study of microeconomics should teach one just as much about human behavior as does the study of psychology or sociology.

Grade Calculation

The grades will be based on the following activities:

Mid Term Exam        350 pts

Final Exam                400

Class Participation       95

Sample Exams            55

Attendance                 90

Discretionary Points    10*

Total                1000 pts

*To be used only in borderline cases.

The following are minimum points for each letter grade:

A    =    850        B=750        C=650        D=550