American University

Department of Economics

Principles of Microeconomics, Fall 2012

(Econ-200-003H, Mon & Thurs 1:10 - 2:25 pm)

Instructor: Walter G. Park, Kreeger Building 106

EMail: WGP@American.Edu
Phone: (202) 885-3774, Fax: (202) 885-3790
Office Hours: Mon. 11 - 1 pm, Thurs. 2:30 - 4:30 pm

(1) General Education Requirements:

ECON-200 Microeconomics is one of the courses in Foundational Area 4 (Social Institutions and
Behavior) in American University's General Education Program. More details about the General
Education Program requirements can be found at:
(https://www.cas.american.edu/provost/gened/index.cfm)

(2) Course Objectives:

This course presents an economic approach to thinking about how and why social, economic, and
political systems work the way they work. While macroeconomics focuses on the workings of
the economy as a whole, microeconomics focuses on the working details within an economy (e.g.
consumer behavior, firm behavior, and government behavior). More specifically, the core issue
in microeconomics is resource allocation; i.e., how should society’s limited or scarce resources
be allocated among alternative uses to satisfy human wants. In a market economy, market forces
determine how resources are allocated; e.g. goods are consumed by those most willing to pay for
them and produced by those who can produce them at least cost. But sometimes markets fail to
allocate resources efficiently or equitably. This is where public policy comes into play. How
should policy authorities allocate resources? Do they in fact allocate resources optimally, or
does public intervention produce worse outcomes?

The two main objectives in this course are: (i) to develop a conceptual framework for thinking
about economic problems; (ii) to apply this framework to real-world events and policy issues.
Examples of economic applications include antitrust, drugs, crime and punishment, environment,
education, health care, organ shortages, marriage and family, child adoptions, poverty, income
distribution, stocks and bonds, biotechnology and agriculture, insurance markets, innovation,
transportation, immigration, international trade and economic development, and more.

Specific Learning Objectives:

 Knowledge 1) Students should understand how a market economy functions, and explain its
strengths and weaknesses;
2) Understand the concepts of opportunity costs and comparative advantage;
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3) Explain how incentives and institutions guide the economic choices of

individuals and society at large;
4) Analyze the workings of competitive and non-competitive market
structures, and remedies against excessive market power and income inequality;
5) Understand the properties of supply and demand curves: elasticities,
consumer and producer surplus, equilibrium, shifts vs. movements along curves;
6) Understand the costs and revenues of a business enterprise, and how they
determine productivity and the input and output choices of firms;
7) Learn about the policy applications of microeconomic theories.

 Skills 1) Students should be able to read and understand the intuition in technical
economic works; e.g. news articles, public policy reports, literature surveys, and
government documents.
2) Learn how to set up and analyze a market using the tools of supply and
demand;
3) Develop the ability to use graphical tools and interpret findings;
4) Improve one’s presentation skills through group (oral) presentations and
improve one’s writing skills through written essays;
5) Learn to work in teams and participate in classroom activities, such as
economic experiments and debates.
6) Strengthen research skills by conducting a project on a policy issue.

(3) Pre-requisites:

It is recommended that you take Introductory Macroeconomics (Econ-100 or equivalent) prior to

or concurrently with this course.

(4) Required Texts and Materials:

i. Wheelan, Charles (2010), Naked Economics: Undressing the Dismal Science.

W.W. Norton and Co. ISBN 978-039-333-7648.

ii. Levitt, S. and Dubner, S. (2009), Freakonomics, William Morrow & Co,
ISBN 978-006-073-1335.

iii. McConnell, C., Brue, S., and Flynn, S. (2012), Principles of Microeconomics19th
edition. McGraw-Hill. ISBN 978-007-787-7644. (Bundled with the Study Guide)

iv. Supplemental Readings (electronic copies to be posted on Blackboard).

v. Aplia (an online homework website).

– Items i - iii are available at the campus bookstore.

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– A separate subscription to APLIA is required (www.aplia.com). In order to access the course’s

APLIA site, you will need the following Course Key: 4MA7-2FNE-ZLJV. Instructions for
accessing APLIA are posted on Blackboard (see under Course Information)
– If copies of the Wheelan (2010) and Levitt & Dubner (2009) books at the campus store have
run out, inform the store and have it order more for you. It should take three or four days.
Alternatively, you can try to order from Amazon.com or BarnesandNoblecom. If you have
trouble getting the textbook from the campus bookstore, you may also try www.coursesmart.com
and purchase/download an e-book.
– Each of the course materials above plays an important role in the course. The McConnell,
Brue, and Flynn textbook illustrates the basic economic principles or foundations. APLIA
provides exercises based on the economic principles. The Wheelan (2010) and Levitt & Dubner
(2009) books are non-technical and provide everyday applications of economic ideas. For more
light readings in economics, see the Appendix to this syllabus.

(5) Course Evaluation:

i. 2 Midterms (15% per midterm) 30%

ii. Final Exam 30%
iii. Problem Sets (online at www.Aplia.com) 20%
iv. Group Presentation & Paper 20%
Total: 100%

– The 1st midterm will be held in class on Sept. 27th and the 2nd midterm on Nov. 1st. The
final exam is cumulative and will be held in class on Dec. 13th (11:45 - 2:15 pm).

– Problem sets will be assigned approximately weekly. See Blackboard -> Assignments for a
list of due dates for these assignments. You will access and work on the problem sets directly at
the APLIA web site (go to www.aplia.com). The problem sets are designed to help you better
understand the course material. The problem sets must be completed and submitted for grading
before the due date/time.

– Students will also participate in a group presentation & debate and write a paper on it. This
will fulfill the General Education requirement that the course contain a research component.
Details of this project can be found on Blackboard, under Assignments; see Presentation
Guidelines and Presentation Schedule – Sign up. The objective is to debate public policy issues
(e.g. education, immigration, health care, inequality, environment, crime, and business
regulation) and to relate them to developments within the U.S. (local, state, and federal levels)
and/or abroad (e.g. Africa, Asia, Latin America, etc.). Presentations will be held in November.
Each group presentation should last 35 minutes (i.e. approximately 20-25 minutes for the
debate/presentation and an additional 10-15 minutes for questions and comments from the
audience). Please make sure to complete the sign-up sheet by Sept. 20th so that a final schedule
can be drawn up. Attendance during class presentations is required. Point deductions will be
assessed for unexcused absences from class presentations. A good portion of the final
examination will consist of material from the presentations. Moreover, the presentations will
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largely be peer-graded. At the end of the semester, your fellow classmates will fill out a
performance evaluation of your group’s presentation. If you are absent, you will not be able to
evaluate your peers. Each student will also write a short 5 - 6 page (single-spaced) critique based
on his/her Group’s presentation or debate. This paper (in hardcopy) is due Dec. 6th in class.

– Policy on missed assignments/exams: No late assignments will be accepted and no make-up

exams will be given (except in the case of medical or family emergencies). Furthermore, the due
dates of assignments and dates of examinations cannot be changed. It is the students’
responsibility to plan their travel, extracurricular activities, internship or job schedule, and their
class schedules accordingly. In the event that you have a medical or family emergency, and you
miss a midterm or a problem set, please provide full documentation. Your missed assignment
and/or midterm will be waived and your final grade will be pro-rated accordingly. If you miss
the final exam, however, a make-up exam will be arranged for you afterwards.

– Grade Scheme:
A (93-100%) B+ (77-84%) C+ (67-69%) D (50-59%)
A- (85-92%) B (73-76%) C (63-66%) F (0-49%)
B-(70-72%) C- (60-62%)

– Standards of academic conduct are set forth in the University's Academic Integrity Code
(http://www.american.edu/academics/integrity/code.htm).
By registering, you have acknowledged your awareness of the Academic Integrity Code, and you
are obliged to become familiar with your rights and responsibilities as defined by the Code.
– Those interested in learning more about the economics major should consult:
http://www.american.edu/cas/econ/undergraduate/undergraduate.htm

(6) Course Outline:

The following is a tentative outline for the semester. See section 7 for some study tips.

Part I: MARKET MECHANISMS & COMPETITIVE MARKETS

Dates: Topic Background Readings

Aug. 27 Economic Approach Wheelan (henceforth WH): Ch. 1
Levitt & Dubner (henceforth LD): Intro, Ch. 1

Aug. 30 Cost-Benefit Analysis McConnell et al. (henceforth MBF): Ch. 1

Sept. 6 Comparative Advantage MBF: Ch. 23 (pp. 472 - 475); Ch. 7 (153 - 156)

Sept. 10 Demand & Supply MBF: Ch. 3; WH: Ch. 2

Sept. 13, 17 Consumer Behavior I: MBF: Ch. 4 (pp. 75 - 83); Ch. 14 (pp. 294 - 297)
Elasticities
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Sept. 20, 24 Consumer Behavior II: MBF: Ch. 6 (pp. 116 - 120); Ch. 5 (pp. 93 - 96)
Utility

Sept. 27 Midterm #1

Oct. 1 Producer Behavior I: WH: Ch. 7;

Finance; Production MBF: Ch. 17 (365 - 366); Ch. 7 (pp. 140-152)

Oct. 4 Producer Behavior II: MBF: Ch. 7 (pp. 140-152) continued

Costs and Profits

Oct. 8 Competitive Markets MBF: Ch. 8 (pp. 163-175)

Oct. 11, 15 Applications (by Sector): LD: Chs. 3, 4; MBF: Ch. 15 (pp. 318 - 321); Ch. 19
Energy, Drugs, Agriculture Supplemental Readings (see Blackboard)

Part II: MARKET FAILURES & IMPERFECTLY COMPETITIVE MARKETS

Dates: Topic Background Readings

Oct. 18, 22 Public Goods WH: Chs. 3, 4; MBF: Ch. 5 (pp. 99 - 104)
Asymmetric Information LD: Ch. 2; MBF: Ch. 17 (pp. 358 - 361)

Oct. 25, 29 Market Power MBF: Ch. 10 (pp. 194 - 204)

MBF: Ch. 11 (pp. 216 - 218, 221 - 223)

Nov. 1 Midterm #2

Nov. 5 Game Theory MBF: Ch. 11 (pp. 226 - 227)

Supplemental Readings (see Blackboard)
Dates: Topic Background Readings
Nov. 8 Externalities MBF: Ch. 5 (pp. 104 - 109)
Income Distribution MBF: Ch. 20 (pp. 410 - 421)

Part III: PUBLIC POLICY ISSUES

Nov.12, 15 Presentations & Debates I [Student Slides to be posted on Blackboard]

Nov. 26, 29 Presentations & Debates II [Student Slides to be posted on Blackboard]

Dec. 3 Trade and Globalization WH: Chs. 12, 13; MBF: Ch. 23 (pp. 488 - 494)

Dec. 6 Epilogue

Dec. 13 Final Exam (11:45 - 2:15 pm)

Note: No Econ-200-003H classes during the following periods:

Labor Day Sept. 3
Thanksgiving Week, Nov. 21 - 25
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(7) Important Additional Notes About the Course:

– Note that the lectures will not cover everything contained in the readings; our aim is to cover
the basics and select useful applications for study. Also, the readings supplement the lectures,
not the reverse. Thus, focus on what we cover in class, and use that as a guide for your readings.

– In the first week, make sure to review ‘Graphing’ in the Appendix to Ch. 1 of the textbook and
in Aplia on your own. This course makes use of graphical tools and analyses.

– Check our course’s Blackboard site regularly for announcements and other postings. Please
also contribute to the Discussion Board Forums in Blackboard regularly.

– Study Tips: The Naked Economics and Freakonomics books are easy to read. They’re not
textbooks but leisure reading. (For more leisure readings, see the Appendix to this syllabus.) It
might be useful to read these books early on in the semester in order to get an overview of the
subject. As for the textbook, here are some tips for reading the chapters in your textbook: first,
remember that you are only required to read those sections of the textbook that we cover in the
course. Second, skim the chapter and cross reference the contents to your lecture notes. Third,
read the chapter carefully, focusing on what we covered in class, and underline/highlight key
points. Fourth, analyze the graphs patiently: check the labels, the relationship(s) being
described, and the economic principle being illustrated by the graph (e.g. is it trying to show that
minimum wages raise unemployment?) Fifth, review the material. See if you can explain the
concepts, define terms, or illustrate/replicate the graphs on your own (i.e. in your own words).
More active reading like this is preferable to re-reading, re-reading, and re-reading the chapter.

– The textbook includes a Study Guide and our Blackboard site contains additional Textbook
Resources. Please go over these after reading each chapter. (These are optional activities.)
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Appendix: Popular Books in Micro-Economics (Reference only)

 Ariely, Dan (2008), Predictably Irrational, Harper Collins.

 Beattie, Alan (2009), False Economy, Riverhead Books.

 Becker, Gary and Posner, Richard (2009), Uncommon Sense, University of Chicago
Press.

 Cowen, Tyler (2007), Discover Your Inner Economist, Penguin Books.

 Fisman, Ray and Miguel, Edward (2008), Economic Gangsters, Princeton University
Press.

 Frank, Robert (2007), The Economic Naturalist, Basic Books.

 Friedman, David (1996), Hidden Order: The Economics of Everyday Life, Harper
Collins.

 Gans, Joshua (2009), Parentonomics: An Economist Dad’s Parenting Experiences,

MIT Press.

 Harford, Tim (2006), Undercover Economist, Oxford University Press.

 Heath, Joseph (2010), Economics without Illusions, Broadway Books, New York

 Landsburg, Steven (2007), More Sex is Safer Sex: The Unconventional Wisdom of
Economics, Free Press.

 Levitt, Steven and Dubner, Stephen (2009), Superfreakonomics. William Morrow &
Co.

 McKenzie, Richard (2008), Why Popcorn Costs So Much at the Movies and Other
Pricing Puzzles, Springer.

 McMillan, John (2002), Reinventing the Bazaar: A Natural History of Markets, W.W.
Norton.

 Omerod, Paul (2000), Butterfly Economics, Basic Books.

 Shermer, Michael (2008), The Mind of the Market, Henry Holt & Co.