ECN 221-003, ECN 221-004
PRINCIPLES OF MICROECONOMICS
Fall 2012
INSTRUCTOR: Dr. Pete Schuhmann
PHONE: 962-3417
E-MAIL: schuhmannp@uncw.edu
OFFICE:
OFFICE HOURS:
Cameron 220-F
MW 12:00 - 3:00
TH 12:30 - 2:00
RECOMMENDED TEXTBOOKS:
1. Principles of Microeconomics, by Frank & Bernanke, any edition, Irwin/McGraw-Hill.
2. Principles of Microeconomics, by N. Gregory Mankiw, any edition, Cengage Learning.
3. Introduction to Microeconomics, by Edwin G. Dolan, any edition, BVT Publishing.
COURSE WEBSITE:
http://www.csb.uncw.edu/people/schuhmannp/ecn221.htm
COURSE DESCRIPTION
Analysis of decision making processes and economic equilibrium for the consumer and the individual firm at an
introductory level.
PREREQUISITES
MAT 111. Knowledge of graphing techniques, basic high school algebra, and an introductory understanding of
derivatives is assumed.
COURSE LEARNING OBJECTIVES
The primary objective of this class is to learn the principles of microeconomic theory. In learning about and applying
economic concepts, ideas, and tools, you will also develop a new way of thinking critically. The subject matter is a core
component of the Cameron Business School curriculum and serves as a foundation for further study in all Business
School departments. As we learn the material, I hope you will realize that economics is not about mundane issues.
Rather, economics is fundamental to just about everything in life. If you apply yourself and work hard, you will leave
here with knowledge and intuition that you will use every day (really).
STUDENT LEARNING OUTCOMES (SLO’S):
The course contains an introduction to economic analysis in microeconomics. The main theme is the analysis of markets
and the system of markets that make up the economy. We will examine the role of prices in the allocation of resources.
Students should be able to understand and use the fundamental tools of economic theory to analyze and explain market
phenomena. Within this broad agenda, specific learning outcomes are highlighted below:
SLO1: The student will be able to describe and explain the following terms concepts, methods, and principles:
a) opportunity cost
b) the principle of comparative advantage and gains from trade
c) the principle of diminishing marginal benefit and the law of demand
d) the principle of increasing costs and the law of supply
e) market equilibrium
f) the price elasticity of demand
g) the price elasticity of supply
h) the perfectly competitive model
i) the profit-maximizing condition
j) economic surplus
k) monopoly
l) market failure
m) consumer behavior
n) oligopoly.
SLO2: Students will learn how to identify and measure alternative categories of benefits and costs and demonstrate how
such values affect economic decisions. Students will learn how to use consumer and producer price and quantity data to
critically analyze the effects of changes in exogenous factors on market outcomes. Students will also learn to use market
data to calculate elasticity measures in order to describe consumer and producer responses to changes in price. The
predicted results of economic models - specifically the competitive and imperfectly competitive market models - will be
tested against real world data.
SLO3: Students will demonstrate the ability to critically analyze economic arguments using microeconomic modeling.
Students will analyze the impact of exogenous economic changes and price policies in the context of these models.
Students will compare model predictions about the efficiency and equity of resource allocation under different market
structures against real world data.
SLO4: Students will articulate how international trade can lead to more efficient and desirable quantity and price
outcomes for society. Students will be able to convey both the intent and the result of price control policies such as price
ceilings and price floors. Students will articulate the alternative merits and inherent tradeoff between efficient and
equitable market outcomes. Students will also be able to articulate social efficiency outcomes related to various levels of
competition and how public policy can assist or impede such competition.
COURSE POLICIES
GRADING:
Your grade in this course will be based on performance on two exams, three short quizzes, attendance, and a
comprehensive final. The plus/minus system will be implemented on final grades where appropriate. The
weights assigned to each component of your grade are as follows:
- 2 mid-semester exams = 44% of final grade (22% each)
- Attendance = 10% of final grade
- 3 quizzes = 21% of final grade (7% each)
- Final exam = 25% of final grade
EXAMS:
The two mid-semester exams will likely be mostly multiple choice with a few short answer questions (true/false
or fill-in-the-blank). Each exam will test your knowledge of material covered since the previous exam, so the
exams are not explicitly comprehensive. However, nearly all of the material in this class builds on previously
attained knowledge. You will find that you will be using information from the first part of the semester
throughout the course. The final exam is comprehensive in coverage.
QUIZZES:
Quizzes will be given at the beginning of the class on the scheduled date, and should take approximately 20
minutes. The format of the quizzes will be a mix of multiple choice questions, short answer, and graphing.
“CHALLENGE QUIZ”:
One of your quiz grades may be replaced during the semester by taking a “challenge quiz” prior to the next exam.
This process entails submitting a formal written request, and scheduling a time to take a much more difficult
quiz on the same topics. Do not sign up to take a challenge quiz unless you are prepared to explain the
material in detail in your own words. By submitting the request and scheduling the challenge, you
automatically forfeit the original quiz grade and accept the outcome of the challenge quiz. Quizzes that were
missed because of an unexcused absence cannot be challenged.
ATTENDANCE:
Attendance will be taken randomly throughout the semester. Attendance is 10% of your grade. So, if I take
attendance 10 times, and you are there for 9 of those classes, you will receive a 90% for that component of your
grade. If you do not miss any classes, you will have an additional 2 points added to your final grade for the
course. If you miss 3 or more classes you will have 2 points deducted from your final grade. Absences will only
be excused for valid and documented University emergencies.
MAKE-UP POLICY:
Make up quizzes and exams will not be given for unexcused absences. If you know prior to the quiz or exam
date that you will be missing class for an excused reason, you must schedule a make-up, preferably to be taken
prior to the scheduled date. If your absence is excused after the quiz or exam, you must schedule a make-up as
soon as possible. The make-up will be different, but equally challenging. If you do not have documentation for
your absence, it will be unexcused and the quiz or exam will be scored a zero.
Students have a responsibility to report all planned, university excused absences by Wednesday, September 7th
so that arrangements can be made to schedule dates for missed assignments and tests. Circumstances warranting
a planned, excused absence include athletic department approved absences, university related trips, religious
observations, and other excused absences that are reasonably known in advance of the semester. The instructor
reserves the right to give a grade of zero when students do not exercise this responsibility.
TIPS FOR SUCCESS:
This class is about learning fundamental issues in economics and applying an economic way of thinking to
problems we encounter every day. As we develop a methodology for solving problems, I hope you will also
develop a sense of intuition about economic issues. I am not interested in formalism and memorization. I want
you to show that you have truly learned the material and understand why it is important. As you study, you
should always ask yourself questions that begin with the word “Why” to gauge your comprehension (“How”
questions are important too).
Successful students are inquisitive. I will ask a lot of questions during class, and I hope you will respond. You
should not hesitate to ask questions either during or after class. While I cannot promise to have all the answers, I
can assure you that issues you feel are important will be addressed.
Successful students read (a lot). Get a book about microeconomics and read it. You can purchase used copies of
the recommended books for less than $5 each, so you should get two or three books and read them all. True
learning is your goal and that comes from approaching concepts from multiple angles and perspectives. Reading
content ahead of class time will greatly enhance your learning and success. I cannot stress this strongly enough.
Successful students come to class and pay attention. You should never miss class. You should write down
everything. Turn off your phone. Focus on the course content.
Successful students come to office hours. If you feel that you are having difficulty with the class, you should let
me know as soon as possible. Do not wait until it’s too late. Use the office hours, make an appointment to see
me or send me questions via e-mail. You may also drop by my office for extra help any time you feel it is
necessary, but you might want to call first to make sure I’m in.
This is your course. You will find that I am flexible with regard to many aspects of this class. I value your input
and will use it to make the class better for you, so if there is anything that you feel will enhance your learning
experience, please let me know.
Final tip: Purchase a 3-ring binder for this course - there are numerous handouts.
ACADEMIC HONESTY:
ALL ASPECTS OF THE UNIVERSITY HONOR CODE WILL BE STRICTLY ADHERED TO
As a student at UNCW, you are pledged to uphold and support the UNCW Student Academic Honor Code:
The University of North Carolina Wilmington is a community of high academic standards where academic
integrity is valued. UNCW students are committed to honesty and truthfulness in academic inquiry and in the
pursuit of knowledge. This commitment begins when new students matriculate at UNCW, continues as they
create work of the highest quality while part of the university community, and endures as a core value
throughout their lives.
Information about the Honor Code, including definitions of cheating and plagiarism is found at:
http://www.uncw.edu/policies/documents/03_100FINALHONORCODE_Aug2009.pdf
FALL 2012 T/H CLASS SCHEDULE ~ Unit topic dates may change. Quiz and exam dates will not.
Thursday
8/23
Introduction & Syllabus
Tuesday
Thursday
8/28
8/30
Unit 1
Unit 1
Tuesday
Thursday
9/4
9/6
Unit 2
Unit 2
Tuesday
Thursday
9/11
9/13
Unit 2 & Quiz 1
Unit 3
Tuesday
Thursday
9/18
9/20
Unit 3
Unit 3
Tuesday
Thursday
9/25
9/27
Unit 4
Unit 4
Tuesday
Thursday
10/2
10/4
Exam 1
Unit 5
Tuesday
Thursday
10/9 No Class ~ Fall Break
10/11 Unit 5
Tuesday
Thursday
10/16 Unit 6
10/18 Unit 6
Tuesday
Thursday
10/23 Unit 6 & Quiz 2
10/25 Unit 7
Tuesday
Thursday
10/30 Unit 7
11/1 Unit 7
Tuesday
Thursday
11/6
11/8
Tuesday
Thursday
11/13 Unit 8
11/15 Unit 9
Tuesday
Thursday
11/20 Unit 9
11/22 No Class ~ Thanksgiving
Tuesday
Thursday
11/27 Unit 9
11/29 Unit 10 & Quiz 3
Tuesday
12/4
Tuesday
12/11
Unit 8
Exam 2
Unit 10
3:00 – 6:00 Final Exam
Course Outline
This course is composed of 10 units. We will cover these units in the order presented below.
You can find these topics in any principles of microeconomics textbook.
Unit 1: What is economics?
 Scarcity
 Opportunity cost
 Positive vs. normative analysis
 Marginal analysis
 Comparing marginal costs and benefits vs. comparing total costs and benefits
 Micro vs. Macro Economics
 Efficiency
Unit 2: Allocating scarce resources
 Budget line model
How to draw it.
Slope reflects opportunity cost.
Shifting (change income, change in one or both prices)
 Production possibilities frontier model
Why this shape? What does the shape mean about opportunity cost?
Shifting the PPF (changes in technology, availability of resources, quality of resources)
Trade, comparative advantage and the PPF
 The law of increasing opportunity costs
 The principle of comparative advantage
Unit 3: The functioning of markets and price determination
 What is a “Market”?
 Demand (the law of, curve, and schedule) and Determinants of demand (= demand shifters)
 Quantity demanded and changes in quantity demanded
 Supply (the law of, curve, and schedule) and the determinants of supply (= supply shifters)
 Quantity supplied and changes in quantity supplied
 Equilibrium
 Where does the equilibrium price (P*) come from?
 Shortages and Surpluses
 How changes in one market can affect another market?
 Using individual demand curves to construct the market demand curve.
 Normal vs. inferior goods
 Price floors
 Price ceilings
Unit 4: Understanding changes in prices and quantities: Elasticity
 The price elasticity of demand
 elastic vs. inelastic D
 determinants of elasticity
 changes in elasticity along D curve
 measuring elasticity between 2 points on a D curve (midpoint formula)
 changes in revenue from price changes
 The income elasticity of demand
 The cross-price elasticity of demand
 The elasticity of supply
Unit 5: Consumer Theory
 Preferences and the budget line revisited
 utility (marginal vs. total )
 law of diminishing marginal U
 the utility maximizing rule for consumption of 2 or more goods (the “equimarginal principle” )
 “consumer equilibrium”
 benefit (marginal vs. total )
 net benefit and consumer surplus




the net-benefit maximizing rule for consumption of a single good
the income effect (IE) of a price change
the substitution effect (SE) of a price change
application of IE and SE to wage changes (the “backward bending” labor supply curve)
Unit 6: Perfect competition, production and profit
 assumptions for a perfectly competitive (PC) market (implications for behavior of PC firms)
 The demand curve facing a PC firm and “price-taking” behavior
 Costs (fixed, variable, marginal)
 explicit costs and implicit costs
 profit (economic vs. accounting)
 “normal” profit
 fixed vs. variable inputs
 law of (and point of) diminishing marginal returns
 production curves (total, marginal, average)
 equimarginal principle for capital and labor decisions
Unit 7: Costs
 costs (fixed, variable, total, averages)
 shapes of unit cost curves in the short-run
 economies of scale and long-run costs curves (IRTS, CRTS, DRTS)
Unit 8: Profit Maximization and long run market dynamics
 profit maximization by a PC firm
 the shut down decision (short-run)
 the long-run decision of whether or not to stay in the market
 the PC firm’s short-run supply curve
 long run competitive equilibrium (LRCE)
getting there
price implications of
profitability implications of
efficiency implications of
Unit 9: Monopoly
 model of monopoly
assumptions
implications
 barriers to entry
 natural monopoly
 monopoly power
 profit max by a monopolist
 efficiency of PC vs. monopoly
Unit 10: Imperfect Competition
 monopolistic competition (MC) model
- assumptions
- implications
 LR equilibrium and monopolistic competition
- getting there
- efficiency of (firm vs. market)
 profit max by MC and Oligopoly
 oligopoly models
- The kinked demand curve model
- cartels and collusion
- price leadership