This course is a rigorous introduction to the microeconomic theory of markets: why we have them, how they work, what they accomplish and why they sometimes fail. The theory will be applied to current events and policy debates to understand, analyze and evaluate market outcomes.
Students should expect to work on the course daily. Each week will include both synchronous and independent study segments. The independent part includes 2 sessions a week, each about 1-2 hours, of pre recorded lectures, in short segment format, followed by a short quiz. The synchronous time slots will be used for application and extension of this material. Students will work in small, virtual, groups with the professor and a TA as monitors and mentors. Participating in on line discussion will be compulsory and part of the graded requirements of the course. Each week will also have a graded assignment to be completed over the weekend. The course will conclude with a final 2 hour exam.
Schedule of topics:
Week One: Where do markets come from? We will start with understanding the constraint of scarcity that we face and the concept of opportunity cost that reflects the true cost of any decision we make.
Week Two: Part 1: We will discuss how gains from specialization according to our comparative advantage allows us to use our resources efficiently. Part 2: We will introduce the basic model of Supply & Demand. We will also introduce of the concept of elasticity to discuss effects of price and income changes on market outcomes. This will allow you to communicate with other economists and finally understand those business pages and market updates.
Week Three: Part 1: We will explore the great accomplishment of markets: maximizing the size of the pie or the total benefit to society Part 2: we will learn what happens when government intervenes in the market? We will analyze price floors and ceilings, taxes and subsidies and learn how the best intentions sometimes lead to very unfortunate results.
Week Four: Part 1: Introduction to firms’ decisions: understanding firms’ cost curves and the goal of profit maximization. Part 2: The Perfectly Competitive Market: what is it? does it exist? why is it a crucial benchmark?
Week Five: Part 1: Monopolies of various types: one price monopoly, natural monopoly, price discrimination and monopolistic competition. What market outcomes do we get in each case? How should government intervene in such cases? Part 2: When markets fail: externalities and public good.