Econ 326: Intermediate Microeconomic Analysis

Spring 2018

Monday & Wednesday 11:00-11:50am
Edward St. Johns Teaching and Learning Center 1224

Instructor: Ginger Z. Jin
Teaching Assistant: Palak Suri

 

Contact Information

Course Description

Course Outline

Important Dates

 

Lecture Notes, Exams, Handouts and Grades will be posted on www.elms.umd.edu.

 

Homework sets will be available via MyEconLab.

 
  

Contact Information

In any case, the best way to reach us is via e-mail.

Instructor

Teaching Assistant

Ginger Z. Jin
Office: 3115F Tydings
Office Hours: M 3:30-5:30pm
Phone: 301-405-3484
E-mail: ginger@umd.edu
Web: kuafu.umd.edu/~ginger/

Palak Suri
Office: Tydings 3115Q
Office Hours: Thursday 12:30-2:30pm
E-mail: suri@econ.umd.edu



Course Description

 

·      Goal

The goal of this course is teaching you how to analyze the economic decision making of individual buyers and sellers, how to understand the resulting market outcomes, and how to apply the economic thinking to real-world problems. We will emphasize analytical logic and theoretical rigor, in order to prepare you to address a wide range of issues in public economics, labor economics, industrial organization, environmental economics, education economics, development economics, and more!

·      Prerequisites

The Economics Department imposes strict prerequisites for this class. Students eligible for credit must:

(1) have minimum grade of C- in Econ200, Econ201 and Math141,

AND

(2) have enrolled in the Economics Bachelor of Science Program.

For those who do not meet the prerequisites but believe that an exception could be made, please talk to Shanna Edinger May or other undergraduate advisors in Tydings 3114. Only they can grant you permission into the class if you do not satisfy the prerequisites. (They also have the right to administratively drop your registration of Econ326 if the prerequisites are not met and you do not have a special permission from them.) Any advisor outside of the Economics Department does not have the authority.

·      Waiting List Policy

The maximum capacity is specified by the university. To ensure teaching quality, we are not able to accommodate any seat beyond the maximum capacity.

·      Textbook and related software

 

Microeconomics, 9th Edition, by Robert Pindyck and Daniel Rubinfeld.
ISBN: 9780134184241 (regular book available at UMD bookstore);
ISBN: 9780134184838 (looseleaf available at UMD bookstore);

ebook (available at www.pearsonmylabs.com, access for 6 months with access code).

MyEconLab software, available at http://www.pearsonmylabs.com .

Homework sets will be assigned via MyEconLab, so access to MyEconLab (9th edition) is required. Textbook is recommended but not required. Textbook of 8th edition is acceptable as well.

Textbook and MyEconLab purchase instructions here. MyEconLab registration instructions here.

·      Online posting about the course

The official syllabus will be posted on my personal website, elms.umd.edu. and MyEconLab. Course announcements, handouts, exams, and grades will be posted on elms.umd.edu. Homework sets will be posted (and automatically graded) on MyEconLab.

The University has adopted email as the primary means of communication outside the classroom, and I will use it to inform you of important announcements. Students are responsible for updating their current email address via the appropriate link on testudo.umd.edu/Registrar.html. Failure to check email, errors in forwarding email, and returned email due to "mailbox full" or "user unknown" will not excuse a student from missing announcements or deadlines.

·      Lecture notes

Lecture notes will be available on elms.umd.edu. They are subject to change, as I may correct errors, introduce new materials, and provide new examples throughout the semester. Please be aware of the most updated time of lecture notes. Course outlines and the relevant textbook chapter numbers for each lecture are available in the syllabus.

·      Accommodations

Students with disabilities who require special accommodations must get in touch with the instructor within the first three weeks of class.

·      Evaluation

Grades for the course will be based on:

(1) six homework sets, 6 points each, I will take the best five of the six, total 30 points.
(2) two mid-terms, 15 points each, 30 points total.
(3) one cumulative final, 40 points.
No other extra points will be provided.

The final letter grade will be calculated by the following table depending on the bracket that your total number of points belongs to. There will be NO ROUNDING and NO CURVES in the final score/letter calculation. For example, a total score of 74.999 is still below 75 and will correspond to B-.

F

below 40

D

[40, 45)

D+

[45,50)

C-

[50,60)

C

[60,65)

C+

[65,70)

B-

[70,75)

B

[75,80)

B+

[80,85)

A-

[85,90)

A

[90,95)

A+

[95,100]

Logistics for homework: Homework sets will be assigned in MyEconLab. I will allow multiple tries on each question. You will learn correct answers and your grade right after you submit the work online at MyEconLab.

Logistics for midterms and final: Midterm and final exams will be given on hard copy in classroom. Anyone late more than 15 minutes during an exam is not allowed to attend the exam. TAs will grade the exams by hand and return them in TA sections instead of regular lecture time.

Make-up Exam Policy: All students are required to attend both mid-terms and the final exam.

o   Make-up exam will be granted if a student has an excuse in compliance with University policy. If you believe you are eligible to take a make-up exam, please inform the professor and provide the appropriate documentation as soon as possible. The four valid excuses according to University policy are medical conditions, religious observances, participation in University events at the request of University authorities, and compelling circumstances beyond your control. According to the new university policy , students who miss major deadlines (including exams and problem sets) because of illness or injury need to provide documentation. Documentation from the University Health Center or any other medical professional must verify dates of treatment and the time period during which the student is unable to meet academic responsibilities. Religious observances and participation in University events should be documented well in advance. Make-up exam requests must be directed to the instructor. If you miss an exam and cannot document a valid excuse, your grade will be recorded as a zero.

 

o   If a student has an excuse that is not in compliance with University policy, he/she is allowed to skip one midterm and roll over the points of that midterm to final if and only if (1) the request is made at least one month in advance and to the instructor directly, AND (2) such request is made at most once per student throughout the whole semester. This allowance does not apply to the final exam.

 

o   I have set up the make-up date for both midterms as the Friday following the regular exam day, 9-9:50am. The location will be announced later. You will need documentation as described above to take the make-up exam.

Exam Regrade Policy: If, after going over your exam and the exam solutions, you believe some of your solutions were more correct than originally judged to be, you may submit, in writing, an exam regrade request. Your regrade request must specify which solutions(s) you believe were not graded appropriately and a substantive explanation for why you believe your solutions are more correct than originally judged. Your entire exam is subject to regrade. Exam regrade requests are due no later than 14 calendar days after exams are returned to the class (note that this deadline applies even if you are not present in class the day graded exams are returned.)

Homework make-up policy If you miss the deadline of homework due to legitimate reasons in compliance with university policy, I will give you a specific password to makeup the homework on MyEconLab. Any delay due to other reasons is not acceptable and will lead to a grade of zero for the missed homework.

Academic Integrity: The University of Maryland, College Park has a nationally recognized Code of Academic Integrity, administered by the Student Honor Council. This Code sets standards applicable to all undergraduate students, and you are responsible for upholding these standards as you complete assignments and take exams in this course. Please make yourself aware of the consequences of cheating, fabrication, facilitation, and plagiarism. If I observe what I believe is a violation of the Code of Academic Integrity, I will refer any and all students involved to the Student Honor Council.

·      Class attendance

We have two lectures per week on Monday and Wednesday, and recitations on Friday. Lectures are taught by Professor Jin and recitations are taught by teaching assistants. We are going to introduce many new concepts, some of which you may not be able to completely understand at the first time. Attendance at the Friday recitations is strongly encouraged. Recitations will include practice problems, review of homework sets, presentation of supplementary material, and detailed presentation of difficult materials introduced in the Monday and Wednesday lectures.

·      End of Year Course Evaluation

CourseEvalUM will be open for students to complete their evaluations in the last two weeks of the semester. Students can go directly to the website ( https://www.courseevalum.umd.edu) to complete their evaluations.

  

Course Outline

This outline is tentative; weeks are subject to change per instructor notice.

Category

Date

Topic

Textbook Sections

Lecture 1

Jan. 24

Introduce the course
Go over syllabus

Introduce MyEconLab and classroom technology

First-class survey

Chapter 1 & 2.1-2.3

Recitation

Jan. 26

Math review: TAs go over related calculus, optimization, Lagrange Multiplier method

 

Lecture 2

Jan. 29

Consumer preference, part 1

·  motivation: consumer theory is important for consumer choice, firm decision, and policy makers

·  components: consumer preferences, budget constraint, consumer choice

·  total utility, marginal utility, diminishing marginal utility

·  cardinal utility, ordinal utility

·  indifference curves

·  axioms of preferences: completeness, transitivity, non-satiation, balance

Chapter 3.1 & 3.2

Lecture 3

Jan. 31

Consumer preference, part 2

·  review the properties of indifference curves

·  marginal rate of substitution

·  examples of indifference curves, utility functions and MRS

Chapter 3.1 & 3.2

Recitation

Feb. 2

Practice problems on consumer preference

 

Lecture 4

Feb. 5

Budget constraint

·  define budget constraint

·  budget constraint changes in response to income or price changes

·  examples of regular and kinked budget constraint

Chapter 3.2

Lecture 5

Feb. 7

Consumer choice and demand function

·  derive consumer choice

·  interior solution: MRS=Px/Py, budget constraint binding

·  corner solution: perfect substitutes, perfect complements

·  demand function: at the optimal choice x* = f(Px, Py, I), homogenous degree of zero

·  example: Cobb-Douglas utility

Chapter 3.3-3.5, Chapter 4.1-4.4, Chapter 4 Appendix

Recitation

Feb. 9

Practice problems on budget constraint, consumer choice, consumer demand

Homework #1 due Feb. 9 11:59pm

Lecture 6

Feb. 12

How do income and price changes affect consumer choice?

·  Income consumption curve

·  Engel curve

·  normal and inferior goods

·  Price consumption curve

·  downward sloping demand curve

·  cross-price effects: substitutes, complements, independent

Chapter 4.1-4.4

Lecture 7

Feb. 14

Income and substitution effects

·  Go through the class example in handout #1

·  Show how the drawings of substitution effect will differ when price increases instead of decreases

·  Slutsky Equation

Chapter 4.3-4.4

Recitation

Feb. 16

Practice problems on income and price changes for consumer demand

 

Lecture 8

Feb. 19

Individual and market demand

calculate aggregate demand from demand segments

·  demand elasticity, income elasticity and cross elasticity

Chapter 4.3-4.4

Lecture 9

Feb. 21

More on market demand

·  consumer surplus

·  impact of network externality on demand

Chapter 4.3-4.5

Recitation

Feb. 23

Midterm review #1

Homework #2 due 11:59pm, Feb. 23

Midterm #1

Feb. 26

Midterm #1

Lecture 10

Feb. 28

Risk and Uncertainty, part I

·  Describe risk, distinguish risk and uncertainty

·  Risk preference

·  Risk premium

Chapter 5.1-5.2, 5.4

Recitation

Mar. 2

Review of midterm #1 answers

practice problems on uncertainty

Lecture 11

Mar. 5

Risk and Uncertainty, part II

·  Two examples:

·  Demand for risky assets

·  Obama care

Chapter 5.1-5.2, 5.4

Lecture 12

Mar. 7

Describe production, Part 1

·  production technology, short run, long run

·  short run: diminishing marginal returns, total product, marginal product, average product, role of technology improvement

Chapter 6

Recitation

Mar. 9

Practice problems on risk and uncertainty, and production function

 

Lecture 13

Mar. 12

Describe production, Part 2

·  long run: isoquants, substitution among inputs, MRTS

·  examples of isoquants: perfect substitutes, perfect complements, Cobb-Douglas

·  returns to scale: increasing, decreasing, constant

·  production function is cardinal, not ordinal

Homework #3 due Mar. 16

Chapter 6

Lecture 14

Mar. 14

Cost minimization part 1

·  review of production function: diminishing marginal returns, MRTS, returns to scale, using Cobb-Douglas as an example

·  cost function in the short run: variable cost, marginal cost, fixed cost, sunk cost

Chapter 7

Recitation

Mar. 16

Practice problems on production function and cost minimization

Spring break

Mar. 18-25

 

 

Lecture 15

Mar. 26

Cost minimization part 2

·  cost minimization in the long run: optimal choice of cost given production level, MRTS=wage/rent

·  derive cost function for an example of Cobb Douglas

·  show how optimal inputs change when wage increases

·  put short-run cost and long-run cost in one graph

·  production with two outputs

·  economy of scale, economy of scope

Chapter 7.4-7.5 and Chapter 7 Appendix

Lecture 16

Mar. 28

Profit maximization -- competitive firm, short run

·  review of cost minimization

·  economy of scale, diseconomy of scale, its relationship to increasing/constant/decreasing return to scale

·  economy of scale and economy of scope

·  define profit maximization problem

·  derive the optimal condition: P=MC, show in graph

·  define competitive market: homogenous goods, free entry/exit, each firm is a price-taker

Chapter 8.1-8.6

Recitation

Mar. 30

Practice problems on profit maximization

Lecture 17

Apr. 2

Profit-maximization -- long run

·  supply curve

·  one firm, short run

·  one firm, long run

·  market, short run

·  market, long run, depending on constant/increasing/decreasing cost technology

Chapter 8.7-8.8

Lecture 18

Apr. 4

Introduction to the analysis of competitive markets

·  definition of competitive market: homogenous good, each seller being price taker, free entry

·  at a competitive equilibrium: buyers take price as given and choose consumption to maximize her own utility; sellers take price as given and choose input and output to maximize profit; demand equal to supply

·  consumer surplus, producer surplus

·  distortion such as price ceiling and price floor may generate dead weight loss

Chapter 9

Recitation

Apr. 6

Midterm review #2

Homework #4 due at 11:59pm, Apr. 6

Midterm #2

Apr. 9

Midterm #2

Lecture 19

Apr. 11

A simple exchange economy expressed in Edgeworth Box

·  definition of Edgeworth box

·  Endowment and optimal consumption choice in an Edgeworth box

·  Contract Curve, equilibrium price, Pareto efficiency

·  An example of Edgeworth box, see handout #2

Chapter 16.2

Recitation

Apr. 13

Review of Midterm #2 answers

Practice problems on Edgeworth box and international trade

 

Lecture 20

Apr. 16

Production and Trade Efficiency

·  Efficiency and equity

·  Production efficiency

·  Gain from trade

·  Absolute and comparative advantage

·  An example of international trade

Chapter 16.3-16.5

Lecture 21

Apr. 18

Monopoly part 1

·  why market fails?

·  definition of Monopoly

·  Monopoly's profit maximization problem

·  Monopoly's pricing rule: markup, lerner index

·  consumer surplus, producer surplus, dead weight loss

·  compare Monopoly with competitive equilibrium

Chapter 16.7, 10.1-10.4, 10.7

Recitation

Apr. 20

practice problems on Monopoly
Homework #5 due 11:59pm, Apr. 20

 

Lecture 22

Apr. 23

Monopoly part 2

·  price discrimination, definition and example

Chapter 10.1-10.4, 11.1-11.2

Lecture 23

Apr. 25

Monopsony and monopolistic competition

·  Monoposony: definition and example

·  Monopolistic competition

Chapter 10.5-10.6, 12.1

Recitation

Apr. 27

Practice problems for monopoly pricing, price discrimination, monopolistic competition

 

Lecture 24

Apr. 30

Oligopoly

·  Cournot equilibrium in duopoly: concepts, reaction function, solve for equilibrium

·  Stackelberg equilibrium in duopoly: concepts, reaction function, solve for equilibrium

·  Welfare comparison between perfect competition, monopoly and oligopoly

Chapter 12

Lecture 25

May 2

Markets with Asymmetric Information

Chapter 16.7, 17.1-17.4

Recitation

May 4

Practice problems for oligopoly and asymmetric information

 

Lecture 26

May 7

Public Goods, Externality

·  Externality and market failures

·  Public Goods

Chapter 18

Lecture 27

May 9

Final exam review

Homework #6 due 11:59pm, May 11

  
 

Important Dates

 

Feb. 9

Homework #1 due 11:59pm

Feb. 23

Homework #2 due 11:59pm

Feb. 26

Midterm #1, class time (11-11:50am)

Mar. 2

Makeup for midterm #1 (need documentation, 9-9:50am, Key 0102)

Mar. 16

Homework #3 due 11:59pm

Apr. 6

Homework #4 due 11:59pm

Apr. 9

Midterm #2, class time (11-11:50am)

Apr. 13

Makeup for midterm #2 (need documentation, 9-9:50am, Key 0102)

Apr. 20

Homework #5 due 11:59pm

May 11

Homework #6 due 11:59pm

May 15

Final Exam, 8-10am, the same classroom as lectures