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Professor Joseph Burke


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Intermediate Microeconomics

Department of Economics, Ave Maria University

1011 Academic Building, 10:10 – 11:50, TR, Spring 2011


Professor Joseph Burke


Phone: (239) 280-1613

Email: joseph.burke@avemaria.edu

Office: 103 Newman Hall

Office Hours: 11:00 to 12:00 Fridays

Course Code: Econ 302

Prerequisites: Econ 202

Credits: 4

Course Description


This course deepens students’ understanding of microeconomic theory, building on the foundation they received in Principles of Microeconomics. This course will approach the theories of the consumer and the firm through the use of economic models. Students will learn how to express economic models in mathematical terms and how to then manipulate those models using algebra and calculus. Calculus is not a prerequisite, but students will learn some calculus during the semester and will benefit from having previously taken a calculus course.

The models covered in the course fall into eight classes: utility maximization, profit maximization, cost and expenditure minimization, general equilibrium, public goods, externalities, risk, simultaneous games, and sequential games. The utility maximization and expenditure minimization models are the basis of the theory of the consumer, and the profit maximization and cost minimization models are the basis for the theory of the firm. General equilibrium models describe the interaction of firms and consumers in markets, essential for understanding Adam Smith’s Theory of the Invisible Hand. Models of public goods and externalities provide a framework for much economic policy, as risk models do for insurance markets, and games are the foundation for understanding oligopolies and imperfect competition.

The approach to the material in this class is meant to both deepen students’ understanding of microeconomics and introduce them to the techniques of modeling. For each class of models, the discussion begins with a simple example of a model in the class. Students are taught how to manipulate models with algebra and calculus and calculate measures related to the models.

Intermediate Microeconomics is essential to the economics program at Ave Maria University. Building on the foundation they received in their Principles course, this course will teach students the fundamental models of microeconomics that constitute the main part of economic theory. They will also learn how to manipulate these models, which will help them explain and predict economic behavior and make effective arguments. Additionally, these skills will be necessary for students who intend to do academic research. Like Principles of Microeconomics, this course will also touch on Catholic social teaching, as conflicts between economic theory and Catholic teaching will be identified where they occur.



Expected Outcomes for Student Learning


  1. This course will develop students’ knowledge of economic terminology and theory. Students should know the behavioral assumptions economics makes about consumers and firms, i.e. consumers behave so as to maximize their utility and firms behave so as to maximize their profit. They should be able to define and graph two-dimensional production functions, budgets, indifference curves, and production possibility frontiers. Students should be familiar with the basic models of economics: the utility maximization, profit maximization, cost minimization, and expenditure minimization problems. Students should be able to define Pareto Optimality. Students should know the content of the first and second welfare theorems, the Stolper-Samuelson Theorem, the Rybczynski Theorem, and the Factor Product Equilization Theorem. They should know what externalities and public goods are, and know the content of the Coase Theorem. Students should know the basic model of risk and insurance, as well as the associated problems of adverse selection and moral hazard. Students should know what a game is, and the difference between sequential and simultaneous games, and be able to define Nash equilibrium.

  2. This course will also develop students’ ability to use economic theory to explain and predict economic phenomena. Using the basic models of economics, students should be able to demonstrate the effects of changes in prices or income on quantity demanded, and changes in price on quantity supplied. They should also be able to illustrate these effects graphically and explain them in words. Students should also be able to apply the various general equilibrium and trade theorems in order to predict the consequences of policy changes. Students will also be expected to be able to explain economic outcomes using the basic theories of risk, externalities, public goods, and oligopoly.

  3. This course will also develop students’ ability to make economic arguments and pursue economic research. The topics are taught at a fundamental level, emphasizing the role of models, which are the basis of economic arguments and research. Students will learn the basic elements of models, how they are constructed, how they are manipulated, and how they are solved. They will learn how to translate English into mathematical equations, form a Lagrangian, take the derivatives of the Lagrangian, solve the system of first-order conditions to get a solution to a model, and analyze properties of the solution.



Readings


Nicholson, Walter, and Christopher Snyder, Intermediate Microeconomics and Its Application, Tenth Edition, Mason, OH: Thomson South-Western, 2007.

Lectures and Attendance


Lectures will be open to participation from students. Students are encouraged to ask questions and contribute to discussions. Attendance is mandatory, and quizzes and attendance will count for 10% of the grade.

Office Hours


Students are welcome to stop by and discuss philosophy, theology, history, literature, culture, politics, mathematics, The Office, or microeconomics whenever I am in my office. As a rule, you should come to my office whenever you have worked on a problem for half an hour or more and still have not found the solution. It makes no sense to spend hours working on a problem by yourself when you could solve it in fifteen minutes with me; those who persist in doing so show poor economic reasoning skills.

Homework


Homework will be regularly assigned, and due dates are given on the course schedule. Homework will count for 40% of the grade for the course.

The late policy for homework is as follows: homework is considered late if it is submitted past 5pm on the due date, and late homework will be penalized 5% per day. For the purposes of this policy, days end at 5pm and Saturday, Sunday, and Monday are considered a single day.



Quizzes


Short quizzes will be occasionally given throughout the course to make sure students are doing the reading. Economics is learned through reading the book, hearing the lectures, and doing the homework. If a student is not doing the reading, then he is more likely to have more difficulty following and comprehending the lectures. Quizzes and attendance will count for 10% of the grade for the course.

Exams


There will be one midterm and one final exam in the class. Both exams will be in-class exams. The midterm will cover material from the first half of the course, and the final will be cumulative. The midterm will count for 20% and the final for 30% of the student’s grade for the course.

Students with Disabilities


Any student who feels he or she may need an accommodation based on the impact of a disability should contact me privately to discuss your specific needs.  Please also contact the Counseling Services Office to coordinate reasonable accommodations for students with documented disabilities.

Grading


Attendance and quizzes 10%

Homework 40%

Midterm 20%

Final 30%




A Above 92.5%

B+ 90 to 92.5%

B 87.5 to 90%

B 82.5 to 87.5%

B- 80 to 82.5%

C+ 77.5 to 80%

C 72.5 to 77.5%

C- 70 to 72.5%

D+ 67.5 to 70%

D 62.5 to 67.5%

D- 60 to 62.5%

F Below 60%





Evaluation Strategies


  1. Quizzes and participation in lectures will be used to evaluate students’ knowledge of the course material. Quizzes allow for a direct assessment of students’ progress, and participation for an indirect assessment, which can be seen, for instance, in the quality of questions asked during lecture. Quizzes and participation will be used in conjunction with the homework to evaluate their progress in the course.

  2. Students’ knowledge of important topics will be evaluated through homework. Nearly every major topic in the course will have a corresponding homework assignment: sets, polynomial calculus, utility maximization, expenditure minimization, profit maximization, cost minimization, general equilibrium, the Stolper-Samuelson Theorem, the Rybczynski Theorem, the Factor Product Equilization Theorem, public goods, externalities, game theory, and oligopoly models.

  3. The midterm will test the student’s knowledge of material from the first half of the course. It will cover consumer and producer theory, specifically the utility maximization, expenditure minimization, profit maximization, and cost minimization problems.

  4. The final will test the student’s knowledge of all topics covered in the course. The final will be cumulative, and the student is expected to have mastered the material by the end of the course.













Intermediate Mircoeconomics Schedule

13-Jan

W

Introduction; English, notation, and graphs; sets; consumption sets

15-Jan

F

Consumption sets; no money illusion; production possibility sets

18-Jan

M

Production possibility sets: multiple inputs and outputs; utility function

20-Jan

W

Utility function; indifference curves

22-Jan

F

Economics Knowledge Survey; terminology; profit

25-Jan

M

Univariate polynomial calculus; cost minimization problem

27-Jan

W

Revenue maximization problem

29-Jan

F

Profit maximization; competitive assumption; short and long-run

1-Feb

M

Monopoly; marginal revenue/cost; markup and demand elasticity

3-Feb

W

Review of profit, revenue, cost problems; multivariate calculus

5-Feb

F

Profit maximization with multiple outputs

8-Feb

M

Constrained optimization

10-Feb

W

Utility maximization; Cobb-Douglas

12-Feb

F

Income effects

15-Feb

M

Substitution effects

17-Feb

W

Slutsky equation

19-Feb

F

Utility and Expenditure Problems

22-Feb

M

Marshallian and Hicksian demands: homogeneity, symmetry, slopes

24-Feb

W

Profit, Revenue, and Cost Problems

26-Feb

F

homogeneity, symmetry, slopes; GDP function

1-Mar

M

Monopoly

3-Mar

W

Review

5-Mar

F

Midterm Exam

8-Mar

M

Spring Break

10-Mar

W

Spring Break

12-Mar

F

Spring Break

15-Mar

M

Sources of Market Power

17-Mar

W

General Equilibrium

19-Mar

F

Rybczynski Theorem

22-Mar

M

Stolper-Samuelson Theorem

24-Mar

W

Factor Price Equalization Theorem

26-Mar

F

Pattern of Trade

29-Mar

M

First and Second Fundamental Welfare Theorems

31-Mar

W

Present Value

2-Apr

F

Easter Break

5-Apr

M

Easter Break

7-Apr

W

Capital and Time

9-Apr

F

Probability, Expected Utility Hypothesis

12-Apr

M

Options and Risk

14-Apr

W

Diversification, Moral Hazard, Adverse Selection

16-Apr

F

Externalities

19-Apr

M

Public goods provision

21-Apr

W

Coase Theorem

23-Apr

F

Simultaneous games

26-Apr

M

Sequential games

28-Apr

W

Industrial organization

Writing Notes


  1. Be clear.

  2. Be brief.

  3. Use correct grammar.

  4. Vary sentence structure.

  5. Be entertaining. Use humor when appropriate.

  6. Choose a topic you in which you are interested.

  7. Avoid the passive voice whenever possible.

  8. Liberally consult the Writing Center’s Handbook of Writing and Strunk and White. (Strunk, William Jr. and E. B. White, The Elements of Style Fourth Edition, New York: Longman, 2000.)

  9. Cite all sources.

  10. Do not plagiarize!

  11. Do not worry about writing poorly. Some of the worst writers in the country make millions of dollars writing novels.

  12. Do not worry about rejection or failure. All writers have these fears. If you do not do something for fear rejection, then you will never do anything.


Learning Strategies


  1. Preview the material before class. Skim the chapter, looking at the charts and graphs and reading the bold and highlighted terms.

  2. Come to class.

  3. Review the material immediately after class. Spend 10 minutes remembering what was discussed in class and writing notes to yourself.

  4. Read the textbook.

  5. Start your homework on the day it is assigned. Don’t look for help until you have spent at least 30 minutes trying to solve a problem.


Bloom’s Taxonomy


Learning is a game. The goal is to climb to the top of the pyramid.



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