Economics 201

Introduction to Economic Analysis
Fall 2020
Jeffrey Parker, Reed College

Course Calendar and Syllabus

 

Go to this week's readings

 
Monday
Class
Wednesday
Class
Friday
Class

August 31

Introduction to Econ 201

September 2

Basic concepts of economics

Due: Case questions

September 4

Supply and demand

Due: Case questions

September 7

Labor Day: No class session

September 9

Experiment: Double auction

Due: Problem Set #1

September 11

Elasticity

Due: Case questions

September 14

Applications of the competitive market model

Due: Case questions

September 16

Discussion of double-auction experiment

Due: Problem Set #2 (Analysis of double auction)

September 18

Modeling household decisions

Due: Case questions

September 21

Price and income changes in the household decision model

Due: Case questions

September 23

Consumer choice and demand

Due: Problem Set #3

September 25

Modeling production

Due: Case questions (not handed in)

September 28

Costs and cost functions

Due: Case questions (not handed in)

September 30

Profit maximization in competition

Due: Problem Set #4 is Dairy Farms case questions

October 2

Analysis of competitive markets

Due: Case questions

October 5

First midterm exam

October 7

Profit maximization and monopoly

Due: Case questions

October 9

Applications of monopoly and monopolistic competition

Due: Case questions

October 12

Imperfect competition and oligopoly

Due: Case questions

October 14

Oligopoly and game theory

Due: Problem Set #5

October 16

Profit-maximization and factor inputs

Due: Case questions

October 19

Labor markets

Due: Case questions

October 21

Capital markets

Due: "Economic Naturalist" assignment

October 23

General equilibrium

Due: Nothing

October 26

Externalities

Due: Case questions

October 28

Public goods

Due: Problem Set #6

October 30

Innovation and Technology

Due: Case questions

November 2

Income distribution

Due: Case questions

November 4

Introduction to macroeconomics

Due: Case questions

November 6

Second midterm exam

November 9

Measurement in macroeconomics

Due: Case questions

November 11

Economic growth

Due: Case questions

November 13

Financial system

Due: Case questions

November 16

Aggregate labor market and unemployment

Due: Case questions

November 18

Monetary system and inflation

Due: Problem Set #7

November 20

Aggregate demand and supply

Due: Case questions

November 23

Thanksgiving Break

November 25

Thanksgiving Break

November 27

Thanksgiving Break

November 30

Monetary and fiscal policy

Due: Case questions

 

December 2

Phillips curve

Due: Problem Set #8

December 4

Great Recession and Financial Crisis

Due: Case questions

December 7

To be determined

Due: Nothing

December 9

Reading period: No class

 

Final Exam will be 9-12 on Tuesday, December 15

 


1. Introduction to Economics

Monday, August 31: Introduction to Econ 201

Syllabus and course expectations. What economics is and what questions it attempts to answer.

No required reading or assignments

Prerecorded lecture

Back to top of syllabus

Wednesday, September 2: Essential concepts of economics

Basic concepts of economics: decision-making, scarcity, opportunity cost.

Required reading

  • Dasgupta, Partha, Economics: A Very Short Introduction, Oxford University Press, 2007. This short book is available through the Reed Library as an e-book using the link above.
  • Goolsbee, Austan, Steven Levitt, and Chad Syverson, Microeconomics, 2nd ed., Worth Publishers, 2016, Chapter 1.

Prerecorded lecture

For more background

  • Mankiw, N. Gregory, Principles of Economics, 6th edition, Southwestern, 2012, Chapters 1, 2, and 3. (Hereafter, this text is referred to as "Mankiw Economics." This book combines micro and macroeconomics. The macro section is also published separately as Principles of Macroeconomics. This is the primary text we shall use in the final third of the course. Copies of both the combined text and the macro text are available on reserve.)

Assigned work

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Friday, September 4: Supply and demand analysis

Introducing supply and demand curves as tools to model the behavior of markets. Determinants of demand and supply. Walrasian (market-clearing) equilibrium. Comparative static analysis of shifts in curves.

Required reading

  • Goolsbee, Levitt, and Syverson, Sections 2.1 - 2.4.

Prerecorded lecture

For more background

  • Mankiw Economics, Chapters 4 and 6.

Assigned work

Back to top of syllabus

Wednesday, September 9: Double-auction experiment

An experiment to illustrate the interaction of supply and demand in a simple market setting.

No required reading

Prerecorded lecture: Experiment instructions

Assigned work

  • Problem set #1 is due today.
  • Problem set #2 is an experiment report on the double-auction experiment. It is due on Wednesday, September 16. The data from the experiment will be posted by Thursday morning.

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Friday, September 11: Elasticity

Concept and measurement of demand and supply elasticity. Determinants of elasticity in short run and long run. Effects of elastic and inelastic supply and demand curves.

Required reading

  • Goolsbee, Levitt, and Syverson, Sections 2.5 - 2.6.

Prerecorded lecture

For more background

  • Mankiw Economics, Chapter 5.

Assigned work

Back to top of syllabus

Monday, September 14: Applications of the Competitive Model

Using the supply-demand model to analyze gains from exchange and the effects of price controls and taxes.

Required reading

  • Goolsbee, Levitt, and Syverson, Chapter 3.

Prerecorded lecture

For more background

  • Mankiw Economics, Chapters 7 and 8.

Assigned work

Back to top of syllabus

Wednesday, September 16: Discussion of Double-Auction Experiment

Discussion and analysis of experiment performed last week.

Required reading

  • None.
No prerecorded lecture

Assigned work

Back to top of syllabus


2. Household Behavior and Product Demand


Friday, September 18: Modeling consumer behavior

Basic approach to consumer decision modeling. Indifference maps as representation of consumer preferences. Budget constraints as representation of consumer opportunity sets. Utility maximization.

Required reading

  • Goolsbee, Levitt, and Syverson, Chapter 4.

Prerecorded lecture

For more background

  • Mankiw Economics, Chapter 21.

Assigned work

  • Case of the Day: Measuring Utility. This case is based on the study examined on page 115 of Goolsbie's Chapter 4.
  • Problem Set #3 is due on Wednesday, September 23.

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Monday, September 21: Effects of income and price changes on consumers

How income changes and price changes affect the consumption of goods. Decomposing the effects of a price change into the income and substitution effects.

Required reading

  • Goolsbee, Levitt, and Syverson, Chapter 5.

Prerecorded lecture

For more background

  • Mankiw Economics, Chapter 21.

Assigned work

Back to top of syllabus

Wednesday, September 23: Individual and market demand curves

Aggregating individual demand curves to find market demand.

Required reading

  • Goolsbee, Levitt, and Syverson, Chapter 5 (continued).

Prerecorded lecture

Assigned work


3. Firms, Production, and the Supply of Products

Friday, September 25: Modeling Production Technology

The firm as producer of goods and services. Using the production function to represent production technology. Marginal product and diminishing returns. Returns to scale.

Required reading

  • Goolsbee, Levitt, and Syverson, Chapter 6.

Prerecorded lecture

For more background

  • Mankiw Economics, Chapter 13.

Assigned work

  • Case of the Day: Costs and Competition in Dairy Farming. A detailed quantitative analysis of some data on dairy farms in the 1960s. You don't need to submit questions today, but bring them to class.
  • Problem Set #4 consists of two days worth of accumulated case questions on the dairy farm case. It is due on Wednesday, September 30.

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Monday, September 28: Costs and Cost Functions

Various cost concepts: total cost, variable cost, average cost, marginal cost. Relationship of cost to output and inputs in short run and long run. Cost functions and production functions.

Required reading

  • Goolsbee, Levitt, and Syverson, Chapter 7.

Prerecorded lecture

For more background

  • Mankiw Economics, Chapter 13.

Assigned work

  • Case of the Day: Continuing discussion of dairy farming case. Again, no submission is required today.
  • Problem Set #4 is the dairy farms questions from the last two cases, due on Wednesday, September 30.
Back to top of syllabus

Wednesday, September 30: Profit Maximization in Perfect Competition

Economic and accounting profits. Profit maximization as an objective. Conditions necessary for perfect competition. Demand, marginal revenue, and cost curves for a competitive firm. Shut-down and profit-maximization rules in the short-run.

Required reading

  • Goolsbee, Levitt, and Syverson, Sections 8.1 - 8.3.

Prerecorded lecture

For more background

  • Mankiw Economics, Chapter 14.

Assigned work

  • Problem Set #4 is the two sets of case questions on the dairy farms case, and is due today in class.
Back to top of syllabus

Friday, October 2: Competitive Equilibrium in the Short Run and the Long Run

Entry, exit, and scale of production in long-run equilibrium.

Required reading

  • Goolsbee, Levitt, and Syverson, Sections 8-4 - 8.6.

Prerecorded lecture

For more background

  • Mankiw Economics, Chapter 14.

Assigned work

Back to top of syllabus

Monday, October 5: Mid-Term Exam #1

The first of two mid-term exams will be held today at class time. It will be closed-book and cover all material discussed to date in the course.

Wednesday, October 7: Market Power and Monopoly 

Why monopolies arise. Demand and marginal revenue for a monopoly. Profit maximization.

Required reading

  • Goolsbee, Levitt, and Syverson, Chapter 9.

Prerecorded lecture

For more background

  • Mankiw Economics, Chapter 15.

Assigned work

Back to top of syllabus

Friday, October 9: Applications of Monopoly and Monopolistic Competition

Efficiency costs of monopoly. Antitrust laws. Price discrimination. Entry of producers of substitutes under monopolistic competition.

Required reading

  • Goolsbee, Levitt, and Syverson, Chapter 10.

Prerecorded lecture

For more background

  • Mankiw Economics, Chapter 16.

Assigned work

Back to top of syllabus

Monday, October 12: Imperfect Competition and Oligopoly

Characteristics of oligopoly. Collusion, Bertrand, Stackelberg, and Cournot equilibria.

Required reading

  • Goolsbee, Levitt, and Syverson, Chapter 11.

Prerecorded lecture

For more background

  • Mankiw Economics, Chapter 17.

Assigned work

Back to top of syllabus

Wednesday, October 14: Game Theory and Strategic Interaction

Basic concepts of game theory.

Required reading

  • Goolsbee, Levitt, and Syverson, Chapter 12.

Prerecorded lecture

Assigned work

Back to top of syllabus

Friday, October 16: Demand for Factor Inputs

Profit maximization on the input side of the firm. Marginal product, marginal revenue product, and the demand for factors. Factor-market equilibrium under competition.

Required reading

  • Goolsbee, Levitt, and Syverson, Chapter 13.
  • Mankiw, Economics, Chapter 18.

Prerecorded lecture

Assigned work

Back to top of syllabus

Monday, October 19: Labor Markets

Supply of labor. Effects of unions. Equilibrium wages and the characteristics of workers and jobs.

Required reading

  • Mankiw, Economics, Chapters 18 and 19.

Rerecorded lecture

Assigned work

Back to top of syllabus

Wednesday, October 21: Capital Markets

Discounting future receipts and payments. Net present value. Markets for borrowing and lending and the equilibrium interest rate. Decision-making under uncertainty. Risk and interest rates.

Required reading

  • Goolsbee, Levitt, and Syverson, Chapter 14.

Prerecorded lecture

Assigned work

Back to top of syllabus

Friday, October 23: General Equilibrium and Efficiency (no conference)

Efficiency implications of simultaneous general equilibrium in competitive product and factor markets.

Required reading

  • Goolsbee, Levitt, and Syverson, Chapter 15.

Prerecorded lecture

Assigned work

  • Case of the Day: None
  • Problem Set #6 is due in class on Wednesday, October 28. After today's class, we will have completed all the material covered on this problem set.
Back to top of syllabus

Monday, October 26: Externalities

Externalities and efficiency. Property rights and the Coase Theorem.

Required reading

  • Goolsbee, Levitt, and Syverson, Sections 17.1 - 17.3.

Prerecorded lecture

For more background

  • Mankiw Economics, Chapter 10.

Assigned work

  • Case of the Day: The Grand Banks Fishery. This case examines the tragedy of the commons in fishing and applies to both this class and Wednesday's class on public goods.
  • Problem Set #6 is due on Wednesday, October 28.
Back to top of syllabus

Wednesday, October 28: Public Goods

Definition and nature of public goods. Efficiency in the provision of public goods. Other economic roles of government.

Required reading

  • Goolsbee, Levitt, and Syverson, Sections 17.4 and 17.5.

Prerecorded lecture

For more background

  • Mankiw, Economics, Chapter 11.

Assigned work

Back to top of syllabus

Friday, October 30: Innovation and Technology

Sources of new technology: invention and innovation. The role of and microeconomic incentives for research and development.

Required reading

Prereorded lecture

Assigned work

  • Case of the Day: Appropriability and Incentives for Innovation. A discussion of the microeconomics of technological innovation. How does society provide incentives for innovation through protection of intellectual property and other means.

Monday, November 2: Income Distribution

The income distribution implications of general equilibrium. Definitions of equity and equality. Evidence on the U.S. distributions of income, earnings, and wealth. Government policies to transfer income.

Required reading

Prerecorded lecture

Assigned work

 


5. Macroeconomics

Wednesday, November 4: Introduction to Macroeconomics

[Note: Topically, the second midterm should be today, but it is postponed to Friday due to the distraction of Election Day.]

Relationship of macroeconomics and microeconomics. Objectives of macroeconomic analysis. Major schools of macroeconomic thought.

Required reading

Prerecorded lecture

Assigned work

  • Case of the Day: The Great Depression. A short reading about the most dramatic episode in U.S. economic history, and the one that led to the creation of macroeconomics as a discipline.

Friday, November 6: Mid-Term Exam #2

The second mid-term exam will be held in class today. The format will be similar to the first.

 

Monday, November 9: Measurement in Macroeconomics

Gross domestic product as a measure of economic activity. Price indexes and other macroeconomic variables. Implications of measurement problems.

Required reading

  • Mankiw, N. Gregory, Principles of Macroeconomics, 6th ed., Mason, Ohio: South-Western/Cengage Learning, 2012, Chapters 10 (23) and 11 (24) (hereafter, Mankiw). Note: This book contains the macroeconomics chapters from Principles of Economics. The chapter numbers shown in parentheses in these references are from the longer text.)

Prerecorded lecture

Recommended optional reading

Assigned work

Wednesday, November 11: Economic Growth

Basic facts of long-run economic growth.

Required reading

  • Mankiw, Chapter 12 (25).

Prerecorded lecture

Assigned work

Friday, November 13: Financial System

How financial markets translate saving by households into investment funds for firms. How financial asset markets (are supposed to) work.

Required reading

  • Mankiw, Chapters 13 (26) and 14 (27).

Prerecorded lecture

Assigned work

  • Case of the Day: Mortgage-Backed Securities and Allocation of Risk. How simple and exotic financial assets allow markets to allocate risk efficiently, and how they made the financial system more fragile.
  • Problem Set #7 is due in class on Wednesday, November 18. After today's class we will have covered all of the material on this problem set.

Monday, November 16: Aggregate Labor Market and Unemployment

Aggregate demand for and supply of labor. Kinds of unemployment. Natural vs. cyclical unemployment.

Required reading

  • Mankiw, Chapter 15 (28).

Prerecorded lecture

Assigned work

Wednesday, November 18: Monetary System and Inflation

What money is. The organization of the monetary system and the roles of individuals, banks, and the Federal Reserve System. How the money supply is determined. Money and inflation.

Required reading

  • Mankiw, Chapters 16 (29) and 17 (30).

Prerecorded lecture

Assigned work

Friday, November 20: Aggregate Demand and Supply

An introduction to the workhorse framework that macroeconomists often use to describe short-run movements in the economy.

Required reading

  • Mankiw, Chapter 20 (33).

Prerecorded lecture

Assigned work

Monday, November 30: Monetary and Fiscal Policy

Effects of government policies on aggregate demand. Use of monetary and fiscal policy to stabilize the economy.

Required reading

  • Mankiw, Chapters 21 (34) and 23 (36).

Prerecorded lecture

Assigned work

  • Case of the Day: U.S. Disinflation in 1979-82. How the Federal Reserve reduced inflation from near 10% levels starting in 1979, and the other effects of these policies on the macroeconomy.
  • Problem Set #8 is due on Wednesday, December 2.

Wednesday, December 2: Unemployment/Inflation Tradeoffs

The traditional Phillips curve and its modern successors. Appropriate goals for monetary and fiscal policy.

Required reading

  • Mankiw, Chapter 22 (35).

Prerecorded lecture

Assigned work

Friday, December 4: The Financial Crisis and the Great Recession

What happened to the financial system in 2008 and why did it have such a great effect on the macroeconomy in the U.S. and elsewhere? What have been the effects have the policymakers' responses to the crisis?

Recommended reading

Prerecorded lecture

Assigned work

  • Case of the Day: Monetary and Fiscal Policies in 2008-10. An analysis of the various policies enacted by the federal government and the Federal Reserve to cope with the Great Recession of 2008, including TARP, TALF, and the fiscal stimulus package. 

Monday, December 7: To be determined

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Final Exam

The final exam will be 9-12 in the morning on Tuesday, December 15.

Economic Naturalist assignment is due on Wednesday, October 27.