Ec 11: Introduction to Economics

Professor R. Preston McAfee
California Institute of Technology
Winter 2007

Contact:
McAfee
Office: Baxter 100
Office Hours: TBA or by appt    
Phone: (626) 395-3476
[email protected]
Website
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Secretary: Sabrina Boschetti
Office: 111 Baxter
Phone: (626) 395-4228

TA: Lauren Feiler and Sarah Hill
Office: 136, 134 Baxter
Phone: (626) 395-8772,395-3794

A summary of Recent Changes to this site.

Text: Introduction to Economic Analysis by R. Preston McAfee. The text is available in pdf format here, or from Sabrina in Bax 111 for about $12, or from lulu.com.

See also this.

This course introduces the major topics of microeconomic analysis.

Economists use simple mathematical models to shed light on various economic phenomena. Economists have almost universally adopted the maximization paradigm as the primary tood for understanding human economic behavior. The maximization paradigm assumes people behave as if they maximize an objective function (happiness), and much of the course is devoted to applying that paradigm to various situations, starting with trade.

Given that I wrote the text, and the short length of the winter term, it is crucial that you read the text prior to class. It isn't so much reading, although the text has a bit of the "taking a sip from a firehose" problem in places.

Class meets Monday, Wednesday and Friday at 11AM. Some of the Friday meetings are recitation sections which will help you with the homework exercises. Three Fridays will also be regular class meetings and four of them involve economic experiments, in which you participate in experiments and then analyze the experimental data to see if it conforms with the theory or not.

Homework becomes available on a Friday, and is due the following Friday.

Handouts are in pdf format. The Foxit reader is free and much faster than Acrobat.

Martin Osborne's fine mathematical tutorial.

Assessment
Midterm:30%Practice Midterm, 2005, 2006 W Midterm, 2006 S Midterm
Eight problem sets:40%Includes experiment analysis; assistance in recitation
   2005 Homework with answers
Final:30%2005 Final, 2006 W Final, 2006 S Final

For pass-fail students, a passing grade is a D or better, which is an average of 60 or more after the curve.

It is permitted (encouraged) to work together in groups, of no more than three individuals, on homeworks, but not on the midterm and final. Groups may submit a single homework solution.

Schedule
Dates are tentative; check back frequently. You should read the listed sections prior to the class.
DateBook
Section
Topic
Jan 31.1What is Economics?
Major points:Types of reasoning, models, and goals
Lecture:Introduction
 
Jan 5  Supply & Demand Experiment
Lecture:Overheads
DataData Source
Exercises:Homework 1  
 
Jan 82.1-3Supply and Demand
Major points:Demand, marginal value, consumer surplus, supply, marginal cost, profit, shifts in curves
Lecture:Supply and Demand
 
Jan 102.4-5Elasticities
Major points:Quantifying effects
Lecture:Supply and Demand
 
Jan 122.6, 3International Trade & the US Economy (OK to skim ch 3)
Major points:Production possibilities, comparative and absolute advantage, factors and trade
Lecture:Trade
FedstatFederal Statistics Website
Exercises:Homework 1 due today
Answers:Homework 1 Answers
Exercises:Homework 2  
 
Jan 15  Martin Luther King Day Holiday
 
Jan 174.2Competitive Dynamics
Major points:Perfect competition dynamics
Lecture:Perfect Competition
 
Jan 19  Entry Experiment
Lecture:Overheads
Exercises:Homework 2 due today
Answers:Homework 2 Answers
DataData Source
Exercises:Homework 3  
 
Jan 224.1Competitive Firm
Lecture:Perfect Competition
Major points:Types of firms, production functions, profit maximization, costs, economies of scale
 
Jan 244.3Investment
Major points:Present value, NPV rule for investment, investment under uncertainty
Lecture:Investment
 
Jan 264.3Investment Applications
Major points:Resource extraction, tree-cutting
Lecture:Investment
Exercises:Homework 3 due today
Answers:Homework 3 Answers
Exercises:Homework 4  
 
Jan 295.1-2Consumer Theory
Major points:Utility maximization, substitution and income effects, backward-bending labor supply
Lecture:Consumer Theory
 
Jan 315.2Consumer Theory Topics
Major points:Dynamic choice, risk, search
Lecture:Consumer Theory
 
Midterm
Feb 2  Midterm Examination Available
Feb 7  Midterm Examination due today 4PM
Answers:Midterm answers
 
Feb 2  Recitation Section
Exercises:Homework 4 due today
Answers:Homework 4 Answers
 
Feb 56.1-2Interventions
Major points:Taxes, elasticities, price floors and ceilings, quotas
Lecture:Interventions
 
Feb 76.3Externalities
Major points:External effects, Pigouvian taxes, tradable permits, fishing and extinction
Lecture:Externalities
 
Feb 9  Prohibition Experiment
Lecture:Overheads
DataData Source
Exercises:Homework 5  
 
Feb 126.4Public Goods
Major points:Public goods, free-riding, local public goods
Lecture:Externalities
 
Feb 146.5Monopoly
Major points:Basic model, taxation, price discrimination
Lecture:Monopoly
 
Feb 16  Recitation Section
Exercises:Homework 6  
Exercises:Homework 5 due today
Answers:Homework 5 Answers
 
Feb 19  President's Day Holiday
 
Feb 216.6Information
Major points:Market for lemons, Myerson-Satterthwaite, Signaling
Lecture:Information
 
Feb 23  Regulating Externalities Experiment
Lecture:Overheads
DataData Source
Exercises:Homework 7   ALL HOMEWORK DUE BY MARCH 9, NO EXTENSION BEYOND
Exercises:Homework 6 due today
Answers:Homework 6 Answers
 
Feb 267.1Game Theory
Major points:Matrix games, equilibrium, mixed strategies, subgame perfection, supergames, folk theorem
Lecture:Game Theory
 
Feb 287.2-3Game Theory finished, Imperfect Competition started
Major points:Cournot, price dispersion
Lecture:Oligopoly
 
Mar 27.4-5Imperfect Competition Continued
Major points:Hotelling, agency theory
Lecture:Oligopoly
Exercises:Homework 7 due today
Answers:Homework 7 Answers
Exercises:Homework 8   ALL HOMEWORK DUE BY MAR 9, NO EXTENSION BEYOND
 
Mar 57.7Antitrust
Major points:Laws, price-fixing, mergers
Lecture:Antitrust
 
Mar77.6Auctions
Major points:English, Sealed-bid auctions, revenue equivalence, information release
Lecture:Auctions
 
Mar 9  Recitation Section
Powerpoint:Handout
Exercises:Homework 8 due today
Answers:Homework 8 Answers ALL HOMEWORK DUE BY TODAY, NO EXTENSION BEYOND
 
Final
MAR 9  Final is available starting today
Mar 14  Final Examination due today at 4PM; turn in to Sabrina Baxter 111
Answers:Final

Changes to this website since Jan 1, 2007