Examines how decision makers address the central economic problem of scarcity through markets and other mechanisms. Covers price theory, the elements of a market system, consumer behavior, production theory, market structures, labor markets, market imperfections, and government intervention.
Goals, Topics, and Objectives
- Introduction to Economics
a. Define economics.
b. Differentiate between microeconomics and macroeconomics.
c. Explain the basic economic questions.
d. Define opportunity cost, and identify the opportunity cost of a decision. - Marginal Analysis and Decision Making
a. Explain the principles of diminishing marginal benefit and increasing marginal cost.
b. Summarize the economic way of thinking and the marginal approach to decision making.
c. Solve problems using the marginal approach. - Supply and Demand Model
a. Define the laws of supply and demand.
b. Identify the determinants of supply and demand.
c. Illustrate and interpret supply curves and demand curves. - Equilibrium Price and Market Changes
a. Draw a supply and demand diagram, and identify market equilibrium.
b. Explain how market price tends to move towards equilibrium.
c. Use the supply and demand model to predict the impact of changes in supply and demand on equilibrium price and quantity.
d. Analyze a given price change, and offer an explanation for the price change. - Elasticity
a. Define and calculate elasticity.
b. Interpret a price elasticity coefficient.
c. Identify the determinants of price elasticity of demand and supply.
d. Estimate price elasticity of demand or supply for a product based on product and market characteristics.
e. Combine elasticity with the supply and demand model to analyze magnitudes of price changes. - Consumer Surplus and Producer Surplus
a. Define consumer surplus and producer surplus.
b. Identify on a diagram the amount of consumer surplus and producer surplus.
c. Interpret the amount of consumer surplus, producer surplus, and total surplus generated by market activity.
d. State the conditions for the efficiency in terms of total surplus. - Market System and Price Signals
a. Identify the ways markets are linked.
b. Explain how market price acts as a signal that can efficiently coordinate resource allocation across all markets.
c. Compare and contrast the market system’s method of allocation with alternative methods of allocation. - Government Involvement in Markets
a. Explain how government interventions such as price controls, taxes, subsidies, and criminalization can affect market efficiency and the allocation of resources.
b. Use the supply and demand model to predict the impact of a given government intervention on price, quantity, and total surplus.
c. Explain dead weight loss, and identify it on a graph.
d. Define tax incidence, and explain how elasticity impacts the tax incidence. - Consumer Behavior Theory
a. Define utility.
b. Explain the law of diminishing marginal utility.
c. State the utility maximization rule.
d. Identify the factors that influence consumer behavior based on the utility maximization rule. - Production and Cost Theory
a. Differentiate between the short run and long run.
b. Differentiate between fixed and variable costs.
c. Identify the gains to division of labor and specialization.
d. Explain the law of diminishing returns.
e. Explain the relationship between quantity produced and marginal cost.
f. Define economies of scale, and identify the factors that generate economies of scale. - Market Structures and Firm Behavior
a. List types of market structures, give their characteristics, and give approximate examples of each.
b. Explain why perfectly competitive markets minimize the cost of production and maximize the total value of production.
c. Explain why firms in a perfectly competitive market can only make a normal profit in the long run.
d. Identify barriers to entry and other sources of market power.
e. Compare and contrast market structures based on their degree of market power, efficiency, and allocation of resources.
f. Analyze firm behavior linking firm behavior to market structure.
g. Evaluate polices designed to promote or restrict competition. - Market Failures
a. Define market failure.
b. List sources of market failure.
c. Define externality, and identify examples of externalities.
d. Define public goods, and identify examples of public goods.
e. Define common resources, and explain the tragedy of the commons.
f. Assess government options for correcting market failures. - Labor Markets and Wages
a. Identify the determinants of labor supply and demand.
b. Illustrate and interpret labor supply curves and demand curves.
c. Use the labor supply and demand model to predict the impact of changes in supply and demand on equilibrium wage and quantity.
d. Analyze a given labor market outcome, and offer an explanation for the wage change. - Public Choice Theory
a. Explain the assumptions and the prediction of public choice theory.
b. Analyze a political outcome, and use the economic way of thinking to explain that outcome.
Assessment and Requirements
Students will be assessed through tests, quizzes, assignments, and/or class participation.
Outcomes
- Social Sciences
- Category 4: Social Sciences