About this course: We make economics decisions every day: what to buy, whether to work or play, what to study. We respond to markets all the time: prices influence our decisions, markets signal where to put effort, they direct firms to produce certain goods over others. Economics is all around us. This course is an introduction to the microeconomic theory of markets: why we have them, how they work, what they accomplish. We will start with the concept of scarcity and how specialization according to comparative advantage helps us achieve more than we could alone. Next we model a marked using the tools of Supply and Demand and learn what well working markets accomplish and what their limit are. We end by exploring the impact of government intervention on perfect markets. Examples are taken from everyday life, from goods and services that we all purchase and use. We will apply the theory to current events and policy debates through weekly exercises. These will empower you to be an educated, critical thinker who can understand, analyze and evaluate market outcomes.
Created by: University of Pennsylvania
Taught by: Rebecca Stein, Senior Lecturer
Economics
| Commitment | 5 weeks of study, 4-7 hours/week |
| Language | English, Subtitles: Mongolian |
| How To Pass | Pass all graded assignments to complete the course. |
Syllabus
WEEK 1
The Concept of Scarcity
Where do markets come from? We will start with understanding the constraint of scarcity that we face and the concept of opportunity cost that reflects the true cost of any decision we make. We will learn to model scarcity using the Production Possibilities Frontier that allows us to visualize tradeoffs, distinguish between efficient, inefficient and unattainable points. We will also discuss how economic growth affects our options and allows us to achieve the previously unattainable.
17 videos, 2 readings
- Video: The Power of Markets: Introduction
- Reading: Additional Readings: General Suggestions
- Video: 1.1.1 Opportunity Cost: Introduction
- Video: 1.1.2 Opportunity Cost: The Cost of Education
- Video: 1.1.3 Opportunity Cost: Numeric Example 1
- Video: 1.1.4 Opportunity Cost: Numeric Example 2
- Video: 1.1.5 Opportunity Cost: Numeric Example3
- Video: 1.1.6 Opportunity Cost: Numeric Example 4
- Video: 1.2.1 Scarcity: Introduction
- Video: 1.2.2 Production Possibilities Frontier: Definition
- Video: 1.2.3 Allocative Efficiency: Defining Marginal Cost and Marginal Benefit
- Video: 1.2.4 Allocative Efficiency: When Marginal Cost Equals Marginal Benefit
- Video: 1.2.5 Production Possibilities Frontier: Graphical Approach
- Video: 1.2.6 Production Possibilities Frontier: Numerical Example
- Video: 1.2.7 Production Possibilities Frontier: Understanding the Slope
- Video: 1.2.8 Production Possibilities Frontier: Modeling Technological Change and Growth
- Video: 1.2.9 Allocative Efficiency: Graphical Approach 1
- Video: 1.2.10 Allocative Efficiency: Graphical Approach 2
- Discussion Prompt: Production Possibilities Frontier in Your Local Area
- Reading: Additional Readings: Week 1
Graded: Opportunity Cost
Graded: Production Possibility Frontier (PPF)
Graded: Production Possibilities Frontier and Growth
WEEK 2
Specialization & Trade
Trade allows us to achieve the unattainable- we can consume more than we can produce on our own. We will introduce the concept of Comparative Advantage and discuss how gains from specialization allow us to use our resources efficiently. We will apply these concepts to a simple model of trade, showing that now the Consumption Possibilities Frontier allows points outside the Production Possibilities Frontier.
14 videos, 1 reading
- Video: 2.1.1 Markets and Trade: Introduction
- Video: 2.2.1 Comparative Advantage: Numerical Example 1 - Set up
- Video: 2.2.2 Comparative Advantage: Numerical Example 2 - Individual PPFs
- Video: 2.2.3 Comparative Advantage: Numerical Example 3 - Joint PPF
- Video: 2.2.4 Comparative Advantage: Numerical Example 4 - Joint PPF Completed
- Video: 2.3.2 Comparative Advantage: Definition
- Video: 2.2.5 Comparative Advantage: Numerical Example 5 - Gains from Specialization
- Video: 2.2.6 Comparative Advantage: Numerical Example 6
- Video: 2.2.7 Comparative Advantage: Numerical Example 7
- Video: 2.3.1 Absolute Advantage: Definition
- Video: 2.4.1 Gaining from Specialization Through Trade
- Video: 2.4.2 Gaining from Specialization: The Consumption Possibilities Frontier
- Video: 2.4.3 Gaining from Specialization: General Graphical Approach
- Video: 2.4.4 Gaining from Specialization: Imports and Exports
- Discussion Prompt: Comparative Advantage of Your Local Area
- Reading: Additional Readings: Week 2
Graded: Comparative Advantage
Graded: Trade
WEEK 3
Supply and Demand
We will introduce the central model of Supply & Demand. This will allow you to communicate with other economists and finally understand those business pages and market updates. We will distinguish between a movement along and a movement of the supply & demand curves. We will define market equilibrium as understand that at an equilibrium price there is neither excess demand nor excess supply. We will end by a few scenarios where exogenous changes affect supply and/or demand and analyze the impact on equilibrium price and quantity.
15 videos, 1 reading
- Video: 3.1.1 Supply & Demand: Introduction
- Video: 3.1.2 The Demand Curve
- Video: 3.1.3 Shifts of Demand: Part 1
- Video: 3.1.4 Shifts of Demand: Part 2
- Video: 3.1.5 The Supply Curve
- Video: 3.1.6 Shifts of Supply: Part 1
- Video: 3.1.7 Shifts of Supply: Part 2
- Video: 3.1.8 Market Equilibrium: Definition
- Video: 3.1.9 Market Equilibrium: Understanding Who Buys and Who Sells
- Video: 3.1.10 The Invisible Hand: Part 1
- Video: 3.1.11 The Invisible Hand: Part 2
- Video: 3.1.12 Changes in Demand: Effect on Market Equilibrium
- Video: 3.1.13 Changes in Supply: Effect on Market Equilibrium
- Video: 3.1.14 Simultaneous Changes in Demand & Supply: Effect on Market Equilibrium
- Video: 3.1.15 Supply & Demand: Conclusion
- Discussion Prompt: Model the Supply & Demand of a Good or Service
- Reading: Additional Readings: Week 3
Graded: The Demand Curve
Graded: The Supply Curve
Graded: Market Equilibrium
Graded: A Change in Market Equilibrium
WEEK 4
Understanding Markets: Elasticities, Market Surplus, Efficiency, and Equity
There is a lot of terminology this week. We will introduce of the concept of elasticity of demand that measures the responsiveness of quantity demanded to a change in the price of a good. We will explore the relationship between change in price and revenue or sales and how elasticities can help us predict whether a decrease in price will increase or decrease revenue. We then introduce other elasticities of note: cross price elasticity, income elasticity and elasticity of supply. We end the week by exploring the great accomplishment of markets: maximizing the size of the pie or the total benefit to society.
23 videos, 1 reading
- Video: 4.1.1 Elasticity: Introduction
- Video: 4.1.2 Elasticity of Demand
- Video: 4.1.3 What Affects Elasticity of Demand
- Video: 4.1.4 Perfectly Inelastic and Perfectly Elastic Demand
- Video: 4.1.5 Elasticity Along a Straight Line Demand Curve
- Video: 4.1.6 Elasticity and Revenue: Part 1
- Video: 4.1.7 Elasticity and Revenue: Part 2
- Video: 4.1.8 Unit Elastic Demand Curve
- Video: 4.1.9 Cross Price Elasticity: Complements vs. Substitutes
- Video: 4.1.10 Income Elasticity: Normal vs. Inferior Goods
- Video: 4.1.11 Elasticity of Supply
- Video: 4.1.12 Elasticity: Summary
- Video: 4.2.1 Efficiency & Equity: Introduction
- Video: 4.2.2 Consumer Surplus
- Video: 4.2.3 Producer Surplus
- Video: 4.2.4 Maximizing Total Surplus
- Reading: Additional Readings: Week 4
- Video: 4.2.5 T.S. at a Quantity Greater Than Equilibrium Quantity
- Video: 4.2.6 T.S. at a Quantity Smaller Than Equilibrium Quantity
- Video: 4.2.7 Efficiency & Equity: Conclusion
- Video: 4.2.8 Price Ceiling
- Video: 4.2.9 Price Floors: The Case of Minimum Wage
- Video: 4.2.10 Calculating Total Surplus: Numerical Example
- Video: 4.2.11 Price Ceilings: A Numerical Example
- Discussion Prompt: Order Goods by Decreasing Elasticity
Graded: Elasticity of Demand
Graded: Elasticity of Demand & Revenue
Graded: Other Elasticity Terms
Graded: Consumer and Producer Surplus
WEEK 5
When Government Intervenes
In week four we learnt that the markets maximize the surplus that can be generated. So what happens if the government steps in and intervenes in the market? This week we will analyze price floors and ceilings, taxes and subsidies and learn how the best intentions sometimes lead to very unfortunate results.
16 videos, 1 reading
- Video: 5.1.1 Government Intervention: Introduction
- Video: 5.1.2 Modeling a Tax
- Video: 5.1.3 Modeling a Tax: Graphically Interpretation
- Video: 5.1.4 Consequence of a Tax on Consumer and Producer Surplus
- Video: 5.1.5 Consequence of a Tax on Total Surplus
- Video: 5.1.6 Dead Weight Loss
- Video: 5.1.7 Tax Incidence
- Video: 5.1.8 Tax in Extreme Cases of Demand Elasticity
- Video: 5.1.9 Tax in Extreme Cases of Elasticity of Supply
- Video: 5.1.10 Taxes: Summary
- Video: 5.1.11 Modeling a Subsidy
- Video: 5.1.12 Consequence of a Subsidy on Total Surplus
- Video: 5.1.13 Subsidy: Summary
- Video: 5.1.14 Taxes: Numerical Example Part 1
- Video: 5.1.15 Taxes: Numerical Example Part 2
- Video: The Power of Markets: Conclusion
- Discussion Prompt: Analyze a Price Regulation or Intervention
- Reading: Additional Readings: Week 5
Graded: Price Intervention
Graded: Taxes
Graded: Subsidies
Graded: Government Intervention
Graded: Final Exam
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