CAS EC 101

Introductory Microeconomic Analysis

Boston University

The first semester of a standard two-semester sequence for those considering further work in management or economics. Coverage includes economics of households, business firms, and markets; consumer behavior and the demand for commodities; production, costs, and the supply of commodities; price determination; competition and monopoly; efficiency of resource allocation; governmental regulation; income distribution; and poverty. Carries social science divisional credit in CAS.
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24HR Notes for CAS EC 101

Available 24 hours after each lecture

Bruce Watson

CAS EC 101 Syllabus for Bruce Watson — Fall 2018

Professor: Bruce Watson
Lectures: Lecture Section CC: Mondays, Wednesdays and Fridays, 10:10 – 11:00
Lecture Section BB: Mondays, Wednesdays and Fridays, 12:20 – 1:10
Morse Auditorium
Office Hrs: Wednesdays 2:30 – 4:30
Kilachand Center (right next to Morse)
(Starting Wednesday, Sept. 12)
Blackboard Site:
TFs and Sections: The economics department staffs a “TF Principles Center” in Room B17
(in the basement) of the Economics Department, 270 Bay State Road. A
TF will ordinarily be there Mon. – Thurs. from 10 to 6, and Fri. from 10 to
5. It is best if you can go whenever one of the TFs assigned to our class is
“on duty”; they are terrific and are obviously the most knowledgeable
about exactly what our class is covering. The office hours for our TFs will
be posted on the class Blackboard site.
However, if you cannot make it when one of our TFs is available, you can
go to the Principles Center any time when someone is there and get some
Sections are designed to review material presented in lecture, to go over
example problems, and to prepare you for exams. They meet at specific
times with your assigned TF. Sections in this course are optional.
However, you will find it greatly to your advantage to attend. We are very
fortunate to have fantastic TFs, and I’m sure their sections will be very
helpful to you.
EC 101, Section BB /CC Boston University
Introductory Microeconomic Analysis Fall, 2018
This course provides an introduction to current economic issues and to basic economic
principles and methods. The economist John Maynard Keynes wrote that "the ideas of
economists and political philosophers, both when they are right and when they are wrong,
are more powerful than is commonly understood." Economics is not primarily a set of
answers, but rather a method of reasoning. By the end of the semester, you will be able to
use the analysis practiced in the course to form your own judgments about many of the
major economic problems faced by the United States and other countries.
In particular, we will focus this semester on "microeconomics," which is the study of the
interaction of people and firms in markets. Since we live in a market economy, this study
will help you to understand how American society organizes its economic affairs. We
will examine how the forces of supply and demand operate in the markets for goods,
labor and capital. Theories concerning firm behavior will be examined—how companies
decide how much to produce, and how to produce it. Once we have mastered some basic
techniques for thinking about economic problems, we will apply those techniques to such
important social issues as pollution, poverty, income distribution, and international trade.
Course Requirements
There will be three multiple choice exams given in the course—two midterms and a final.
The dates of the exams are:
First Midterm: Fri., Oct. 5
(covering the material from Fri. Sept 7 through Fri., Sept 28)
Second Midterm: Fri., Nov. 9
(covering the material from Tues, Oct. 9 through Fri., Nov. 2)
Section CC (10:10 – 11:00) Mon. Dec. 17 9 – 11
Section BB (12:20 – 1:10) Thurs., Dec. 20 12:30 – 2:30
(cumulative, but slightly weighted toward material covered after the
second midterm)
After the midterms and final, your score will be available on the course Blackboard site
as soon as possible. You will be able to log in and see only your score.
Please Note:
It is your responsibility to plan your travel or other events around exam dates. In
particular, the date of the final exam is determined by the Registrar and cannot be
changed for any reason. Requests to take the final on a different day,
including requests for a make-up final, in order to accommodate travel or
other end-of-semester plans, will not be considered.
No makeup midterms will be given. The lower of each student’s two midterm
scores will be dropped from the calculation of their semester grade. If you miss
one of the midterms for any reason, you will receive a zero, and the score will be
dropped from the calculation of your semester grade. NO MAKEUP EXAMS
WILL BE GIVEN. If you miss both midterms for any reason, you will receive a
grade of zero for your midterm score.
Problem Sets
There will be nine problem sets assigned during the term. These will be multiple choice
sets completed on MyEconLab. Further instructions about MyEconLab will be given
well before the first problem set.
The due date on problem sets cannot be extended for any reason. However, the lowest
two of the nine scores for the semester will be dropped from the calculation of each
student’s semester grade. So, if you cannot do one of the problem sets some week, that
will just be one of the scores that gets dropped.
Grades will be determined by the final (40%), the higher your two midterm scores (30%),
and the average of the highest seven of your nine problem sets (30%).
Your grade will be calculated two ways, and if there’s any difference in the result,
I’ll give you the higher of the two letter grades which result.
In the first calculation, semester grades will determined by a curve. The nature of a curve
is that your grade is based on your performance relative to all other students in the class.
It does not involve an “absolute standard,” e.g., 90 – 100 = A, 80 – 90 = B, etc., which
you may be used to from high school or in some other courses. I believe that a curve is
ultimately the fairest way to determine grades, since it does not set some arbitrary
absolute standard, but judges students on their performance relative to their peers.
With a curve, your grade is based on your percentile rank in the class, i.e., the percentage
of students in the class who scored below you. If you are in the 60th percentile, for
example, that means that 60% of students had scores equal to or below yours, while 40%
of students had scores above yours.
The curve is applied to your total semester average, weighting the average of your seven
highest problem set percentage scores at 30%, your higher midterm percentage score at
30%, and your final percentage score at 40%.
The curve applied will be as follows:
Letter Grade Percentile Rank Range
of Letter Grade
A 80th %ile – 100th %ile
A- 65th %ile 80th %ile
B+ 55th %ile 65th %ile
B 45th %ile 55th %ile
B- 35th %ile 45th %ile
C+ 25th %ile 35th %ile
C 20th %ile 25th %ile
C- 10th %ile 20th %ile
D 2nd %ile -- 10th %ile
F 0th %ile -- 2nd %ile`
For example, say that your semester point total is 235/333.33, and that this puts you in
the 57th percentile overall. Your semester grade, then, would be a B+.
Absolute Scale
In the second calculation, grades will be determined by the standard curve you may be
familiar with from high school. In this approach, your letter grade is based on your total
points as a percentage of the total possible points for the semester. Here is the scale:
A 93.0%
A- 90.0%
B+ 87.0%
B 83.0%
B- 80.0%
C+ 77.0%
C 73.0%
C- 70.0%
D 65.0%
E/F 0.0%
So, for example, if your total points for the semester were 85% of the total possible
points, you would get a letter grade of B.
Most of the readings listed below are drawn from the textbook: Microeconomics (7th
ed.), by Glenn Hubbard and Anthony O’Brien. Note: This is the latest edition, but any
edition would do. If you really want a hard copy, the 5th or 6th or an International Edition,
or any edition will do. The majority of the reading in the text reinforces material you'll
learn in class, but some of the topics we cover may not appear in the book. Conversely,
some of the reading is purely for background, and will not be covered explicitly in class.
You should consider the textbook to be most useful as a reference, or as an additional
source of review for material we have presented in class. In short, you are not required
to buy the book. The readings listed in the course calendar below are merely
supplementary material, and not assignments. You will not be responsible-on
problem sets or exams-for material in the book that we have not covered in class.
If you have purchased a used copy of an earlier edition of Hubbard and O’Brien, you
should still find it useful. However, the page numbers given below refer to the latest, 6th,
The rest of the readings listed below will be drawn from recent newspaper and magazine
articles. These will all be available on the course web site.
Academic Conduct
It is your responsibility to know and understand the provisions of the CAS Academic
Conduct Code (copies are available in CAS Room 105). Cases of suspected academic
misconduct will be referred to the Dean's Office. In addition, anyone found cheating on
an exam will receive a zero grade for the exam.
Wed., Sept. 5
Registering for MyEconLab
Fri., Sept. 7
Course Overview
Introduction to Economics
Hubbard & O’Brien: Chap. 1
Chap. 1 Appendix
Mon., Sept. 10
Four Central Concepts of Economics
Overview of the Economy: Product and Factor Markets
Determinants of Demand for an Individual
Wed., Sept. 12
The Demand Schedule for an Individual
The Demand Curve for an Individual
From Individual Demand to Market Demand
Fri., Sept. 14
Increase in Quantity Demanded vs. Increase in Demand
Decrease in Quantity Demanded vs. Decrease in Demand
Hubbard & O’Brien: Section 3.1
Mon., Sept. 17
Determinants of Supply for an Individual Supplier
The Supply Curve for an Individual Supplier
From Individual Supply to Market Supply
Change in quantity supplied vs. Change in supply
Hubbard & O’Brien: Section 3.2
Wed., Sept. 19
Price Ceilings and Floors
Hubbard & O’Brien: Section 3.3
PS 1 Available on MyEconLab
Fri., Sept. 21
Comparative Statics
Mon., Sept. 24
Price Elasticity of Demand
Hubbard & O’Brien: Secs. 6.1 – 6.2
Wed., Sept. 26
Elasticity (cont.)
Other Demand Elasticities
Price Elasticity of Supply
Hubbard & O’Brien: Sec. 6.4 and 6.6
PS 1 Must Be Completed by 11:45 PM
PS 2 Available on MyEconLab
Fri., Sept. 28
Behind the Demand Curve: Consumer Theory
Utility and Marginal Utility
Indifference Curves
Marginal Rate of Substitution
Hubbard & O’Brien: Chap. 10 Appendix
Mon., Oct. 1
Review Session for Midterm 1
Wed., Oct. 3
No ClassExtended Office Hours for Midterm 1
Office Hours from 10 – Noon and 2:30 – 4:30 Kilachand 106D
PS 2 Must Be Completed by 11:45 PM
Fri., Oct. 5
Midterm 1
(Covering the material from Fri. Sept 7 through Fri., Sept 28)
Tues., Oct. 9
Budget Constraints
Consumer Optimum
Wed., Oct. 10
Changes in Income
Changes in Prices
PS 3 Available on MyEconLab
Fri., Oct. 12
Income and Substitution Effects
Deriving the Demand Curve
Mon., Oct. 15
Consumer Theory Review and Practice Problems
Wed., Oct. 17
Behind the Supply Curve: Producer Theory
Firms’ Costs
Hubbard & O’Brien: Sections 11.4− 11.5
“Case Studies: Marginal vs. Average Cost”
PS 3 Must Be Completed by 11:45 PM
PS 4 Available on MyEconLab
Fri., Oct. 19
The Perfectly Competitive Firm in the Short Run
Firms’ Revenues and Profit Maximization
Supply for a Perfectly Competitive Firm
The Shut-Down Condition
Hubbard & O’Brien: Sections 12.1 – 12.4
Mon., Oct. 22
The Perfectly Competitive Firm in the Long Run
Comparative Statics
Hubbard & O’Brien: Section 12.5
Wed., Oct. 24
Hubbard & O’Brien: Sections 15.1 – 15.3
PS 4 Must Be Completed by 11:45 PM
PS 5 Available on MyEconLab
Fri., Oct. 26
Monopolistic Competition
Hubbard & O’Brien: Chap. 13
Mon., Oct. 29
Basics of Game Theory
Hubbard & O’Brien: Sections 14.1− 14.3
Wed., Oct. 31
Introduction to Factor Markets
Labor Supply
Hubbard & O’Brien: Section 17.2
PS 5 Must Be Completed by 11:45 PM
PS 6 Available on MyEconLab
Fri., Nov. 2
Labor Demand
Equilibrium in the Labor Market
The Market for Capital
Hubbard & O’Brien: Sections 17.1, 17.3, 17.6
Mon., Nov. 5
Review Session for Midterm 2
Wed., Nov. 7
No Class—Extended Office Hours for Midterm 2
Office Hours from 10 – Noon and 2:30 – 4:30 Kilachand 106D
PS 6 Must Be Completed by 11:45 PM
Fri., Nov. 9
Midterm 2
(covering the material from Tues, Oct. 9 through Fri., Nov. 2)
Mon., Nov. 12
Introduction to Welfare Theory
Consumer Surplus
Producer Surplus
Hubbard & O’Brien: Sections 4.1 – 4.2
Wed., Nov. 14
Market Efficiency
Welfare Analysis of Price Controls
Welfare Analysis of Monopoly
Hubbard & O’Brien: Sections 4.3, 15.4
PS 7 Available on MyEconLab
Fri., Nov. 16
Basics of Trade
Absolute vs. Comparative Advantage
Practice Problems
Hubbard & O’Brien: Sections 9.1 – 9.3
Mon., Nov. 19
Welfare Analysis of Trade and Tariffs
Hubbard & O’Brien: Section 9.4
Mon., Nov. 26
Information Asymmetry
Adverse Selection
Hubbard & O’Brien: Section 7.3
“The lemon dilemma,” The Economist, Oct. 11, 2001
Wed., Nov. 28
Information Asymmetry (cont.)
Moral Hazard
Principal-Agent Problem
PS 7 Must Be Completed by 11:45 PM
PS 8 Available on MyEconLab
Fri., Nov. 30
Negative Production Externalities
Positive Production Externalities
Hubbard & O’Brien: Section 5.1
Mon., Dec. 3
Externalities (cont.)
Negative Consumption Externalities
Positive Consumption Externalities
Wed., Dec. 5
Externalities: Public and Private Solutions
Hubbard & OBrien: Sections 5.2 – 5.3
PS 8 Must Be Completed by 11:45 PM
PS 9 Available on MyEconLab
Fri., Dec. 7
Private Goods
Public Goods
Quasi-public Goods
Common Resources
Hubbard & O’Brien: Section 5.4
Mon., Dec. 10
Review Session for the Final Exam
Wed., Dec. 12
No ClassExtended Office Hours for Final Exam
Office Hours from 10 – Noon and 2:30 – 4:30 Kilachand 106D
PS 9 Must Be Completed by 11:45 PM
Mon., Dec. 17
9:00 – 11:00
Section CC Final Exam
Thurs., Dec. 20
12:30 – 2:30
Section BB Final Exam

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