Economics is the study of production and allocation of scarce resources, and how agents make decisions under conditions of scarcity and uncertainty. This course provides a rigorous introduction to economics, with special emphasis on microeconomics. It will introduce you to economics as a discipline and as a way of thinking. It will also provide you with a set of tools, which will be very useful in other economics courses.
We will first study the behavior of individual consumers and firms. Then we will give you some insight into how markets work and whether market outcomes are desirable. We will also look at situations in which the firm is a monopolist, or competes with a limited number of rivals. Some of the key concepts we will introduce include economic incentives, marginal analysis, opportunity cost (which costs matter), market efficiency (what does it mean for a market to work) and strategic behavior (how to predict and respond to your rivals’ decisions).
The tools that you will be acquainted with in this class are fundamental for most upper division courses of the Economics major as well as classes in Finance, Accounting and Marketing.

Textbook: Robert S. Pindyck, and Daniel L. Rubinfeld: Microeconomics (7th Edition), Prentice-Hall Series in Economics. The textbook can be bought at the NYU Bookstore.

Prerequisites: This course assumes familiarity with multivariate calculus and high school algebra. In addition, we will have a review section on most essential mathematical tools.

TA’s Sessions: We meet twice a week and in addition a Teaching Assistant (TA) will conduct a recitation every week.

Homework Assignments: There will be 10 homework assignments. Homework assignments will consist of problems and short answer questions based on the material presented in class. The objective of these assignments is to give you the opportunity to practice the concepts. TA’s will go over the solutions.

Presentation : Each week there will be a short set of questions related to the topics covered in class. You will complete these online in groups of 5 or 6.

Quiz: There will be 2 quizzes. There are absolutely no make-ups for missed quizzes.

Grading Policy: Your grade will be determined by the following

• Presentations 5%
• Problem Sets 20% (2011 Problem Sets)
• Quiz 10%
• Midterm 30% (2011 Midterm Exam)
• Final 35% (2011 Final Exam)

Reading List and Tentative Course Schedule

• Week 1:
Introduction and Preliminaries: what is Economics?  The study of how a society uses its limited resources to produce, trade and consume goods and services. Sections 1.1, 1.2
The Basics of Supply and Demand. The demand Curve describes consumers’ choice, while the Supply Curve describes how much firms will produces. Equilibrium of Supply and Demand through price. Sections 2.1, 2.2, 2.3, 2.4, 2.5
• Week 2:
Consumer Behavior (1): preferences and their representation by a utility function. How do consumers make a decision given the alternatives that are available? Sections 3.1, 3.2, 3.3, 3.4, 3.5
Consumer Behavior (2): Budget Constraints. Sections 3.1, 3.2, 3.3, 3.4, 3.5
• Week 3:
Consumer Behavior (3): utility maximization. How do consumers maximize their utility given the budget constraint. The use of utility maximization to derive Marshallian demand curves.
Individual Demand: Study how utility maximizing choice of a good varies as Income Changes (Engel Curve), and as the price of the good itself changes (Demand Curve). Sections 4.1, 4.2 page 122, Appendix to Chapter 4 pages 149-155
• Week 4:
Market Demand:add up individual demands to get market demand. Discuss Elasticity of Demand, the responsiveness of demand to price. Sections 4.3, 4.6
Production Part I: We introduce firms and how they decide to produce. A firm is described by how it can transform inputs such as labor and capital into outputs, which is called a production function. We also discuss marginal versus average product of labor and capital. Sections 6.1, 6.2
• Week 5:
Production Part II: Production with two inputs. The tradeoff between using more labor or capital is called the marginal rate of technical substitution. As well we discuss returns to scale, i.e. are larger plants more productive? Sections 6.3, 6.4
The Cost of Production: We discuss the difference between sunk costs and fixed costs and costs in the short run versus the long run. Sections 7.1, 7.2, 7.3, 7.4, Appendix 7 pages 264-268.
• Week 6:
Profit Maximization and Competitive Supply. We look at the firm’s decision to produce in a perfectly competitive market. If a firm is maximizing profits, then it sets marginal costs to marginal revenue. Sections 8.1, 8.2, 8.3, 8.4, 8.5
The Analysis of Competitive Markets. We use the tools of Consumer and Producer Surplus to analyze the effect of a tax or rent control on the efficiency of a market. Pareto Efficiency. Sections 9.1, 9.2, 9.3, 9.6
• Week 7:
Midterm Review Lecture.
• Week 8:
Externalities and Public Goods. In many situations your actions affect others indirectly. Does this affect market efficiency?  We will talk about the failure of several fisheries due to the externality problem. Sections 18.1, 18.2, 18.6, 18.6,
Market Power: Monopoly and Monopsony (I). We analyze firms with market power that do not take the market price as given, but can choose the price of their products. Section 10.1 up to page 357
• Week 9:
Monopoly, Market Power and Antitrust (II): The social cost of monopoly and laws against monopoly: the antitrust laws. Sections 10.2, 10.3,10.4
Pricing with Market Power. We look at Price Discrimination, the practice of setting different prices for different types of consumers (such as students discounts or quantity discounts). Sections 11.1, 11.2
• Week 10:
Choice under Uncertainty. Expected Utility and Risk Preferences. How do we make choices when certain variables such as income and prices are uncertain (making choices with risk)? Sections 5.1, 5.2, 5.3
Game Theory (I): Simultaneous moves. We examine strategic decision making, when you are interacting with a competitor. We look at dominant strategies and a solution concept called Nash Equilibrium. Sections 13.1, 13,2, 13.3
• Week 11:
Game Theory II: Games Trees, Commitment & Threats. We look at sequential games in this lecture and the strategic role of commitment and threats. Sections 13.5, 13,6, 13.7
Monopolistic Competition and Oligopoly. We examine how firms set price or quantity when they have a single competitor (Bertrand and Cournot Competition).Part I Section 12.2 up to page 455, 12.3
• Week 12:
Monopolistic Competition and Oligopoly. We examine how firms set price or quantity when they have a single competitor (Bertrand and Cournot Competition).Part II Sections 12.2 from 455 on
Asymmetric Information I: Adverse Selection & Signaling. Frequently a seller or producer knows more about the quality of the product than the buyer does. How does asymmetric information affect economic outcomes? Sections 17.1, 17.2
• Week 13:
Asymmetric Information II: Adverse Selection & Signaling. Frequently a seller or producer knows more about the quality of the product than the buyer does. How does asymmetric information affect economic outcomes? Sections 17.3, 17.4
Applications of Game Theory: Auctions Section 13.8
• Week 14:
Applications of Game Theory on Public Goods, (or topics left over depending on the time we have left) Section 18.6