Unit I:  Basic Economic Concepts - 2 Weeks

(Chapters 1, 2, & 6, McConnell & Brue)
A.    Founding Principles

• Scarcity, the economizing problem
• Tradeoffs and Opportunity Cost
• Free-market system (Adam Smith’s invisible hand)

B. Types of Economics

• Microeconomics vs. macroeconomics
• Positive economics vs. normative economics

C. Production Possibilities Graph

• Straight vs. bowed PPF
• Underutilization, full employment, and unattainable
• Law of increasing opportunity cost
• 3 shifters of the PPF
• Consumer goods vs. capital goods

D. Circular Flow Model

• Product market, Factor market, and Public sector

E. Specialization and Trade

• Absolute advantage
• Comparative advantage

 
Unit II:  Supply, Demand, And Consumer Choice – 4 Weeks
(Chapters 3, 4, 20, & 21.  McConnell & Brue)
A.    Demand (graph)

• Law of demand
• Market demand curve
• Determinants of demand
• Normal vs. inferior goods
• Substitutes and complements

B. Supply (graph)

• Law of supply
• Market supply curve
• Determinants of supply

C. Equilibrium and Efficiency (graph)

• Equilibrium price and quantity
• Disequilibrium:  surplus and shortages (graphing)

D. Government Policies (graphs)

• Price floors and Price ceilings
• Excise taxes, Subsidies, Tariffs, Quotas

D. Elasticity

• Price, Income, and Cross Price elasticity of demand
• The total revenue test (graph)

E. Consumer Choice

• Law of diminishing marginal utility, Substitution effect, Income effect
• Marginal benefit/cost
• Utility maximizing rule

 
Unit III.  Costs of Production and Perfect Competition- 3 Weeks
(Chapters 22 & 23.  McConnell & Brue.)
A. Economists vs. Accountants

• Total revenue
• Explicit and Implicit costs
• Economic costs and profits

B. Costs of Production (graph)

• Fixed Costs, Variable costs, and Total costs
• Per-unit costs (AVC, AFC, ATC)
• Shifts in MC, ATC. AVC, and AFC
• Marginal costs and Marginal revenue
• Sunk costs

C. Law of Diminishing Marginal Returns (graph)

• Stage I:  increasing returns
• Stage II:  decreasing returns
• Stage III:  negative returns

D. Long-run Production Costs (graph)

• Economies of scale, Constant Returns to scale, Diseconomies of scale

E. Characteristics of Perfect Competition

• Price takers
• Demand = MR= Price
• Graph:  Firm vs. industry (market)
• Short-run (profit or loss)
• Long-run equilibrium (New firm enter and exit)
• Normal profit
• Shutdown decision (P< AVC)
• Productive efficiency (P = Min ATC)
• Allocative efficiency (P = MC)

 
Unit IV.  Imperfect Competition-3 Weeks
(Chapters 24 & 25.  McConnell & Brue)
A. Characteristics of Monopolies

• Barriers to entry
• MR below demand (graphs)
• Profit-maximizing price and quantity
• Natural monopoly

B. Effects on overall economy

• Compared to competitive industry
• Dead-weight loss
• X-efficiency

C. Price discrimination (graph)

• Purpose and results
• Graph (MR=D)

D. Regulation

• Unregulated price, Fair return price, and Socially optimal price
• Taxes and subsidies

E. Characteristics of Monopolistic Competition

• Long-run equilibrium (graph)
• Excess capacity
• Non-price competition
• Product differentiation

F. Characteristics of Oligopolies

• Kinked demand curve-competitive pricing
• Game theory (chart) price leadership
• Collusion and cartels

Unit V.  Resource Market-3 Weeks(Chapters 27, 28, 29, & 35.  McConnell & Brue)
A.    Demand for labor

• Derived demand
• Marginal revenue product
• Marginal resource cost

B. Perfectly competitive labor market (graph)

• Wage makers
• Perfectly elastic supply of labor

C. Monopsony (graph)

• Wages and quantity compared to perfectly competitive labor market

D. Labor Unions

• Goals and methods

E. Effects of Minimum Wage
F. Wage differentials

• Investment in human capital vs. physical capital

 
Unit VI.  Market Failures and Government Involvement-3 Weeks
(Chapters 30, 31, & 34.  McConnell & Brue)
A.    Public goods

• Demand for public goods
• Supply of public goods
• Free-rider problem
• Non-excludability and Non-rivalry

B. Positive externalities/spillover benefits (graph)

• Marginal social benefits vs. private benefits
• Underallocation
• Government remedy

C. Negative externalities/spillover costs (graph)

• Marginal social cost vs. private cost
• Overallocation
• Government remedy

D. Income distribution

• Lorenz curve (graph)
• Tax incidences