Course Syllabus

Jump to Today

Programming in R for policy simulations

  • Intro to R (code)
    • Major elements of Rstudio; how to create data; using the sequence function; how to create your own function.
  • Functions in R (code)
    • Illustrates the usefulness of writing functions for policy simulations, where a parameters are defined as inputs are used in a series of steps to produce output. 
  • Saving Multiple Results in Functions in R (code)
    • Illustrates how to write a function that remembers more than one result using the "cbind" command. Uses market equilibrium price and quantity from supply and demand functions as an example. 

Foundations of Economics

Foundational Tools in Economics

Financial Investment

  • Discounting Theory
    • What it is and why we do it, connection between theory and markets
  • Financial Formulas
    • Future Value of a Present Amount, Present Value of a Future Amount, Annuity Value of a Present Amount, Present value of Annuity, Present Value of Growing Annuity
  • Inflation
    • Purchasing power of money, base year conversions, methods for inflation adjustment in net present value analysis
  • Alternative Investment Criteria
    • Net present value, internal rate of return, benefit cost ratio, simple payback period, comparing projects with different lifecycles, capital costs, and irreversible investments ("wait and see NPV")

Supply and Demand

  • Demand Curves
    • Law of demand; Slope of demand; meaning of the height of the demand curve
  • Demand Shifters
    • Change in price versus change in demand; factors that shift the demand curve
  • Market Demand
    • Horizontal summation from individual to market; equal marginal benefit at each price
  • Consumer Surplus
    • Calculating CS, locating CS on demand curve, consumer expenditure
  • Demand Curve Math
    • Demand function with income component, finding key points along demand curve, consumer surplus, consumer expenditure
  • Supply Theory
    • Law of supply; meaning of the height of the supply curve, 
    • market supply; Horizontal summation from individual to market; equal marginal cost
  • Supply Shifters
    • Change in price versus change in supply; factors that shift the supply curve
  • Supply Curve Math
    • Supply function, finding key points along supply curve, producer surplus, producer revenue
  • Producer Surplus
    • Calculating PS, locating PS on supply curve, producer revenue
  • Interpreting Supply and Demand
    • Comprehensive (44:43) review of interpretations of curve heights and areas under the curve.

Markets

Welfare Analysis & Markets (Cost Benefit Analysis)

Applications in Supply & Demand

  • Market Elasticity 
    • Elastic vs. inelastic supply and demand curves.
  • Input and Output Markets
    • Example: How change input market might effect output market
    • Example: How change in output market might effect input market
  • Taxation: Price Changes and Adjustments
    • Overview how prices change (price received by producers, paid by consumers, changes in surplus)
    • Graph components
    • Provides summary of how supply and demand equations adjust to introduction of tax/subsidy.
    • Other tax responses: Alchian-Allen Theorem
  • Tax Incidence
    • Graphical illustration of tax equivalence
  • Tax Deadweight Loss
    • Brief overview of the intuition. Graphical demonstration in “price changes in adjustments”.
  • Tax Math
    • Two examples of calculating social surplus changes.
    • The two examples also demonstrate tax equivalence.
    • Also includes summary of how supply and demand equations adjust to introduction of tax/subsidy.
  • Subsidy
    • Briefly summarizes “negative tax” adjustments. Shows changes in prices, social surplus, and deadweight loss.
  • Price Controls 
    • Price Ceilings and Price Floors: Social Surplus Calculations
  • Markets as Data Processing Systems 
    • How markets use knowledge
    • Demand Displacement and Supply Expansion
  • Social Cost of Government Spending 
    • Social Surplus lost with government purchases

Institutional Failures and Difficult Cases for Markets

Consumer Choice

  • Demand Functions
    • Gives linear demand function example; Interpretations of function.
  • Elasticities of Demand
    • Interpretation and calculation of: price elasticity of demand; income elasticity; cross-price elasticities; examples are done for word problems, linear demand equations; log-log demand equations.
    • Drawing elasticities from Empirical Studies.
    • Factors Affecting Elasticity

Production

  • Production Technology
    • Defining production functions, short-run vs long-run, intro to the idea of optimal input use, law of diminishing returns (table and graph), economic returns to scale
  • Isoquants
    • Derivation, marginal rate of technical substitution, productivity changes (dynamics), slope of isoquant, demonstration of diminishing marginal returns.
  • Isocost Curves
    • Plots isocost curve, slope of isocost curve, shifts/rotations in isocost analysis.
  • Input Optimization
    • Bringing together isoquants with isocost; conditions for optimization; “optimization as an entrepreneur would see it”; marginal revenue product.
  • Pigouvian Dirty Input Tax
    • Demonstrates that an output tax on a good which uses a “dirty” factor of production is less efficient than a tax on the dirty factor of production itself.
  • Long Run vs Short Run Optimization
    • Uses optimal input spreadsheet to demonstrate that shocks to output demand have higher costs in short-run optimization than under long-run optimization.
  • Cost Types
    • Definitions of accounting cost, economic cost, fixed cost, variable cost, sunk cost, marginal cost, and average costs (variable, fixed, total).
  • Costs Tabular Demo
    • Uses a table to demonstrate the cost types
  • Costs Graphical Demo
    • Uses graphs to demonstrate cost types
  • Economies of scale
    • Economies versus diseconomies of scale; Graphical demonstration; describes possible sources;

Competitive Price Takers

  • Types of Firms
    • Sole proprietorship; partnership; corporation; purpose of firms; transaction costs
  • Perfect Competition
    • Assumptions; Occurrence; Market vs Firm; Marginal Analysis; Profit function; long run equilibrium
  • Market Dynamics
    • Demonstrates via video; shows positive market demand shock and the dynamics of a perfectly competitive market that earns short run profits but returns to a long run equilibrium of zero profits.
    • Demonstrates via video a positive supply shock arising from a new cost saving technology.
  • Shut Down Rule
    • Discussion of when firms stay-open versus shut-down; Math demo; graphical demo

Competitive Price Searchers

Monopoly and Strategic Competition

 

 

BELOW NOT WORKING/DISCONTINUED

 

Finance Formulas

Alternative Investment Criteria & Considerations

 

Course Summary:

Course Summary
Date Details Due