Economics 200
Introduction to Microeconomics

Course Introduction

Scope of the Course

The overall goal of this course is to help you to master a set of economic principles that will enable you to think more coherently and consistently about a wide range of economic and social problems. The principles of economics will be taught as the tools of analysis. It is meaningless (and difficult) to master the tools alone; you must also be able to apply the tools to the problems of everyday life. You will learn to analyze different situations and solve a variety of problems ranging from the strategy of pizza sellers offering two-for-one deals, to a farmer's decision on the quantity and type of crop to grow.

These online materials attempt to recreate, as closely as possible, my in-class course in the Principles of Microeconomics. In addition to the online materials, you should have Miller's textbook and the accompanying Study Guide written by Miller and VanHoose.

Course Goals and Objectives

By the end of this course you should be able to

• apply the tools of economic analysis to the problems of everyday life;
• discuss the economic implications of current worldly events verbally and in writing; and
• discuss the potential economic impacts of various public policy decisions.

This course will equip you to think about the world from an economic perspective; ideally, you will be able to analyze critically, and objectively, decisions in the private and public sector. For example, what are the expected short- and long-term effects of a new environmental regulation? How are incentives altered and how are industry and consumers expected to react? Many people will gladly offer their opinions on these questions, but few will be able to provide clear, analytical reasoning based on a sound theoretical framework. I hope that you will become comfortable conducting rigorous economic analysis, and learn to recognize when it is missing in policy and other debates. By the end of this course, you will also be prepared for—and I hope, excited about—studying economics further.

Reviewing the Course

See the Online Student Handbook to find answers to questions you may have about your online learning course.

In this course introduction, you will get an overview of the essential steps to completing the course and a detailed overview of the course format. Please take time now to review this information carefully. If you have questions about your participation in the course, after you have finished reading this introduction, please consult the list of contacts at UW Educational Outreach provided in the Online Student Handbook. Both I and the staff at UW Online Learning are eager to assist you in any way possible in order to make this course as satisfying and rewarding as possible.

About the Online Environment

Your online course offers several advantages to the traditional classroom, including the comprehensive Online Student Handbook, the ability to communicate electronically with other students and with your instructor, and links to a rich array of online resources.

Online Student Handbook

This handbook answers questions about your online learning course, such as how to purchase your text, schedule an exam, obtain a transcript, and get technical help if you need it. The handbook also provides additional resources, such as how to order books or journals from the library and how to study for an online course.

Communicating with Your Instructor and Student Peers

Online Discussion Forums, designed by the University of Washington award winning Catalyst team, allow you to communicate with other currently enrolled students and with your instructor. We encourage you to use the forum to exchange ideas, resources, and comments about your course work with other students in this course. This unstructured forum is monitored by your instructor.

You can use e-mail to ask me a question or preferably post your question on the discussion forum. I will reply on the same forum.

Online Resources

As an online student, you have access to a wealth of Web resources compiled to provide fast, easy access to information that supports your online learning experience. Organized by subjects, Online Resources link you to sites with help for writing and research, study skills, language learning, and library reference materials. All links have been assessed for credibility and reliability, and they are regularly monitored to ensure their usability.

Have you ever stopped to wonder how the vast range of economic activity in our economy manages to flow between buyers and sellers with no central planning? How, for example, does there happen to be a Beatles CD in the record store when you go to purchase one? Chances are the CD was recorded in a different city and packaged with materials produced in a different country. Through perhaps twenty different stages of production, a CD finds its way to a shelf in a local store and sells for a price you are willing to pay. Both you and the artists are better off for this exchange, though you have never met them, and there are many stages between their creative activity and your purchase in the record store.

Though the Beatles were not composing at the time, such questions fascinated Adam Smith, the famous Scottish philosopher and classical economist. Smith wondered about the seemingly random and unorganized activities in the market, and how they worked to nonetheless produce both simple and sophisticated goods that people wanted to buy and sellers were happy to sell. This pondering led to his famous phrase "the invisible hand," from his 1776 text, An Inquiry into the Nature and Causes of the Wealth of Nations. By the end of this course, I hope you understand the basis of exchange, the invisible hand, and how resources are directed to their highest-valued use throughout an economy.

This course introduces you to the principles of neoclassical microeconomic theory. Classical economic theory deals with the problems encountered by individuals and society because of scarcity. Whenever scarcity exists, people must make choices about what they will and will not give up; because of scarcity, they cannot have everything. Making a choice necessitated by scarcity implies a cost—an opportunity cost (an economic term you will learn about), which is the next best foregone option.

Economics is the science that studies this kind of decision making. In particular; it studies how individuals react when opportunities or constraints, such as prices, incomes, or laws change. Neoclassical microeconomic theory includes economic principles such as marginal analysis, that were added to the classical theoretical framework. "Micro" means small, and refers to the emphasis on the decisions of individuals, firms, and markets rather than national economies, which fall within the realm of macroeconomics.

Course Materials

Required Textbooks

• Miller, Roger LeRoy. Economics Today: the Micro View. Thirteenth Edition. New York: Pearson Addison Wesley, 2006. ISBN: 0321481844.(Hereafter referred to as "Miller"); and
• Miller, Roger LeRoy and David VanHoose. Study Guide to accompany Economics Today: the Micro View. Thirteenth Edition. New York: Pearson Addison Wesley, 2006. ISBN: 0321316649. (Hereafter referred to as "Study Guide").

or

• Miller, Roger LeRoy. Economics Today. 13th ed. New York: Pearson Addison Wesley, 2006. ISBN: 0321454626.
  Miller, Roger LeRoy and
• David VanHoose. Study Guide to Accompany Economics Today. 13th ed. New York: Pearson Addison Wesley, 2006. ISBN: 0321303954.

Note that you have two options for text choice. If you are planning on taking ECON 201 through Online Learning with the University of Washington, I strongly recommend using the full editions of both text and Study Guide. If you are not, you can use the "Micro View" editions of both text and Study Guide. Each has the same chapter and page numbering, but the full text also includes chapters pertaining to macroeconomics, which are omitted from the Micro versions. The full text can also be used for Econ 201.

Overall, online learning students have responded favorably to the Miller text. I have selected this text because the author centers on the basics of economic theory. Rather than filling the pages with all the theoretical nuances of microeconomics, he has presented the core concepts in a simple fashion. These concepts are illustrated with real-world examples that I hope will interest you and convince you of the relevance and applicability of what may seem at times rather dry.

The "Concepts in Brief" section in each chapter of Miller summarizes the most important ideas of the chapter, and describes how the chapter fits into the overall course. There is also a "Summary Discussion of Learning Objectives" at the end of each Miller chapter, and several similar sections in the Study Guide.

Miller provides a "Did You Know That" section at the beginning of each chapter. These insights offer perspective and relevance to the topics discussed in the chapter. The author also offers a section titled "Issues and Applications" based on current economic issues in an attempt to tie the concepts of the chapter into the lives of students.

In addition to providing more depth and breadth, the supplementary texts (the Study Guide and the recommended readings) offer you an alternative presentation of the same material.

I have made the Study Guide a requirement, because it provides additional opportunities for you to practice what you will learn in this course.

Recommended Textbooks

• Samuelson, Paul A. Economics. McGraw Hill/Irwin, 2004. ISBN: 0072872055  
• Yates, Michael. Naming the System. Monthly Review Press, 2003. ISBN: 1583670793

One of the advantages of basic neoclassical microeconomic theory is that it is a consistent, widely supported theory about how individuals react to incentives. The theoretical core, therefore, is the same in most standard introductory textbooks. Hence, any basic economics textbook with a good index may help you understand the basic concepts. Just locate in the index the topics listed in the assignment and read the relevant pages.

The Samuelson text is a classic textbook that may help you to narrow your search or be more selective. Additionally, the Yates text offers an alternative to the neo-classical text used in 98% of undergraduate principles of economics texts. These books may be available from your local library or a new or used bookstore.

Course Organization

The course organization follows that of the textbook, covering chapters 1–4 and 21–32. The material is divided into fourteen lessons, as follows:

• Unit One: Basic Economic Concepts
  • Lesson One: The Nature of Economics
  • Lesson Two: Scarcity and the world of Trade-offs
  • Lesson Three: Demand and Supply
  • Lesson Four: Extensions of Demand and Supply Analysis
• Unit Two: Dimensions of Microeconomics
  • Lesson Five: Demand and Supply Elasticity
  • Lesson Six: Rents, Profits, and the Financial Environment of Business
• Unit Three: Market Structure: Perfect Competition
  • Lesson Seven: The Firm: Cost and Output Determination
  • Lesson Eight: Perfect Competition
• Unit Four: Preparing for the Midterm Exam
• Unit Five: Imperfect Competition and Regulation
  • Lesson Nine: Monopoly
  • Lesson Ten: Monopolistic Competition
  • Lesson Eleven : Oligopoly and Strategic Behavior
  • Lesson Twelve: Regulation, Deregulation, and Antitrust
• Unit Six: Labor Resources
  • Lesson Thirteen: The Labor Market: Demand, Supply, and Outsourcing
  • Lesson Fourteen : Union and Labor Market Monopoly Power
• Unit Seven: Preparing for the Final Exam

Assignments and Exams

There are five written assignments, a midterm, and a final examination, for a total of seven graded course components.

Written Assignments

Each written assignment is worth ten points, and together they constitute 25 percent of your final grade. Points will be assigned on the basis of the accuracy and completeness of your answer. You must show all work, and all graphs must be carefully labeled. Each written assignment consists of five essay questions. Answers to each question should be approximately half a page.

Please read the information in "How to Complete Your Online Learning Course" in the Student Handbook on submitting assignments. You will also find instructions in the "About Your Instructor" page on the course syllabus.

Exams

Your midterm examination consists of multiple choice, true-false, short answer, and problem sections worth a total of 50 points, representing 25 percent of your grade. Partial credit on some questions is possible, but only if you show all your work and your answers are legible. The format of the final exam is similar to the midterm, except that each section is comprehensive; the exam is worth a total of 100 points, representing 50 percent of the course grade.

You can earn a total of 200 points, distributed as shown in table i.1, below.

Table i.1—Point Distribution

Course Components	Possible Points	Percent of Grade
Assignment 1	10	5
Assignment 2	10	5
Assignment 3	10	5
Midterm Exam	50	25
Assignment 5	10	5
Assignment 6	10	5
Final Exam	100	50
Total	200	100

Unit 4 includes a practice exam for the midterm, and Unit 7 includes a practice exam for the final. Short answers keys for each are provided.

Graphs and Algebra

Far too often, students get confounded by course material—not because they don't intuitively understand the economic theory, but because they get caught up in the graphs and simple algebra. The graphs we will use in this course are primarily linear (straight lines), but you should also be able to use nonlinear curves. You will be asked to perform some calculations with the simple linear functions. This is nothing other than high school math; although—in case you have effectively blocked it out of your mind—a little review may be in order. If you have been away from math for a while, or have a math phobia, an investment of time reviewing these concepts will pay off many times throughout the course. A review of graphing is provided in Appendix 1A of your textbook.

How to Approach Each Lesson

Each lesson begins by assuming you have read the relevant chapter in the textbook and gone through the Study Guide. The first item listed, therefore, is the assigned chapter from the text. You should read the appropriate Miller chapter before working through the rest of the online lesson. The text provides many examples of real problems so you have an opportunity to apply the economic principles being discussed. The text also provides key terms and learning objectives that will help guide your study in this course.

Understanding any discipline requires knowledge of its language. You should learn definitions for all the key terms listed—the key terms in the online lesson are the same as the ones in the textbook. The textbook's key terms are defined in the margins throughout the chapters, listed at the end of each chapter, and re-stated in a glossary at the end of the text. Be aware that although many of the terms, such as efficiency and cost, will seem familiar, they are used in a very precise and specific manner in economic analysis that may differ slightly from your current understanding of the term. I recommend you carefully read and think about each key word, and make sure you are comfortable with its use in economics.

Learning objectives begin each lesson, and brief answers or guidelines to the learning objectives are provided at the end of each lesson. If you write out your understanding of the learning objectives before reading my descriptions, you will see which parts of the material you have grasped and those with which you are still struggling. When you are satisfied that you have a basic understanding of the material covered in the chapter, you are ready to continue.

As you work through each lesson, think about the learning objectives for the content. The online lesson goes over—in more depth—;material that I feel is either particularly difficult or often misunderstood. In every course of microeconomics I have taught in the past twelve years, the same questions and confusions appear. Some concepts seem particularly problematic. I have tried to anticipate those problems and the most commonly asked questions, and address them in the lessons.

Opportunities to Test Your Understanding

The only way to learn economics is to sit down and put the pencil to the page. Only by actually working out problems will you be able to realistically assess your understanding of the principles.

Therefore, each lesson includes knowledge checks as well as problems and questions from the text and the Study Guide.

Knowledge Checks

Throughout the commentary for each lesson, I have added some "knowledge checks" that are more representative of assignment and exam problems than those in the textbook or the Study Guide. Further, these will help you assess whether you are meeting the learning objectives. You should spend some time on these problems, as they will help you to internalize the material. The knowledge checks appear near the material from which they arise.

Answers are provided, but they will only help you if you work through each problem before checking your answer. I recommend writing down your answers for the questions in each lesson; if you have made a mistake in your reasoning, you can see where you have made it. Keeping a record of your answers will also help you when you are reviewing the material for exams and assignments. If you have difficulty, I recommend re-reading the relevant sections in the textbook and working through some more problems. Supplementary resources are also suggested, where applicable. Many of these resources can be found on the Internet, and I cannot encourage you enough to use them.

Problems and Questions

Each lesson also includes a selection of "Problems and Questions" from the end of each chapter in Miller, and most or all of the chapter questions from the Study Guide. You will not submit these questions and problems for grading, but a selection of them will appear on the midterm and final examination. If you don't work them out in advance, you will be at a disadvantage. If you do work them out, however, even if the numbers change, the methodology will be familiar. Write out your answers to these questions, then check your answers. Re-read sections of the Miller chapter if necessary to help you fully understand the answers. Keep your corrected answers in your notebook for review and reference. If you have made any errors, read through the explanation given and review that section once more in Miller. After completing each lesson, you should go back to any questions you missed in the previous lesson and make sure you can answer before proceeding.

Note that the most important end-of-chapter problems from Miller are listed at the end of each lesson; it would be worthwhile for you to complete all the problems, however. Answers are provided in the lessons.

The Study Guide contains four kinds of questions to accompany each chapter of Miller: completion questions, true-false questions, multiple choice, and matching. A good strategy for the multiple choice and true/false questions is to first thoroughly review the Miller chapter. Then answer the questions in the Study Guide without looking at the text. Before checking your answers against those given, work through the questions a second time, this time verifying your answers by referring directly back to the Miller chapter. This will reinforce your mastery and allow you to discover your errors. Finally, after doing this, check your answers against the ones provided. Answers to the questions from the Study Guide are given at the end of each chapter in that study guide.

Other Opportunities to Test Your Understanding

If you want more practice on any or all of the topics covered throughout the course, I have included answers to the unassigned problems from your text, as well as answers for each "Issues and Applications" problem and "Questions for Critical Analysis". Although none of these are required, more practice is always better for your understanding of economics. I recommend doing as many of these questions as you have time for.

How to Succeed in This Course

I have never known a student who passed introductory economics without working through the questions and problems. Studying economics requires far more than memorizing terminology and retracing graphs. Exams don't ask you for definitions you have read from the book; the questions presume you know those definitions and can apply them analytically to work through problems. Studying the principles of economics without working through questions is analogous to reading a calculus text without doing problems: you can't appreciate the working of the theory. So it is essential that you carefully complete the knowledge checks, questions, and problems. Until you wrestle with these exercises, you will not know how well you have grasped the principles. This is the best method for you to test your own understanding of the material, and it is how most instructors will test your understanding. The goal is to learn an economic way of thinking and an analytical approach to problem solving. Studying the textbook can provide a framework within which this analysis can take place; but it cannot provide the techniques for problem solving. Continued practice answering different questions is the best method for training your mind to think analytically in order to solve economic problems.

Economics is a discipline that builds upon fundamental propositions. It is very important that you adequately grasp each concept before moving on to the next assignment. Again, how you do on the questions and problems is the best test of your mastery of the subject matter.

Finally, once you have carefully worked through the relevant chapters and feel comfortable with the knowledge checks, Miller's end-of-chapter questions, and the Study Guide questions and problems, you should try the appropriate practice exam (midterm or final). This gives you one final opportunity to assess your understanding of the material before you write the exam. The practice exam contains a selection of questions from all the chapters (six chapters for the midterm, fourteen chapters for the comprehensive final), in the same format and of approximately the same length as the real exam. You can simulate the exam conditions (that is, within the allowed time and with no supporting materials except for a calculator—but try not to simulate the stress or anxiety!), and then evaluate yourself with the answer key provided. After reviewing any problem areas, you should be ready for your exam. Relax and think of it as an opportunity to communicate everything you have learned.
In summary, I recommend you tackle each chapter in the following order:

1. Read the chapter overview from the online lesson.
2. Read the assigned chapter in Miller.
3. Read and work through the lesson commentary. Make sure you try to meet all the learning objectives and write down answers for problems and questions within this lesson.
4. Check your answers to both the learning objectives and the problems.
5. Review troublesome areas in the text and commentary in the lesson.
6. Work through all of the practice questions and check your answers.
7. Return to your text or the lesson, contact your instructor, or consult a supplementary text if problems remain.

A Message to You

This system is designed to allow you to teach yourself economics. All you need do is apply yourself and follow the directions. Economics is not easy, but it can be mastered with effort. When you successfully finish this course, you will not only grasp the principles of economics, but you also will have demonstrated that you can learn, and that you can learn by yourself. After all, life is a continual process of learning. In that process each of us has to rely on one main teacher—ourselves.

Final Note

In formatting this course to follow micro courses at the University of Washington, I have not assigned every chapter in Miller. Excellent discussions such as chapter 20, "Consumer Choice," are not compulsory. One goal of this course is to induce you to study economics further, and you are encouraged to browse through the table of contents for chapters that may interest you.

About the Course Developer

My name is Shon Kraley. I received my Ph.D. in economics from the University of Washington in 2001. My undergraduate degree from Portland State University is also in economics. I began teaching economics at the UW in 1995. In 1999, I was presented the Langton Award for Outstanding Undergraduate Instruction. I am the head of Economics at Lower Columbia College and received the faculty of the year award in 2004.

As an undergraduate math major, I was confronted with a career as a math instructor. My roommate at the time was studying economics and suggested that I give it a try. A grad student taught my first economics course. The content was over his head and his teaching was unapproachable; it was a miserable experience. However, I gave it one more chance and as luck would have it I had a wonderful instructor for my second course. The rest, as they say, is history.

I particularly enjoy ECON 200 and 201 because for many students, it represents their first contact with economics. Having a good instructor will hopefully make students want to learn more. Also, this course offers the opportunity to relate these concepts to the real world before charging headlong into the mathematics of economics (in 300 and 301).

My professional interests focus on natural resources (particularly coastal resources and energy economics) and industrial organization (the study of competition).

---

©2007, University of Washington. All rights reserved.
No part of this publication may be reproduced in any form or
by any means without permission in writing from the publisher.