DUSP Courses 1998

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11.210 Microeconomics for Planners

Department of Urban Studies and Planning Fall, 1999

Course Name: Microeconomics for Planners 11.210

Instructor: Frank Levy (Room 9-515, phone 3-2089)

Assistant: Laura Wilcox (Room 9-519, phone 3-7736)

Teaching Assistants:

Tito Bianchi

Peilei Fan

Ming Zhang

We will set the times of weekly section meetings and the times of office hours for Levy, Bianchi, Fan and Zhang once students know their schedules.

INTRODUCTION: Microeconomics for Planners, aka 11.210, is designed to give you a good grounding in microeconomics with emphases on areas that are of interest to planners. Over the past several years, topics were added to the course without any deletions. As a result, we reached a point where the course was sacrificing depth for breadth. This year, we have pruned the syllabus a little to allow more time for the subjects we cover. This year, in addition to standard microeconomic topics, we will focus on the spatial location of economic activity, economic aspects of education, and an economic perspective on environmental issues. We will also use technology-based examples throughout the course. All of these topics tie into other parts of the DUSP curriculum. Our immediate goal is to help you to think naturally about economic concepts like the appropriate role of markets and the meaning of opportunity cost. Our broader course goal is to equip you think more intelligently about both your professional work and the daily news.

HOUSEKEEPING: In addition to the regular class meetings, Tito, Peilei and Ming each conducts a weekly review section. Section meetings are held to help you understand the material in the lectures, to review problems that arise in the homework, etc. Attendance is optional but at the start of the course, you should attend a few sessions to see if they are useful. The alternative - not attending sessions until a week before the first exam is a shortcut to disaster. To keep the workload balanced, we would appreciate your attending the section to which you are assigned each of these t.a.'s is very good.

In addition, we will offer a weekly tutoring section for students with weak mathematics backgrounds. Often, students who haven't done mathematics for a while can't see the economics behind the graphs and the algebra. Because they are afraid of asking "stupid questions" (big mistake), the first few weeks of the course are wasted. The tutoring section is designed to help all students get off to a strong start. We are requesting some students to attend this section based on their scores on the summer mathematics screening test. Whether or not we ask you to attend the section, if you feel shaky about math, it is better to begin with tutoring and then assess whether you need the extra help.

Two final pieces of housekeeping. First, I have rescheduled two classes: the class for Monday, September 20 is moved to Friday, September 24 and the class for Wednesday, October 13 is moved to Friday, October 22. Second, we will have two optional sessions. On September 22, there will be an optional 5:30 session on how to take the first derivative of simple functions, a concept we need for marginal analysis. On November 1, there will be an optional 5:30 session on game theory. Game theory and competitive strategy are interesting topics and very useful in many circumstances but we do not have time to integrate them into the course.

GRADING: Grading for the course will be based graded weekly problem sets (10%), two examinations during the term (20% and 30% respectively) and a final at the end of the term (40%). You may want to form a study group to chew over the weekly problem sets. The risk of study groups is that you can get the right answers based on another person's understanding, and so you never actually learn the material. You can limit this risk by seriously attempting problem set on your own before your study group meets so you are clear on what you do and don't know.

READING: Our text book is Robert S. Pindyck and Daniel L. Rubinfeld (PR) Microeconomics, Fourth Edition, (Prentice Hall), available at the MIT Coop. As a source of extra practice material, we have ordered the textbook with a CD-ROM that provides additional exercises on standard microeconomics topics. Additional course reading is contained in a two-part xeroxed reader sold by Graphic Arts (Basement of Building 3). The first part of the reader should be available now.

For students who want help beyond the textbook and CD-ROM, look in the Coop or in other book stores for one of the several paperback "college outline series" on price theory or intermediate microeconomics. Alternatively, a number of current second year students purchased these books last year and some may be willing to give you a good price.

The reading list follows below. For most students, the first third of the course is one new topic after another. After that, however, ideas will reappear in different contexts. For example, we will first encounter the concept of economies of scale in production theory but it will also be useful in understanding the structure of urban and regional economies.

DATE

Sept. 8. Introduction and Getting a Sense of a Market

PR, Chapters 1. Henry Jacoby, and Robert S. Pindyck Lecture "Notes on Markets and Market Definition" (Sloan School of Management, revised July 1996, available on the course web site: http://web.mit.edu/11.210/www/).

Sept. 13, 15, 22. Supply and Demand and Elasticity

PR Chapter 2 and pp. 117 - 122 . Richard Freeman, The OverEducated American. Chapters 1-3. Ethan Bronner, "College Applicants of '99 are Facing Stiffest Competntion", The New York Times, June 12, 1999, p. 1. (We will return to issues of education later in the course.)

Sept. 22. Optional 5:30 PM session for persons unfamiliar with first derivatives.

Sept. 24. Behind the Demand Curve: The Utility Maximizing Individual and the

Concept of Opportunity Cost.

PR, Chapter 3 and Sections 4.1 and 4.2

Sept. 27. Utility Maximization Ctd. and Metropolitan Form

Peter Mieszkowski and Edwin S. Mills, "The Causes of Metropolitan Suburbanization" Journal of Economic Perspectives, vol. 7, no. 3, summer 1993, p. 135-147 (we will return to issues of metropolitan form later in the course).

Sept. 29. Utility Maximization and the Role of Incentives in Public Policy

"The Second Principle......", Chapter 5 in Richard J. Murnane and Frank Levy, Teaching the New Basic Skills, Basic Books, 1996.

Oct 4. Technology, Costs and Returns to Scale

PR. Chapters 6 and 7. David A. Hounshell, From the American System to Mass Production: 1800-1932, Chapter 6.

Oct. 6. Technology and Costs, ctd. and Markets in Perfect Compeition.

PR. Chapter 8

Oct. 11. (MIT Holiday)

Oct. 13. Class postponed until October 22.

Oct. 18. Markets in Perfect Competition, ctd.

Randall Smith, "Full-Service Brokers are Put in a Bind", The Wall Street Journal, June 1, 1999, p. c1.

Oct. 20. Firm Behavior with Market Power

PR Chapters 10, 11

Oct. 22. Market Power, ctd.

Carl Shapiro and Hal Varian, Information Rules, Chapter 7.

Oct. 25. Oligopoly and Monopolistic Competition

PR. Chapter 13

Oct 27. First Midterm Exam (covers through October 22)

Nov. 1. Monopolistic Competition, ctd., Returns to Scale again, and the Structure of Cities and Regions

Paul Krugman, "Space: The Final Frontier", Journal of Economic Perspectives, vol. 12, no. 2, Spring 1998, pp. 161-174. "Cities", a survey in The Economist, July 29, 1995, pp. 3-18.

Nov. 1: (evening) Optional Session on Basic Game Theory Material for Intellectual Interest but will not be tested.

PR, Chapter 13

Nov. 3: The Economics of Information and Uncertainty.

PR, Chapters 17.1-17.3, and Chapter 5

Nov. 8. MIT Holiday

Nov. 10. The Decision to Invest,

PR. Sections 15.1 through 15.6, George Borjas, Labor Economics, Chapter 7. Anne Beamish, Frank Levy, and Richard J. Murnane. "Computerization and Skill Requirements: Examples from a Car Dealership"

Nov. 15. The Decision to Invest, ctd.

Housing Case available on the course web site:

http://web.mit.edu/11.210/www/

Nov. 17. Second midterm

Nov: 22. Competitive Market Analysis, Consumer Surplus, and the Role of Government

PR, Section 4.4 (p. 122-126) and Chapter 9.

Nov 24. Competitive Market Analysis, ctd.

F. M. Scherer, "The United States Sugar Program", Kennedy School of Government, Case C16-92-1128.0 (1992).

Nov 29. Externalities, Public Goods and Property Rights

PD. Chapter 18.

Dec.1. Public Goods and Environmental Economics

PD. Section 15.7. Tom Tietenberg, Environmental and Natural Resource Economics, (third edition) Chapters 12, 14.

Dec. 6. Public Goods and Environmental Economics ctd.

Dec. 8. Wrap-up

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This syllabus may have been updated. To ensure that you're looking at the most recent version, please hit "Reload."
11.210 Microeconomics for Planners
Department of Urban Studies and Planning Fall, 1999 Course Name: Microeconomics for Planners 11.210 Instructor: Frank Levy (Room 9-515, phone 3-2089) Assistant: Laura Wilcox (Room 9-519, phone 3-7736) Teaching Assistants: Tito Bianchi Peilei Fan Ming Zhang We will set the times of weekly section meetings and the times of office hours for Levy, Bianchi, Fan and Zhang once students know their schedules. INTRODUCTION: Microeconomics for Planners, aka 11.210, is designed to give you a good grounding in microeconomics with emphases on areas that are of interest to planners. Over the past several years, topics were added to the course without any deletions. As a result, we reached a point where the course was sacrificing depth for breadth. This year, we have pruned the syllabus a little to allow more time for the subjects we cover. This year, in addition to standard microeconomic topics, we will focus on the spatial location of economic activity, economic aspects of education, and an economic perspective on environmental issues. We will also use technology-based examples throughout the course. All of these topics tie into other parts of the DUSP curriculum. Our immediate goal is to help you to think naturally about economic concepts like the appropriate role of markets and the meaning of opportunity cost. Our broader course goal is to equip you think more intelligently about both your professional work and the daily news. HOUSEKEEPING: In addition to the regular class meetings, Tito, Peilei and Ming each conducts a weekly review section. Section meetings are held to help you understand the material in the lectures, to review problems that arise in the homework, etc. Attendance is optional but at the start of the course, you should attend a few sessions to see if they are useful. The alternative - not attending sessions until a week before the first exam is a shortcut to disaster. To keep the workload balanced, we would appreciate your attending the section to which you are assigned each of these t.a.'s is very good. In addition, we will offer a weekly tutoring section for students with weak mathematics backgrounds. Often, students who haven't done mathematics for a while can't see the economics behind the graphs and the algebra. Because they are afraid of asking "stupid questions" (big mistake), the first few weeks of the course are wasted. The tutoring section is designed to help all students get off to a strong start. We are requesting some students to attend this section based on their scores on the summer mathematics screening test. Whether or not we ask you to attend the section, if you feel shaky about math, it is better to begin with tutoring and then assess whether you need the extra help. Two final pieces of housekeeping. First, I have rescheduled two classes: the class for Monday, September 20 is moved to Friday, September 24 and the class for Wednesday, October 13 is moved to Friday, October 22. Second, we will have two optional sessions. On September 22, there will be an optional 5:30 session on how to take the first derivative of simple functions, a concept we need for marginal analysis. On November 1, there will be an optional 5:30 session on game theory. Game theory and competitive strategy are interesting topics and very useful in many circumstances but we do not have time to integrate them into the course. GRADING: Grading for the course will be based graded weekly problem sets (10%), two examinations during the term (20% and 30% respectively) and a final at the end of the term (40%). You may want to form a study group to chew over the weekly problem sets. The risk of study groups is that you can get the right answers based on another person's understanding, and so you never actually learn the material. You can limit this risk by seriously attempting problem set on your own before your study group meets so you are clear on what you do and don't know. READING: Our text book is Robert S. Pindyck and Daniel L. Rubinfeld (PR) Microeconomics, Fourth Edition, (Prentice Hall), available at the MIT Coop. As a source of extra practice material, we have ordered the textbook with a CD-ROM that provides additional exercises on standard microeconomics topics. Additional course reading is contained in a two-part xeroxed reader sold by Graphic Arts (Basement of Building 3). The first part of the reader should be available now. For students who want help beyond the textbook and CD-ROM, look in the Coop or in other book stores for one of the several paperback "college outline series" on price theory or intermediate microeconomics. Alternatively, a number of current second year students purchased these books last year and some may be willing to give you a good price. The reading list follows below. For most students, the first third of the course is one new topic after another. After that, however, ideas will reappear in different contexts. For example, we will first encounter the concept of economies of scale in production theory but it will also be useful in understanding the structure of urban and regional economies. DATE Sept. 8. Introduction and Getting a Sense of a Market PR, Chapters 1. Henry Jacoby, and Robert S. Pindyck Lecture "Notes on Markets and Market Definition" (Sloan School of Management, revised July 1996, available on the course web site: http://web.mit.edu/11.210/www/). Sept. 13, 15, 22. Supply and Demand and Elasticity PR Chapter 2 and pp. 117 - 122 . Richard Freeman, The OverEducated American. Chapters 1-3. Ethan Bronner, "College Applicants of '99 are Facing Stiffest Competntion", The New York Times, June 12, 1999, p. 1. (We will return to issues of education later in the course.) Sept. 22. Optional 5:30 PM session for persons unfamiliar with first derivatives. Sept. 24. Behind the Demand Curve: The Utility Maximizing Individual and the Concept of Opportunity Cost. PR, Chapter 3 and Sections 4.1 and 4.2 Sept. 27. Utility Maximization Ctd. and Metropolitan Form Peter Mieszkowski and Edwin S. Mills, "The Causes of Metropolitan Suburbanization" Journal of Economic Perspectives, vol. 7, no. 3, summer 1993, p. 135-147 (we will return to issues of metropolitan form later in the course). Sept. 29. Utility Maximization and the Role of Incentives in Public Policy "The Second Principle......", Chapter 5 in Richard J. Murnane and Frank Levy, Teaching the New Basic Skills, Basic Books, 1996. Oct 4. Technology, Costs and Returns to Scale PR. Chapters 6 and 7. David A. Hounshell, From the American System to Mass Production: 1800-1932, Chapter 6. Oct. 6. Technology and Costs, ctd. and Markets in Perfect Compeition. PR. Chapter 8 Oct. 11. (MIT Holiday) Oct. 13. Class postponed until October 22. Oct. 18. Markets in Perfect Competition, ctd. Randall Smith, "Full-Service Brokers are Put in a Bind", The Wall Street Journal, June 1, 1999, p. c1. Oct. 20. Firm Behavior with Market Power PR Chapters 10, 11 Oct. 22. Market Power, ctd. Carl Shapiro and Hal Varian, Information Rules, Chapter 7. Oct. 25. Oligopoly and Monopolistic Competition PR. Chapter 13 Oct 27. First Midterm Exam (covers through October 22) Nov. 1. Monopolistic Competition, ctd., Returns to Scale again, and the Structure of Cities and Regions Paul Krugman, "Space: The Final Frontier", Journal of Economic Perspectives, vol. 12, no. 2, Spring 1998, pp. 161-174. "Cities", a survey in The Economist, July 29, 1995, pp. 3-18. Nov. 1: (evening) Optional Session on Basic Game Theory Material for Intellectual Interest but will not be tested. PR, Chapter 13 Nov. 3: The Economics of Information and Uncertainty. PR, Chapters 17.1-17.3, and Chapter 5 Nov. 8. MIT Holiday Nov. 10. The Decision to Invest, PR. Sections 15.1 through 15.6, George Borjas, Labor Economics, Chapter 7. Anne Beamish, Frank Levy, and Richard J. Murnane. "Computerization and Skill Requirements: Examples from a Car Dealership" Nov. 15. The Decision to Invest, ctd. Housing Case available on the course web site: http://web.mit.edu/11.210/www/ Nov. 17. Second midterm Nov: 22. Competitive Market Analysis, Consumer Surplus, and the Role of Government PR, Section 4.4 (p. 122-126) and Chapter 9. Nov 24. Competitive Market Analysis, ctd. F. M. Scherer, "The United States Sugar Program", Kennedy School of Government, Case C16-92-1128.0 (1992). Nov 29. Externalities, Public Goods and Property Rights PD. Chapter 18. Dec.1. Public Goods and Environmental Economics PD. Section 15.7. Tom Tietenberg, Environmental and Natural Resource Economics, (third edition) Chapters 12, 14. Dec. 6. Public Goods and Environmental Economics ctd. Dec. 8. Wrap-up