## Course Meeting Times

Format 1:

Lectures: 2 sessions / week, 1 hour / session

Recitations: 1 session / week, 1 hour / session

Format 2

Discussion sections: 3 sessions / week, 1 hour / session

## Description

This introductory course teaches the fundamentals of microeconomics. Topics include consumer theory, producer theory, the behavior of firms, market equilibrium, monopoly, and the role of the government in the economy. 14.01 is a Humanities, Arts, and Social Sciences (HASS) elective and is offered both terms.

## Prerequisites

Knowledge of *18.01 Calculus I* is helpful. There are no other prerequisites.

## Course Format

14.01 is offered in two formats. Both use the same textbook, cover the same topics and have the same requirements, including exams. 14.01 is a 3-0-9 course (3 hours of class plus 9 hours of preparation).

### Format 1: Lecture-recitation

Students attend one-hour lectures on Mondays and Wednesdays. Students also attend 1 hour recitations on Fridays—these are not optional. Instructors will introduce new material at these recitations which will be part of problem sets and exams.

### Format 2: Discussion Sections

Students attend three one-hour sections weekly on Monday, Wednesday, and Friday.

## Selecting a Format

During the first 2 weeks of the semester, students may switch between formats. At the due date of the first homework (see below) students must submit the completed assignment at the recitation or section of their choice. This submission will automatically enroll them in that choice. Thereafter you can change only with special Faculty approval. If sessions are extremely unbalanced, the Faculty reserves the right to re-assign students.

## Textbook

Pindyck, Robert S., and Daniel L. Rubinfeld. *Microeconomics*. 6th ed. Upper Saddle River, NJ: Pearson Prentice Hall, 2004. ISBN: 9780130084613 .

The book is also available in digital format from CourseSmart.

## Problem Sets, Exams, and Grading

The final grade in the course will be based on the following percentages:

ACTIVITIES | PERCENTAGES |
---|---|

Homework (best 9 of 10, 3% each) | 27% |

Exam 1 | 23% |

Exam 2 | 23% |

Exam 3 | 23% |

Class participation | 4% |

There will be 10 mandatory problem sets which will be individually graded and returned to the students. At the end of the term students will have the best 9 homework grades cumulated up and this will count for 27% of the final course grade. Problem sets are due on the indicated days in class. Late problem sets will not be accepted.

There will be 3 exams held throughout the term, two at night and one during the final exam period (see calendar below). Each exam will each cover roughly 1/3 of the course material, will be 1.5 hours long and will count as 23% (collectively 69%) of the grade. The remaining 4% of the grade will come from class participation.

Exams and homework will draw heavily on class/lecture material in addition to the textbook.

At the end of the semester, the faculty will report **internal** grades to the MIT registrar with + and - modifiers, where appropriate, and only for grades A, B, C. The faculty will be happy to **regrade** any problem set or exam – **in entirety**. Consequently it is possible for your revised grade to fall as well as rise. If you are an MIT freshman, the faculty will evaluate your performance on the first exam and first 3 problem sets and if it falls below passing, we will send out a warning to you and your advisor.

## Conflicts and Makeup Exams

Conflicts must be received by the head TA **at least one week prior** to the exam.

Illness on the day of the exam: If you should happen to be sick the day of the exam, contact one of the Deans in Student Support Services to verify your illness and let the head TA know.

A fixed makeup exam time will be scheduled by the head TA.

## Tutoring

Students are encouraged to seek help from the faculty and their assistants. An undergraduate TA will be in charge of offering tutorial help.

## Calendar

The calendars for the two formats are similar but not identical in terms of class meetings. They are presented separately below. The calendar for Format 2 can be found here.

### Format 1: Lecture-recitation

The calendar below provides information on the course's lecture (L), and recitation (R) sessions.

SES # | TOPICS | KEY DATES |
---|---|---|

L1 | What is economics? | |

R1 | Supply-demand analysis | |

L2 | Comparative statics | Problem set 1 out |

L3 | Dynamic analysis | |

R2 | Utility, revealed preference |
Problem set 1 due Problem set 2 out |

L4 | Optimization, duality | |

L5 | Demand curves | |

R3 | Engle curves |
Problem set 2 due Problem set 3 out |

L6 | Risk and uncertainty | |

R4 | Risky behavior, examples |
Problem set 3 due Problem set 4 out |

L7 | Production | |

L8 | Input use | |

R5 | Review of chapters 1-5 | Problem set 4 due |

L9 | Cost curves | Exam 1 taken |

R6 | Scale and cost | Problem set 5 out |

L10 | Profit maximization | |

L11 | Entry and exit | |

R7 | Competitive markets |
Problem set 5 due Problem set 6 out |

L12 | Examples | |

L13 | Competitive markets (cont.) | |

R8 | Economic "surplus" |
Problem set 6 due Problem set 7 out |

L14 | Efficiency of markets | |

L15 | Market structure | |

R9 | Review of chapters 6-9, 16 | Problem set 7 due |

L16 | Monopoly power | Exam 2 taken 1 day after Ses #L16 |

L17 | Monopsony – regulation | Problem set 8 out 2 days after Ses #L17 |

L18 | Pricing power | |

L19 | Pricing power (cont.) | |

R10 | Monopoly-pricing power |
Problem set 8 due Problem set 9 out |

L20 | Oligopoly | |

L21 | Monopolistic competition | |

L22 | Competitive strategy | |

L23 | Factor markets | |

R11 | Factor-labor markets |
Problem set 9 due Problem set 10 out |

L24 | Labor-land markets | |

L25 | Capital markets | |

R12 | Review of chapters 10-15, 17-18 | Problem set 10 due |

L26 | Insurance-risk markets | |

L27 | Government | Exam 3 taken 7 days after Ses #L27 |

### Format 2: Discussion Sections

The calendar below provides information on the course's discussion (D), and question and answer (Q) sessions.

SES # | TOPICS | KEY DATES |
---|---|---|

D1 | Overview: themes, types of markets, economic measurement, economic analysis | |

D2 | The basics of supply and demand | |

D3 | Elasticities of demand | Problem set 1 out |

D4 | Price elasticity of supply; consumer preferences | |

D5 | Deriving MRS from utility function, budget constraints, and interior solution of optimization |
Problem set 1 due Problem set 2 out |

D6 | Optimization, revealed preference, and deriving individual demand | |

D7 | Substitution and income effects, individual and market demand, consumer surplus | |

D8 | Irish potato famine, network externalities, and uncertainty |
Problem set 2 due Problem set 3 out |

D9 | Preference toward risk, risk premium, indifference curves, and reducing risk | |

D10 | Insurance and production functions |
Problem set 3 due Problem set 4 out |

D11 | Production functions | |

D12 | Production functions and cost of production | |

Q1 | Review of chapters 1-5 |
Problem set 4 due Exam 1 taken 5 days after Ses #Q1 Problem set 5 out 7 days after Ses #Q1 |

D13 | Cost functions | |

D14 | The cost of production and profit maximization | |

D15 | Short run and long run supply |
Problem set 5 due Problem set 6 out |

D16 | Long run supply and the analysis of competitive markets | |

D17 | Supply restrictions, tax, and subsidy | |

D18 | Tax, subsidy, and general equilibrium |
Problem set 6 due Problem set 7 out |

D19 | Efficiency in exchange, equity and efficiency, and efficiency in production | |

D20 | Production possibilities frontier and output market efficiency | |

D21 | Why markets fail | Problem set 7 due |

Q2 | Review of chapters 6-9, 16 | Exam 2 taken 1 day after Ses #Q2 |

D22 | Monopoly | Problem set 8 out 2 days after Ses #D22 |

D23 | Monopoly and monopsony | |

D24 | Monopoly and monopsony (cont.) | |

D25 | Pricing with market power |
Problem set 8 due Problem set 9 out |

D26 | Pricing and monopolistic competition | |

D27 | Game theory and oligopoly | |

D28 | Oligopoly | |

D29 | Strategic games | |

D30 | Dominant firm model and factor market |
Problem set 9 due Problem set 10 out |

D31 | Factor market | |

D32 | Investment, savings, time, and capital markets | |

D33 | Asymmetric information | Problem set 10 due |

D34 | Externalities, market failure and government | |

D35 | Public goods and review of chapters 10-15, 17-18 | Exam 3 taken 7 days after Ses #D35 |