# ECON 201

## Microeconomic Theory I: Competitive Behavior ECON 201 (4)

ECON 201 covers aspects of microeconomic theory involving competitive markets. Topics include the behavior of households and firms, partial equilibrium analysis of product and factor markets, and general equilibrium. Prerequisite: ECON 103 with a minimum grade of C- or ECON 113 with a minimum grade of A-; ECON 105 with a minimum grade of C- or ECON 115 with a minimum grade of A-; MATH 157 with a minimum grade of C-. Students with credit for ECON 301 may not complete this course for further credit. Quantitative.

*Note: I = skill to be introduced in the course; D = skill to be further developed

#### Analyze and Interpret economic models

Solve and interpret standard models of consumer behavior

• Define and calculate marginal utility and the marginal rate of substitution (I)
• Derive factors that affect consumer demand and the elasticity of demand (I)
• Derive the demand curve of an individual consumer (I)
• Use algebra to model a consumer's options (I)
• Use calculus or marginal conditions to find a consumer's utility-maximizing choice (I)
• Use preference operators to model a consumer's preferences (I)
• Use utility functions to model a consumer's preferences (I)
• Distinguish between the substitution effects and income effects of a price change (I)
• Explain the role of preferences in consumer choices (D)
• Identify factors that affect consumer demand and the elasticity of demand (D)
• State and explain the Law of Demand (D)
• Define, calculate and interpret elasticities (D)

Solve and interpret standard models of producer behavior

• Define and calculate marginal product and marginal rate of transformation (I)
• Derive a competitive firm’s supply curve from its cost or production function (I)
• Derive factors that affect firm supply and the elasticity of supply (I)
• Distinguish between fixed and variable costs, and between long-run and short-run costs (I)
• Explain the cost-minimizing choice of inputs for a firm (I)
• Model the production technology of a firm (or other economic unit) using algebra (I)
• Model the production technology of a firm (or other economic unit) using graphs (I)
• Use calculus and/or marginal conditions to derive a competitive firm's profit maximizing output decision (I)
• Use calculus to derive the cost-minimizing choice of inputs for a firm (I)
• Compute and/or graph the cost function of a firm (D)
• Distinguish between decreasing marginal product and returns to scale (D)
• Explain the role of constraints and opportunity cost in firm choices (D)
• Identify factors that affect firm supply and the elasticity of supply (D)
• Link diminishing marginal product to the Law of Supply (D)
• State and explain the Law of Supply (D)

Solve and interpret standard models of market interaction

• Compute and interpret compensated variation and equivalent variation (I)
• Solve a simple (two-consumer, two-good) general equilibrium model (I)
• Distinguish between the short run and the long run (I)
• Explain the role of prices in the economy (D)
• Compute and interpret consumer surplus (D)
• Aggregate firm supply to market supply, in the short run and the long run (D)
• Aggregate individual demands to market demand (D)
• Explain the role of price taking behavior in competitive equilibrium (D)
• Graph and compute the equilibrium of a perfectly competitive market (D)
• Calculate and interpret the effect of a price floor or ceiling in a competitive market (D)
• Calculate and interpret the effect of an excise tax in a competitive market (D)
• Calculate and interpret the incidence of a tax (D)

Identify and analyze market failures, externalities and public goods

• State the definition of Pareto efficiency (I)
• Find Pareto efficient allocations (I)
• State and explain the first and second theorem of welfare economics (I)

#### Critically assess economic arguments, assumptions, and evidence

Critically evaluate assumptions in economic/econometric models

• Apply the concept of revealed preferences (I)
• State the basic axioms of consumer theory (I)
• Understand determinants and meaning of a budget constraint (I)
• Distinguish long-run and short-run demand/supply curves, understand how they change systematically (I)
• State the essential features of a perfectly competitive market (D)
• Explain the role of assumptions in economic models (D)

Compare and critically evaluate economic arguments

• Use a model to evaluate the validity of an economic argument (I)
• Classify statements about the economy as normative or positive (D)
• Identify the key assumptions and empirical claims in an economic argument (D)

#### Use oral, written, and graphical methods to communicate economic insights

Formulate written economic arguments evaluating or supporting a position

• Write a brief paragraph (e.g., on an exam) that explains or applies economic concepts (D)

Present economic arguments by means of graphs, charts and tables

• Use graphs to depict a consumer's utility-maximizing choice (I)
• Use graphs to depict a competitive firm's profit-maximizing decision (I)
• Use graphs to depict a firm's cost-minimizing choice of inputs (I)
• Graph and explain the effect of changes to market conditions on equilibrium price and quantity (D)

#### Use economic concepts to understand real-world human activity and public policy

Apply economics to everyday situations

• Analyze business decisions in a competitive environment (I)
• Analyze business decisions in a non-competitive environment (monopoly and oligopoly) (I)
• Analyze complex real-world events using the supply and demand model (I)
• Analyze the equilibrium effects of government interventions (taxes, subsidies, regulation) (I)
• Formally model the decision-making of participants in a real-world situation (I)
• Interpret a real-world situation using the concepts of scarcity, substitution, opportunity cost, and equilibrium (D)
• Describe the incentives facing participants in a real-world situation (D)
• Interpret simple real-world events using the supply and demand model (D)
• Predict the economy's response to changes in market conditions (D)

Use economics to evaluate specific policies

• Analyze the welfare effects of specific policies (I)

Evaluate current events using tools of economics

• Evaluate current events as they relate to the general course content (D)
ECON 201 Educational Goals.pdf
ECON 201 Educational Goals