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ECON1101 & 7073 Semester 1 2010 page 1 of 7

COURSE OUTLINE
ECON1101 Microeconomics 1

(& ECON7073 Microeconomic Principles for Economic Policy)

School of Economics, College of Business and Economics

Course Description The course examines how individuals and firms make
decisions by weighing up costs and benefits, and how the
interaction of their decisions leads to market and social
outcomes. The model of market supply and demand is
employed to examine the effects of taxes, subsidies, and other
government interventions in market activity. The implications
of different market structures, including perfect competition
and monopoly, are examined. Public goods, externalities and
common resources are key examples of cases in which private
markets may yield socially sub-optimal outcomes. Such cases
are examined and the role of government policy in correcting
for these is discussed. Special attention is given to the design
of schemes aiming to reduce carbon emissions.
Learning Outcomes On satisfying the requirements for this course, students will
have the knowledge and skills to:
• understand economic policy debates as presented in the
media;
• think as an economist; and
• present clearly written analysis of economic issues and
problems.

Lecturer Professor Steve Dowrick


Room 2006, HW Arndt Building
Email: Steve.Dowrick@anu.edu.au

Head Tutor Ms Kristen Wren


Room 1008, HW Arndt Building
Email: Kirsten.Wren@anu.edu.au

Course Administrator Mr Terry Embling


Room 1013, School of Economics Office,
HW Arndt Building
Phone: 6125 0384
ECON1101 & 7073 Semester 1 2010 page 2 of 7

Course Textbook Hubbard, Glenn, Anne Garnett, Philip Lewis and Anthony
O’Brien (2008), Microeconomics, Pearson Education Australia.
A limited number of copies will be available through short-
term loan in the Chifley Library.

Wattle Wattle is an ANU site where students can access


supplementary course material including tutorial exercises and
lecture material; and announcements about lectures, essay
topics, exams and other course administration matters.
Wattle can be accessed via the ANU student home page -
http://wattle.anu.edu.au/ . Students are advised to check Wattle
weekly.

Lectures 11am – 12noon, repeated at 5-6pm, in Manning Clark Lecture


Theatre 1, on Tuesday, Wednesday and Thursday of each of the
13 teaching weeks.
Lecture Outlines will be posted on Wattle before the lecture.
You may find it useful to bring a printout of the outline to each
lecture to use as the basis of your own notes.
Audio recordings of lectures will be available through Wattle.

Lecture Feedback Feedback boxes will be placed by the doors in the Lecture
Theatres. If you choose to give the lecturer feedback, please
place your written comments in the boxes on your way out of
the lecture.

Tutorials Tutorials will start in Week 2. Enrol on-line at


http://eta.fec.anu.edu.au/eta/index.php - enrolments will be
accepted after 9:30 am on the day following the first lecture.
The enrolment can be varied online during the first two weeks
of the semester. After that any student wishing to change
tutorial times must see the Course Administrator.
By the end of each week, tutorial questions will be posted on
Wattle. These question will be considered in the following
week’s tutorial class. You should do the recommended reading
and attempt written answers to the questions before attending
your tutorial. You may be asked to explain your answers
during the tutorial. You will have the opportunity to ask your
tutor to explain material that you do not understand.
Preparing written answers and participating in your tutorial is
the most effective way of learning the course material and for
starting to think as a (micro) economist.

Own Study University study requires at least as much time and effort as a
full-time job. You should expect to put in at least 6 hours per
week of your own study time for this course in addition to the 4
hours of lectures and tutorials. Discussion with fellow students
can be extremely valuable. But all written work for assessment
must be your own original work.
ECON1101 & 7073 Semester 1 2010 page 3 of 7

On-line Learning If you buy the textbook you will find an access code to online
resources which allow you to test your learning through quizzes
on each chapter. Answers (including explanations for any
mistakes) are provided. These quizzes are for your own
enlightenment and are not part of the course assessment. For
students who do not buy the textbook, a default access code can
be issued – email the head Tutor. This will allow access to
quizzes and answers, but not to the chapter by chapter content
of the textbook.

Help Desk The Microeconomics Help Desk in Arndt 1002 will be open
Wednesday 2-5 pm and Thursday 12-3 pm. Tutors will be
there to answer any questions about the contents of the course
that you have not been able to resolve through your own study
and participation in your tutorial group.

Lecturer Consultation
The lecturer will be available for consultation in Arndt 2006
between 11 am and 12 noon on Fridays.
Please note that administrative matters should be dealt with by
the Course Administrator; and course content problems should
be dealt with first by consulting your tutor and then the Help
Desk.

Assessment There will be four compulsory assessments for ECON1101:

1. Mid-term Exam (15% or 30%)


A one-hour mid-term exam will be held at the end of Week 6.
The examinable material will be all that is covered in the
lecture outline up to and inclusive of Week 6.

2. Essay (15%) A 1000 word essay (max 1200) to be handed in to the Course
Administrator’s office by the end of Week 8 (4pm, 30 April).
Late submission will be penalised by a 10% downgrade for
every (working) day late.

The essay topic will be announced in lectures and posted on


Wattle by the end of Week 5.

The work you submit for the essay must be your own original
work. You must not copy other people’s words without
acknowledgment. Detailed instructions for presenting
quotations and citing other people’s work will be distributed as
guidelines with the essay topic. The Academic Skills and
Learning Centre will announce opportunities to register for
workshops focussing specifically on essay-writing for this
course.

3. Tutorial Test (10%)


A 30 minute test will be held in tutorials during Week 10
ECON1101 & 7073 Semester 1 2010 page 4 of 7

covering questions set for tutorial exercises in the previous 3


weeks.

4. Final Exam (60% or 45%)


The three-hour final exam will be held in the examination
period between 10 and 26 June. The final exam is usually held
during the first week of this period. Details will be posted on
the ANU exam timetable site.

Examinable material will be everything covered in the Course


Outline and in lectures, including material already covered in
the mid-term exam.

Course Mark The final mark for the course will be weighted as indicated
above, subject to possible scaling of marks for the whole class.
The mid-term exam is partially redeemable against the final
exam. If your mid-term mark is less than your final exam
mark, the respective weights will be 15% and 60%; if your
mid-term mark is higher, the weights will be 30% and 45%.

For students enrolled in ECON7073, the course mark will be calculated as above
for 85% of the total, with an additional 15% coming from the
special additional essay that these students are set. See the
ECON1101 page on Wattle for details of these additional
requirements and additional tutorials.

Special Exams, Special Consideration, Supplementary Exams, Academic


Honesty, etc.
The university has rules dealing with situations where you are
unable to attend or complete assessments to the best of your
abilities due to accident, illness etc. It is your responsibility
to familiarise yourself with the rules with regard to special
examinations, special consideration and supplementary exams -
see http://cbe.anu.edu.au/Current_Students/general_info/ under
General Policies. Clarification can be obtained from the
College Student Administration Office.

Requests for Special Exams must be made to the College


Student Administration Office .

Requests for Special Consideration should be made to the


School of Economics.

The university has strict rules in relation to academic honesty.


The underlying principle is that all work submitted for
assessment (essays, exams etc) should be your own original
work. You should consult the site
http://academichonesty.anu.edu.au/ for ANU’s policies and
advice on how you can avoid cheating and plagiarism.
ECON1101 & 7073 Semester 1 2010 page 5 of 7

COURSE LECTURE OUTLINE

The numbering is an approximate guide to the week in which material will be


presented. More detailed lecture notes will be posted on Wattle by the Monday of
each week.

Examples of the application of microeconomic principles will be developed


throughout the course. One theme will be the economic principles underlying the
design of schemes to reduce carbon emissions.

The Chapter numbers refer to the textbook by Hubbard et al.

WEEK 1. Basic economic principles (Ch. 1)


- introductory examples of markets
- weighing up costs and benefits
- the principle of opportunity cost
- sunk costs
- making decisions at the margin
- using graphs to clarify our thinking

WEEK 2. Production and Trade (Ch. 2)


- the production possibility frontier
- benefits from trade
- absolute and comparative advantage

WEEKS 3-4. Supply and demand (Ch. 3, 4 & 5)


- what affects supply and demand curves?
- is demand changing or is supply changing?
- Three Steps to Heaven
- elasticities
- price controls and black markets
- the impact of taxes and controls on market price and quantity
- income distribution: who bears the burden of the taxes?

WEEK 5. Consumer Choice (Ch. 6)


- consumption benefits: total and marginal
- equalising marginal utility per dollar
- normal, luxury and ‘Giffen’ goods
- revealed preference
- social and psychological influences on consumer decisions
ECON1101 & 7073 Semester 1 2010 page 6 of 7

WEEK 6. Externalities and the environment (Ch. 15)


- positive and negative externalities
- private or government solutions
- the economics of an emissions trading scheme

WEEK 7. Production technologies and competitive markets (Ch. 7 & 8)


- diminishing returns to single factors
- economies and diseconomies of scale
- conditions for ‘perfect competition’
- competitive supply
- welfare implications of competitive markets – efficiency and equity

WEEKS 8-9. Non-competitive markets (Ch. 9-11)


- economies of scale
- product differentiation
- barriers to entry
- pure monopoly
- monopolistic competition
- competition between a few
- game theory and the Prisoner’s Dilemma

WEEK 10. Asymmetric Information (Ch. 14)


- the market for lemons
- employment contracts
- solutions to information problems

WEEK 11. Income distribution and social policy (Ch. 16)


- progressive and regressive taxation
- measuring income distribution and poverty
- global income distribution

WEEK 12. International Trade (Ch. 13)


- comparative advantage, static and dynamic
- winners and losers
- tariffs and subsidies

WEEK 13. Summary and Revision


ECON1101 & 7073 Semester 1 2010 page 7 of 7

Supplementary Reading

1. Garnaut, Ross (2008), Garnaut Climate Change Review: emissions trading scheme
discussion paper, Melbourne : Garnaut Review Secretariat.
[electronic version accessible through ANU library]

This is a relatively short version of the issues raised in the Garnaut Report.

2. Garnaut, Ross (2009), The Garnaut climate change review : final report,
Cambridge ; New York : Cambridge University Press.

This is the full version.

3. Levitt, Steven D and Stephen J Dubner (2005), Freakonomics : a rogue economist


explores the hidden side of everything , New York : William Morrow.

This is an entertaining guide to microeconomics applied to a host of interesting social


phenomena.

4. Stanford, Jim (2008), Economics for Everyone: a short guide to the economics of
capitalism, London: Pluto Press.

This presents an alternative and critical view of economics.