University of Maryland Spring 07

School of Public Policy PUAF 640

Microeconomics and Policy Analysis

Instructor: Michael Busse Email: Mbusse@umd.edu, Busse340301@aol.com

TA: To Be Announced

Session: Monday 7-9

This course introduces students to an intermediate level of microeconomic analysis with special application to issues of public policy. It is designed to be an integrated analysis of the functioning of the market economy; how it allocates scarce resources through the decision making of its component agents and their interactions in markets. More importantly, many resource allocation issues are influenced by public policy, and most public policies address issues of resource allocation. This makes microeconomic analysis particularly applicable to policy analysis.

In this course we will discuss resource allocation based on the behavior of individual agents (eg. consumers, firms, and governments); the response of economic agents to changes in incentives; market allocations in competitive and non-competitive environments. And finally, we will study what occurs when markets fail and the appropriateness of government interventions to remedy failures.

There will be a problem set each week (you must turn in all but one) for the course, one midterm, and one final exam Evaluation in the course will be calculated as follow:

class participation 10%

problem sets 25%

midterm 25%

final 40%.

Reading List, Spring 2007

Date Topic Readings

1. Jan 25 Introductions, Supply and Demand, and excise taxes K&R, Chap 1, 3.3, 11.2-11.3

2. Feb 1 Theory of the Consumer:

Consumer Tastes, Consumer Behavior K&R Chap 2, 3 (pages 55-85), 3A,

Comparative Statics, Price Changes and Demand 4 (pp. 93-114)

3. Feb 8 Theory of the Consumer continued

4. Feb 15 Consumer Welfare and Labor/Leisure Choice K&R 4 (pp. 121-136), 5.1,

5. Feb 22 Theory of the Firm: K&R 7.1, 7.2, 7.3,

Production Functions

6. Mar 1 Costs in Firm Production Decisions K&R 8, 9, appendix 9A

7. Mar 8 Product Markets: Perfect Competition K&R 10.1, 10.2, 11

Incidence of Taxes

8. Mar 15 MIDTERM

9. Mar 29 Product Markets: K&R 13,

Monopoly and Market Power

10. Apr 5 Product Markets: K&R 14, 15