McConnell, Brue, Flynn: Economics: Principles, Problems, & Policies Economics

• Introduction to Markets
  • Textbook Chapter: Chapter 1
  • MobLab Game: Private Value Sealed Bid Auction
  • Key Teaching Points:
    • Learn how a basic exchange happens by participating in an auction.
    • Gains from trade (i.e., consumer surplus).
    • Price discovery: the transaction price results from the bids of other buyers
• Supply and Demand in a Competitive Market
  • Textbook Chapter: Chapter 3
  • MobLab Game: Competitive Market
  • Key Teaching Points:
    • The “invisible hand” of the market: how individual profit maximization leads to competitive market equilibrium
    • Price discovery: the equilibrium market-clearing price results from the valuations of different buyers and costs of different sellers
    • Gains from trade (i.e., consumer and producer surplus).
    • Shifts in either supply or demand change equilibrium outcomes.
• Public Goods
  • Textbook Chapter: Chapter 4
  • MobLab Game: Discrete (Threshold) Public Goods
  • Key Teaching Points:
    • Highlights the features of public goods: non-rival and non-excludable.
    • Demonstrates the distinction between private and social benefits of public goods.
    • Shows how individual profit maximization leads to the free-rider problem.
• Externalities
  • Textbook Chapter: Chapter 4
  • MobLab Game: Judge Me not
  • Key Teaching Points:
    • When firms do not internalize external costs, profit maximization leads to inefficiently high levels of pollution.
• Government Interventions in Competitive Markets
  • Textbook Chapter: Chapter 5
  • MobLab Game: Competitive Market
  • Key Teaching Points:

Government interventions (per-unit taxes, subsidies, price ceilings and floors) alter equilibrium outcomes.

• • • Equilibrium outcomes do not depend on whether buyers or sellers pay the tax.
    • The difference between tax incidence and who pays the tax.
    • Relative elasticity determine incidence of a tax or subsidy.
    • Excess supply (price floors) and excess demand (price ceilings).
    • The efficiency implications of government interventions.
• Utility Maximization
  • Textbook Chapter: Chapter 7
  • MobLab Game: Consumer Choice: Cobb Douglas
  • Key Teaching Points:
    • Become familiar with the Cobb Douglas utility function.
    • Monotonic transformations of a utility function do not affect the utility-maximizing consumption bundle.
    • Utility maximization can be achieved by sequentially choosing the item with the highest marginal utility per dollar.
• Monopoly Pricing
  • Textbook Chapter: Chapter 12
  • MobLab Game: Cournot (with Group Size=1)
  • Key Teaching Points:
    • Monopolies restrict output in order to increase price.
    • The tension between the quantity price effects of increased output
• Game Theory
  • Textbook Chapter: Chapter 13
  • MobLab Game: Prisoner’s Dilemma
  • Key Teaching Points:
    • Key features of games: payoff matrices, best responses and dominant strategies.
    • Identification of the Nash equilibrium.
    • The (sometimes) conflicting incentives of cooperation and self-interest.
    • Repeated play may lead to more cooperative outcomes.
• Oligopoly
  • Textbook Chapter: Chapter 13
  • MobLab Game: Cournot
  • Key Teaching Points:
    • The underlying logic of the Cournot model: how market price is determined by aggregate output.
    • The equilibrium outcomes of Cournot competition.
    • Repeat interaction may lead to collusive behavior.
• Labor Markets
  • Textbook Chapter: Chapter 15
  • MobLab Game: Simple Labor Market
  • Key Teaching Points:
    • When a perfectly competitive market determines wages, the equilibrium wage (per unit of labor) is equal to the value of the marginal product of labor of the last worker hired.
• Inequality
  • Textbook Chapter: Chapter 21
  • MobLab Game: Dictator Game
  • Key Teaching Points:
• Unemployment
  • Textbook Chapter: Chapter 27
  • MobLab Game: Simple Labor Market
  • Key Teaching Points:
    • Employment levels are determined by both the supply and demand of labor.
    • Policies such as a minimum wage or unemployment insurance affect structural unemployment.
• Money & Banking
  • Textbook Chapter: Chapter 32
  • MobLab Game: Bank Run
  • Key Teaching Points:
    • Highlights the underlying concept of fractional banking.
    • Demonstrates the trade-off between profit and risk, and shows how bank runs may arise.
    • Policy interventions, such as deposit insurance, can reduce the possibility of bank runs.
• International Trade
  • Textbook Chapter: Chapter 38
  • MobLab Game: Comparative Advantage
  • Key Teaching Points:
    • The distinction between absolute and comparative advantage.
    • Experience first hand the gains from specialization and trade.
    • Differences in opportunity costs lead to mutually beneficial trade.