INTRODUCTION TO MICROECONOMICS

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INTRODUCTION

TO

MICROECONOMICS

E201

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Dr. David A. Dilts

Department of Economics, School of Business and Management Sciences

Indiana - Purdue University - Fort Wayne

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May 10, 1995

First Revision July 14, 1995

Second Revision May 5, 1996

Third Revision August 16, 1996

Fourth Revision May 15, 2003

Fifth Revision March 31, 2004

Sixth Revision July 7, 2004

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Introduction to Microeconomics, E201

8 Dr. David A. Dilts

All rights reserved. No portion of this book

may be reproduced, transmitted, or stored, by

any process or technique, without the express

written consent of Dr. David A. Dilts

1992, 1993, 1994, 1995 ,1996, 2003 and 2004

Published by Indiana - Purdue University - Fort Wayne

for use in classes offered by the Department of Economics,

School of Business and Management Sciences at I.P.F.W.

by permission of Dr. David A. Dilts

TABLE OF CONTENTS

Preface.............................................................................................................................. ii

Syllabus............................................................................................................................. iv

I. Lecture Notes

1. Introduction to Economics ......................................................................................

2. Economic Problems................................................................................................

3. Interdependence and the Global Economy ............................................................

4. Supply and Demand ...............................................................................................

5. Elasticity .................................................................................................................

6. Consumer Behavior................................................................................................

7. Costs ......................................................................................................................

8. Competition ............................................................................................................

9. Monopoly ................................................................................................................

10. Resource Markets ..................................................................................................

11. Wage Determination...............................................................................................

12. Epilogue..................................................................................................................

2

7

12

18

29

33

37

43

50

56

60

68

II. Reading Assignments

1. Introduction to Economics ...................................................................................... 71

2. Economic Problems................................................................................................ 87

3. Interdependence and the Global Economy ............................................................ 101

4. Supply and Demand ............................................................................................... 116

5. Elasticity ................................................................................................................. 134

6. Consumer Behavior................................................................................................ 146

7. Costs ...................................................................................................................... 154

8. Competition ............................................................................................................ 165

9. Monopoly ................................................................................................................ 179

10. Resource Markets .................................................................................................. 191

11. Wage Determination............................................................................................... 200

12. Epilogue.................................................................................................................. 217

III. Appendix A

Sample Midterm Examination ........................................................................................... 222

Sample Final Examination................................................................................................. 229

IV. Appendix B

Bibliography, book list ...................................................................................................... 236

i

PREFACE

This Course Guide was developed in part because of the high cost of college

textbooks, and in part, to help organize students= studying by providing lecture notes.

This Guide was made possible because the administration of IPFW had the foresight to

make the campus= printing services available to duplicate these sorts of materials, and

provide them at cost through the auspices of the University Bookstore in Kettler Hall.

Without the active participation of both the campus duplicating services, and its most

cooperative staff, and the bookstore this would not be available.

The department, school nor the professor make anything whatsoever from this

Guide. In fact, the department=s budget and the professor=s own resources are used in

the writing of the Guide, and the numerous draft copies that are produced in the

revisions of this document. Like the sign in the Mom and Pop bait shop on Big Barbee

Lake says, ¡°This is a non-profit organization, wasn¡¯t planned to be B it just sorta worked

out that way.¡± Well, actually it was planned to be a non-profit enterprise in this particular

case.

The professor also wishes to acknowledge the fact that several students have

proposed changes, improvements, caught errors, and helped to make this document

more useful as a learning tool. Naturally, any errors of omission or commission are

those of the professor alone.

ii

Introduction & Use of Guide

This Course Guide is provided to assist students in mastering the subject matter

presented E201, Introduction to Microeconomics. The commercially available student

guides and workbooks are notoriously inadequate and are simply of little value. At

several institutions, prepared course materials are made available to students to assist

their learning. What research has been done concerning these course specific

materials, suggests that students' performances are enhanced by having access to

these types of materials. Because microeconomics is such an important foundation for

business, engineering, and the social sciences this Guide has been prepared.

The purpose of this Course Guide is fourfold. First, the course syllabus is

included in the Guide. Second, the Guide provides the student a listing of the key

concepts covered in the lectures. Third, the Guide provides students with problems and

study-guides to aid each individual in the retaining the materials presented by the text

and lecture. Fourth, sample exams are offered as self-test exercises and to give

students an idea of the level of mastery expected in this course.

Organization

The Guide is divided into eleven units, following the organization of the Tentative

Course Outline found in the syllabus. At the end of each chapters in the reading

assignments there is a section containing the key concepts developed in the chapter,

sample exam questions and a brief study guide. Also in the Guide is the course

syllabus included before the eleven sections covering the substantive portions of the

course. Following the reading assignments are the lecture notes for each chapter. The

final section of the Guide contains sample examinations, including answers.

Note to Students

There is no substitute for doing the reading assignments, attending class, and

working through the material. A teacher cannot cause a student to learn, all a teacher

can do is to organize and present the material, grades can provide a small extrinsic

reward for accomplishment, but it is the student's ability, effort, and desire that

determine how much and how well they will learn. It is hoped this Guide will help in the

learning effort.

iii

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