man holding gray steel frame

Overview

This week finalize our discussions of decision-making and turn to consumers specifically. With the understanding that individuals often seek to equate the marginal benefits and costs of a decision, we focus on how to quantify benefits to consumers in Chapter 10. By the end of the chapter, the hope is that we can explicitly link our ideas of satisfaction and happiness to develop a model of quantity demanded. More specifically, what determines the quantity we ultimately will be willing and able to purchase? A basic model of utility will help us answer this question as we take a seemingly odd measure and still glean something important from it regarding consumer behavior.

With a better understanding of how utility and preferences affect individual demand, we turn to firm decision-making. What determines a firm's willingness to accept along a given supply curve? When do firms know they should produce, rather than shutting down? In this unit, we address these questions and learn about how firm's make choices differently depending on how flexible their inputs are. This sets the stage for a larger discussion of how consumers and firms come together in market structures.

We then turn to two forms of market structures that help us think about interactions between consumers and producers: perfect competition and monopoly.

Learning Outcomes

By the end of this week, you will be able to:

Define and interpret the economic concept of utility.
Understand the importance of the Principle of Diminishing Marginal Utility.
Relate utility directly to the demand curve of an individual.
Define the short run and the long run.
Understand how costs can be redefined based on how variable they are.
Explain how firms make marginal decisions about levels of production to maximize profits.
Understand the conditions that make it likely a firm would choose to shutdown.
Understand and apply perfect competition to real-world markets.
Understand why monopoly power can be problematic.
Model monopoly market structures in comparison to the "ideal" of perfect competition.

Activities

Attend class on Tuesday and Thursday.
Compare different real-world markets to categorize them as perfectly competitive or monopolistic.

Assessments

Exam 2 (Chapters 5-7, 9)
Chapter 10 Quiz/Questions
Chapter 11 Quiz/Questions
Chapter 12 Quiz/Questions
Chapter 13 Quiz/Questions
Paper 4