Markets and Prices, Econ 11

Spring 2003

Fred E. Foldvary

Santa Clara University


Class web sites: foldvaria account 55783

Textbook web site:

Thomson class web site account: 55783

Aplia web site for some problem sets ($21): class key: A27Y-KQW7-9JME

MWF, 9:15-10:20 AM , Kenna 214, 4 units, #30741

Telephone: office 408/554-6968; home 510/843-0248. Office: Kenna 209.

Please do not call my home telephone after 10 PM.

Office hours: Monday, Wednesday, & Friday 8-8:45 AM; and by appointment

Fax (econ dept.) 408/554-2331. Mailbox is in the Department of Economics, Kenna 300.

e-mail: [email protected] (this is a forwarding service that currently goes to Yahoo).

Please do not email me any attachments; I do not open them. Do not email me any problem sets; they must be on paper. If you cannot come to class, then place assignments in my mailbox at the Dept. Of Economics, Kenna 3rd floor. Also note that I usually do not read email late in the evening, so messages sent late in the day may not be read until morning. I also have a campus email address [email protected] which you may use, but I often do not access it on days I am not on campus. Please do not send multiple messages of the same text.

Course overview:

"Markets and Prices" deals with individuals, households, communities and firms in their roles as economizing producers, traders, and consumers. It is about human choice and action within the constraints of the physical and governmental environment. Microeconomics includes utility, consumer choice, supply and demand, opportunity costs, prices, marginal costs and benefits, externalities, and the impact of government spending and taxes.

My aim is that at the end of this class, you will be economically enlightened. The ideals of this university are competence, conscience, and compassion. My goal is that when the class ends, you will be more competent in economics than 99% of the public. You will then be able to direct your conscience and compassion for much better effect. And you will be able to use your reasoning more effectively to avoid making economic mistakes and to have a more prosperous and satisfying life.

A key element of life is feedback. Living beings, economies, firms, households, and governments all depend on feedback signals that help us choose a future course of action. In an economy, profits and losses as well as prices are signals to produce or consume more or less. Successful businesses also use surveys and customer feedback to orient their products to what the buyers desire. In a classroom, the students and instructors also benefit from feedback. I will help by assigning you a student number and occasionally posting your scores on the class web site. This also helps you to make sure your records agree with mine. You should keep all problem sets and exams returned until the class is finished. In this class, I will seek additional feedback by sometimes asking you to write down at the end of a class the main concepts you have learned and whether there is anything that still puzzles you.

You the student should take a professional attitude as a true student of the subject, and as a rule, never let any word or concept go past you that you do not thoroughly understand. Do not be afraid to ask questions, even if you think it might be a simple thing that only you don't get. It is your job to understand the material, and most likely if something puzzles you, it also has been unclear or confusing to other students. I will try to be clear, but I cannot read minds.

As feedback to my teaching, I will also occasionally conduct informal, anonymous evaluations. On a scale of 1 to 5, 5 being the best, I am aiming for a 4.8 on all aspects of teaching. If you think my performance has been less than 5, I will ask you to please tell me what it would take to bring it up to a 5. If you get evaluated at less than what you think you merit, you would want to know why. So please extend me the courtesy and consideration of providing reasons, so that I can know how to bring up my score. This also helps you to learn more and get a better grade.

The objectives of the course:

1. A lifetime intuitive understanding of the basic principles of microeconomics so that you achieve economic enlightenment and sophistication.

2. The ability to analyze economic issues and distinguish good from bad economic thinking.

3. The ability to apply economic concepts to your own life. Concepts you can apply include opportunity costs in making choices, comparative advantage, using marginal analysis, exchange, efficiency, the impact of taxes and regulations, and the difference between constitutional and operational choices.

Biographical sketch:

Fred E. Foldvary received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University, Virginia. He has taught economics at Santa Clara University and in Latvia, Virginia Tech, California State University at Hayward, John F. Kennedy University, and University of California Extension.

Dr. Foldvary is the author of Public Goods and Private Communities and Dictionary of Free-Market Economics, and edited the book Beyond Neoclassical Economics. His areas of research include public finance, business cycles, governance theory, economic philosophy, and the economics of real estate.

Elements of the Class

The following constitutes an agreement between I the instructor and you the student. By staying in the class, you agree to the terms of the syllabus.

Use of class time

The usual structure of class time is:

1. General announcements and news. 2. Hand back assignments and go over them.

3. Discussion of feedback on previous class. 4. Lecture and discussion of new material.

5. Your daily summary of all that you learned.

If you think class time can be used more effectively, please let me know. I will assume that you agree class time is being used effectively unless you let me know otherwise.

Expressing yourself.

You are encouraged to express yourself in class freely and openly by raising your hand. Do not fear asking a question. All questions relevant to the class topics are good questions. Usually, other students may have a similar question. You are also encouraged to send me suggestions by email or at my office. If you feel you are not able to fully express yourself freely, please let me know. I will assume that you agree you feel encouraged to express yourself freely unless you say otherwise

Student progress.

Your scores on problem sets, exams, and reports will be recorded on computer, and I will occasionally post them on the class web site. You will be assigned a number, and this will be shown rather than your name. If you don't wish to be included in this viewing, let me know. I am concerned with your success and progress, and will let you know your status at any time on request. I will assume that you agree that I am being actively helpful with your progress unless you say otherwise

Grades and the criteria for evaluating your work.

The maximum points for each category are:

First midterm exam: 144 points (24 questions)

Second midterm exam: 144 points "

Third midterm exam: 144 points "

Final exam: 288 points (48 questions)

Quizzes, problem sets, reports 260 points

Conversation and oral exam 20 points

total = 1000 points.

There will be an conversation and oral exam in my office. You don't need to prepare for it. It will usually last about 5 minutes. These conversations will help me get to know you better and see how you are developing your economic understanding.

The class grading is as follows.

A : 921-999, A-: 900-920, B+: 880-899, B : 821-879; B-: 800-820; C+: 780-799,

C : 721-779, C-: 700-720; D+: 680-699; D : 621-679; D-: 600-620; F : 0-599

All problem sets, quizzes, and exams are open book and open note. The purpose is to test your ability to analyze rather than memorize. But there must be absolutely no talking during an exam, and your homework must be your own work.

Of course most students are honest, but in case there is any cheating, copying, or other dishonesty in the exams or reports, it is a serious violation of university rules and can result in a zero for the assignment or possibly an F for the course.

Essays are graded by the following criteria:

1) presentation (language, legibility, organization);

2) how completely it covers the topics;

3) focus (avoiding irrelevancies and redundancies);

4) knowledge of the relevant theory, facts, and terms, and defining of key terms;

5) warranting (by clear, sound, organized reasoning) and citing of sources.

Unless you let me know soon after the return of each assignment or exam, I will assume that you agree that I have used fair and appropriate methods to evaluate your work. You need to let me know of any problems promptly, because I can't read minds.


You are expected to attend all the classes. To obtain full credit for problem sets and exams, if you are unable to attend class, you must submit your assignment by placing it in my mailbox before the class time of the date due. If leave town, may arrange with me about submitting it.

Without advance notice or a bona fide documented reason, submissions after the class date for which it is due will be reduced by 20% of the total maximum score. After the following class day, the grade will be zero. Make-up midterms must be scheduled before the midterm date unless there is some emergency. Please do not email me any problem sets.

Unless you tell me otherwise, I will assume that you agree that I have explained the criteria for evaluating your academic performance.

Text books

Principles of Microeconomics, 3rd edition, by N. Gregory Mankiw

Aplia online reading ($21)

The class web site has lecture notes for some of the class material. These are not polished prose, and are available to help you. Some class material is not on the web site.

The class lectures and discussion will provide some material not in the textbooks, and much of the material in the books will not be repeated during class time. The midterms and final exam will include material from both class lectures, problem sets, and readings, but not from the web lectures. You are responsible for obtaining the material if you miss class.

You are expected to have read the assigned material before the class meets.

Reading Assignments

Note: the reading schedule is approximate; sometimes we may be ahead or behind.

For each chapter, we will also be reading the Mankiw web sites.

Week 1. March 31, April 2, 4

Non-graded test of knowledge. Factors of production. Economic models.

Chapter 1. 10 principles of economics (you may skip #7, #9 & #10).

Chapter 2. Thinking like an economist. Appendix, pp. 42 (cause and effect)-44)

Read the rest of the appendix if you are not very familiar with graphs.

Week 2. April 7,9,11

April 7: guest lecture

Chapter 3, Gains from trade (theme continued on Chapter 9)

Chapter 4, Supply and demand.

April 10: Randal O'Toole, San Jose's Urban-Growth and Transit, 5:30 - 7:00 PM, Brass Rail

Week 3. April 14, 16

continuation of supply and demand

April 16: first midterm

April 18: Good Friday holiday

Week 4. April 21,23,25

Chapter 21: Consumer choice.

Chapter 5, Elasticity.

Chapter 6: Price controls and taxation

April 23: Robert Lawson, Economic Freedom and Human Betterment, 5:30 - 7:00, Brass Rail

Apr. 25: last day to withdraw without a W.

Week 5. April 28,30; May 2

Chapter 7: Consumers, producers, and market efficiency.

Chapter 8: The social costs of taxation.

Week 6. May 5, 7, 9

May 5: second midterm

Chapter 9: International trade.

Chapter 10: Externalities.

May 7: Fred Foldvary, Abolish the IMF, 5:30 - 7:00, Brass Rail

Week 7. May 12, 14, 16

Chapter 11: Public Goods. Note: the book chapter is optional.

Read the web site:

Additional reading, not required:

Chapter 12, public finance: the tax system, borrowing, spending

Week 8. May 19,21,23

Chapter 18: The markets for the factors of production.

Chapter 19: Earnings and Discrimination

Week 9. May 28,30

May 26: Memorial Day holiday

Chapter 20: Income inequality and poverty. Read also

May 30: Third midterm. Last day to withdraw from the class.

May 28: Tyler Cowen, Globalization Changing World's Cultures, 7:00-8:30,de Saisset Museum.

Week 10. June 2,4,6

Public Choice. Knowledge in the economy. Economic calculation.

How economics applies to everything. Some history of economic thought.

Review of the course. Evaluation.

Final exam Thursday, June 12, 1:30-4:30 PM.

Note: your final-exam score and class grade will be posted on the class web site.

You have until Monday to check your scores and make inquiries.

After Monday, 10 AM, it will be too late to make any corrections!