Firm Level Economics: Consumer and Producer Behavior

About this course: All goods and services are subject to scarcity at some level. Scarcity means that society must develop some allocation mechanism – rules to determine who gets what. Over recorded history, these allocation rules were usually command based – the king or the emperor would decide. In contemporary times, most countries have turned to market based allocation systems. In markets, prices act as rationing devices, encouraging or discouraging production and encouraging or discouraging consumption in such a way as to find an equilibrium allocation of resources. We will construct demand curves to capture consumer behavior and supply curves to capture producer behavior. The resulting equilibrium price “rations” the scarce commodity. Markets are frequent targets of government intervention. This intervention can be direct control of prices or it could be indirect price pressure through the imposition of taxes or subsidies. Both forms of intervention are impacted by elasticity of demand. After this course, you will be able to: • Describe consumer behavior as captured by the demand curve. • Describe producer behavior as captured by the supply curve. • Explain equilibrium in a market. • Explain the impact of taxes and price controls on market equilibrium. • Explain elasticity of demand. • Describe cost theory and how firms optimize given the constraints of their own costs and an exogenously given price. This course is part of the iMBA offered by the University of Illinois, a flexible, fully-accredited online MBA at an incredibly competitive price. For more information, please see the Resource page in this course and onlinemba.illinois.edu.

Earn credit toward a master's degree This course is part of the fully-online accredited Master of Business Administration (iMBA) from University of Illinois at Urbana-Champaign. Learn More Created by:  University of Illinois at Urbana-Champaign

• Taught by:  Larry DeBrock, Dean Emeritus and Professor of Finance and Professor of Economics

  University of Illinois, Urbana-Champaign College of Business Department of Business Administration

Basic Info Course 1 of 7 in the Managerial Economics and Business Analysis Specialization Commitment 4 weeks, 3-5 hours/week Language English How To Pass Pass all graded assignments to complete the course. User Ratings 4.8 stars Average User Rating 4.8See what learners said Coursework

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Syllabus


WEEK 1


Course Orientation
You will become familiar with the course, your classmates, and our learning environment. The orientation will also help you obtain the technical skills required for the course.


1 video, 5 readings, 1 practice quiz expand

1. Video: Welcome to Firm Level Economics: Consumer and Producer Behavior!
2. Reading: Syllabus
3. Reading: About the Discussion Forums
4. Reading: Glossary
5. Practice Quiz: Orientation Quiz
6. Reading: Updating Your Profile
7. Discussion Prompt: Getting to Know Your Classmates
8. Reading: Social Media

Module 1: Scarcity, Allocation, and Markets



The fundamental problem of scarcity challenges us to think about an allocation mechanism to determine what is produced and who consumes it. We will discuss scarcity and allocation mechanisms. In this course, we will focus on markets and prices as the solution to this resource allocation problem.


7 videos, 3 readings, 2 practice quizzes expand

1. Reading: Module 1 Overview
2. Reading: Module 1 Readings
3. Video: 1-1.1. Scarcity and its Implications
4. Video: 1-1.2. Opportunity Costs
5. Video: 1-1.3. Demand Curves
6. Practice Quiz: Lesson 1-1 Practice Quiz
7. Video: 1-2.1. on the Demand Curve
8. Video: 1-2.2. Movements Along vs. Shifts in the Demand Curve
9. Video: 1-2.3. Constructing the Supply Curve
10. Video: 1-2.4. Movements to New Equilibrium
11. Practice Quiz: Lesson 1-2 Practice Quiz
12. Reading: Module 1 Peer Review Explanation

Graded: Module 1 Peer Review Assignment
Graded: Module 1 Quiz

WEEK 2


Module 2: Government Intervention in Markets



Markets are frequent targets of governments. This module will introduce government policy intervention into the market. This intervention can be direct control of prices or it could be indirect price pressure through the imposition of taxes or subsidies. Both forms of intervention are impacted by elasticity.


10 videos, 3 readings, 3 practice quizzes expand

1. Reading: Module 2 Overview
2. Reading: Module 2 Readings
3. Video: 2-1.1. Setting Dairy Prices
4. Video: 2-1.2. Government Intervention
5. Video: 2-1.3. Direct Price Controls: Price Floors
6. Video: 2-1.4. Direct Price Controls: Price Ceilings
7. Practice Quiz: Lesson 2-1 Practice Quiz
8. Video: 2-2.1. The Price You Pay at the Pump
9. Video: 2-2.2. Excise Taxes
10. Video: 2-2.3. The Incidence of Taxation
11. Practice Quiz: Lesson 2-2 Practice Quiz
12. Video: 2-3.1. Higher Tuition Yet College Applications
13. Video: 2-3.2. Responsiveness of Quantity Demanded and Elasticity
14. Video: 2-3.3. Elasticity Along a Linear Demand
15. Practice Quiz: Lesson 2-3 Practice Quiz
16. Reading: Module 2 Peer Review Explanation

Graded: Module 2 Peer Review Assignment
Graded: Module 2 Quiz

WEEK 3


Module 3: Firms, Production, and Costs



This module will introduce cost theory. Firms are interested in producing profits, which are the residuals when costs are subtracted from revenue. Earlier modules constructed demand curves. They give us an idea of how many units of product we can sell at different prices; this would be firm revenue. We will work to understand inputs, production, and costs.


9 videos, 3 readings, 2 practice quizzes expand

1. Reading: Module 3 Overview
2. Reading: Module 3 Readings
3. Video: 3-1.1. An Economist's Production Function
4. Video: 3-1.2. Types of Firms
5. Video: 3-1.3. Behavior Rule
6. Video: 3-1.4. Behavior Rule – Part 2
7. Video: 3-1.5. Law of Diminishing Marginal Returns
8. Practice Quiz: Lesson 3-1 Practice Quiz
9. Video: 3-2.1. Cost Curves
10. Video: 3-2.2. Derive Short Run Total Cost Family of Curves
11. Video: 3-2.3. Derive Short Run Average Cost Family of Curves
12. Video: 3-2.4. Derive and Depict Short Run Marginal Costs
13. Practice Quiz: Lesson 3-2 Practice Quiz
14. Reading: Module 3 Peer Review Explanation

Graded: Module 3 Peer Review Assignment
Graded: Module 3 Quiz

WEEK 4


Module 4: Firm Behavior



The firm goal of profit maximization requires an understanding of costs and revenues. In this module, we will see how a firm optimally responds to a given market price by finding the profit maximizing output. The level of profits at this maximum profit point will help determine short run equilibrium.


7 videos, 3 readings, 2 practice quizzes expand

1. Reading: Module 4 Overview
2. Reading: Module 4 Readings
3. Video: 4-1.1. Firm Optimization Behavior
4. Video: 4-1.2. Maximizing Profit
5. Video: 4-1.3 Maximizing Profit Graphically
6. Practice Quiz: Lesson 4-1 Practice Quiz
7. Video: 4-2.1. Showing Points on a Graph
8. Video: 4-2.2. Profits After Total Cost Changes
9. Video: 4-2.3. Short Run Shutdown Decisions
10. Video: 4-2.4. Graphing Shutdown Conditions
11. Practice Quiz: Lesson 4-2 Practice Quiz
12. Reading: Module 4 Peer Review Explanation

Graded: Module 4 Peer Review Assignment
Graded: Module 4 Quiz