ECON 1 Applications Assignment

This assignment will require you to do a bit of reading and research, so it may take you longer than the typical homework to complete. Trust me, you don’t want to start it the night before it is due! For this assignment, you will be using the Naked Economics text to understand applications of the concepts we have been learning in class and come up with some real world examples of your own. Our goal is to think critically in order to connect what might seem like abstract microeconomics to your everyday life. By the end of it, no one will feel like asking me, ‘When am I ever going to use this stuff?!’ (Right?) There are three parts to the assignment – (1) Concept, where you will summarize the relevant material, (2) Text, where you will draw on examples from the Naked Economics text, and (3) Application, where you will come up with some relevant examples of your own. Part 1 – Concept First, choose one of the concepts from class that interests you from the list below. The topic you choose is completely up to you. Provide a brief summary of the relevant models surrounding your topic. This does not need to be more than half a page/a few paragraphs, plus relevant graphs if applicable. Think quality, not quantity. Part 2 – Text Next, read the related portion of the Naked Economics text and discuss some examples provided by the author to illustrate the relevance of your topic. If there are many, you only need to provide one or two. Again, think quality over quantity here. Another half a page/a paragraph or two is more than enough. Side note: the book is a very interesting read, I highly recommend you read it in its entirety especially if you decide economics is an interesting topic to you (it is!). Part 3 – Application This is the most important part of the assignment. Here you will come up with two examples of your topic that you have encountered in your life. For example, if your topic is externalities, you might mention (as I would) that your neighbor provides a positive externality to you with the addition of a beautiful sounding fountain in their backyard. Make sure you explain the relevance of your example to the topic. In other words, the fountain provides excess benefits that my neighbor does not incorporate in his analysis of whether to install it or not. The excess benefits are the positive externality in the form of beautiful running water sounds that mask the sound of the freeway. If he thought about the externality provided, he would install one in my yard as well! Lastly, provide an example from the real world. For this part I ask that you find a newspaper, magazine, etc. article (online is fine of course, as long as it is from a reputable source such as the LA Times or The Economist, and not The Onion) or some data on your topic. Data should also come from a reputable source, such as the Census, the Current Population Survey, Statistical Abstract of the United States, the Survey of Income and Program Participation, the National Vital Statistics Report, the Federal Reserve Economic Data (FRED), etc. Explain how it is relevant to your topic, and please attach to your assignment. This portion should be a bit longer, approximately a page or even two, since it requires the most in depth and interesting analysis of your three examples. In total your assignment does not need to exceed 2-3 pages, plus your attached article or data. As usual, if you have any questions at all come see me. If you are not sure whether your data is from a reliable source or your examples are relevant to your topic it is easiest just to check with me. Presentation The final part of this assignment is an optional presentation component. This assignment will be worth up to 50 points, the presentation gives you the opportunity for up to an additional 10 points. In terms of your final grade, this can add up to 1% and has the potential to increase your final letter grade in the course. If you decide to present, you must turn in your assignment at the same time. Depending how many students take advantage of this opportunity, the presentation should be approximately 5-8 minutes long and cover each of the three portions of the assignment, with emphasis on the last Application section. The presentation format is up to you – PowerPoint slides, write on the board or any other format you like better. Time permitting, be prepared for me to ask questions! As an added incentive to those brave souls willing to present in the first round, I will give those students the opportunity for up to 15 points extra credit. Topics and Reading Presenting September 22nd (15 points) – Absolute/Comparative Advantage and Trade o Intro and Ch. 12 – Why does the author claim that the idea that international trade makes us collectively worse off is wrong? – Demand, Supply, and Market Prices o Intro and Ch. 1 – Why is allocating resources without a market/price system, like with a centrally planned economy, “overwhelmingly difficult” in the long run? How does the pursuit of maximum utility and/or profits lead to efficient market outcomes? What is the role of market prices as signals? – Efficiency and Deadweight Loss o Intro, Ch. 2 pgs. 46-53, Ch. 4 pgs. 87-103 – What is deadweight loss, and how does it interfere with the efficiency of our market economy? Presenting October 27th (10 points) – Competition o Intro, Ch. 1 pgs. 6-18, Ch. 5 pgs 117-121 – What defines a competitive market? What do consumers and producers maximize in this market? – Monopoly and Antitrust Policy o Intro and Ch. 4 – What defines a monopoly market? In what way is the government a monopoly? What effects do monopolies have on the economy and innovation? – Price Discrimination o Intro and Ch. 1 – What is the role of prices in markets? What are the benefits of price discrimination and how does it work? Presenting December 6th (10 points) – Externalities o Intro, Ch. 3 – What is an externality? Why is it a problem and how can we solve it? – Environmental Economics and Policy o Intro, Ch. 1 pgs. 6-12, Ch. 2 pgs. 34-39, Ch. 12 pgs. 289-293 – Why do markets struggle with environmental issues, and how is this related to the environment as a luxury good? How can we solve these issues? – Public Goods o Intro, Ch. 3 pgs. 69-79, Ch. 4 pgs. 80-84 – What defines a public good? Can markets provide them? – Asymmetric Information, Adverse Selection, and Lemons o Intro and Ch. 5 – What are the consequences of asymmetric information in markets? Can we fix this issue? – Behavioral Economics o Intro and Ch. 1 – What is behavioral economics? How do some of its issues affect our economic models? – Role of Government – Price Controls and Taxes o Intro, Ch. 3 pgs 58-62, 67-79, Ch. 4 pgs. 94-103 – What is the significance of government’s role in solving market failures, enforcing patents, providing market infrastructures, wealth redistribution, and economic productivity?

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