PBL: MICROECONOMICS. Competency: Capital and Natural Resource Markets

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1 Competency: Capital and Natural Resource Markets 1. Describe how firms determine the quantity of resources to use and what determines resource supply in competitive markets and imperfectly competitive markets. 2. Define the types of capital. 3. Discuss the limitations of substitutability with respect to natural capital. 4. Describe why social capital is important for economic activities. 5. Discuss how the value of capital stock is determined. 6. Describe the concept of discounting. 7. Explain the difference between the economistic and ecological view of natural capital. 8. Discuss the role of financial capital markets in business decisions. 1. Define the difference between wealth and income. Competency: Distribution of Income and Wealth 2. Define how the distribution of personal income in an economy is measured and discuss issues related to income distribution. 3. Define and explain the functional and personal distribution of income. 4. Explain the determinants of income distributions. 5. Discuss how trade can expand a society s consumption opportunities. 6. Describe the distribution of income and wealth in the United States. 7. Describe how inequality is measured. 8. Present different definitions of equity. 9. Explain how government s redistribution of income through taxation, spending, and assistance/entitlement programs affects the well-being of people and businesses in an economy. 10. Explain how subsidies effect income distribution and economic growth. 1. Describe what is meant by economic uncertainty. Competency: Economic Uncertainties 2. Discuss three standard ways of modeling choices made under conditions of uncertainty. 3. Describe the difference between risk and uncertainty. 4. Explain consumer behavior under uncertainty. 5. Differentiate between intermediate and final goals. 6. Discuss the relationship between economics and well-being. 7. Summarize the differences between the three spheres of economic activity. 8. Understand what is meant by economics in context. Page 1

2 Competency: Elasticity 1. Use concepts of elasticity of demand and supply to evaluate quantitatively economic situations. 2. Describe how elasticity is calculated and its relevance to understanding markets. 3. Identify and interpret the relationship between price elasticity of demand and the effect of a price change on total revenue. 4. Define, calculate, and interpret cross elasticities and income elasticities of demand. 5. List and explain the determinants of elasticity. 6. Define and differentiate between substitutes and complements. 7. Calculate and explain the determinants of price elasticity of supply. 8. Explain long elasticity and tax incidence. 9. Understand the income and substitution effects of a price change. 10. Define and illustrate equilibrium. 11. Discuss the differences between short-run and long-run elasticities. Competency: Labor Markets and Wages 1. Explain how the marginal productivity theory of resource demand applies to wage rate determination. 2. Explain how the wage rate is determined. 3. Calculate and determine wage rates in a competitive labor market and in a monopolistic labor markets. 4. Explain the effects of unions and specific union tactics on wages and employment in both competitive and monopolistic markets. 5. Evaluate the efficiency of specific legislation aimed at increasing wage rates and employment. 6. List and describe the factors that affect worker productivity. 7. Discuss how individuals make decisions about entering the market for paid labor. 8. Describe the interaction of supply and demand in the aggregate labor market. 9. Explain variations in wages among workers, including wage discrimination based on race and gender. 10. Explain how wages are affected by the market value and productivity of the individual working. 11. Discuss wage differences among jobs and professions, using the laws of demand and supply and the concept of productivity. Page 2

3 Competency: Market Failure 1. Discuss how to use the concepts of equity, efficiency, and market failure to analyze and evaluate government policies such as price floors and ceilings, tax policy, and environmental policy. 2. Define and explain the effects of price ceilings and price floors. 3. Identify areas of actual/potential market failure. 4. Discuss causes of market failure and possible means of correction. 5. Describe types of government policy interventions used to overcome or prevent market failure. 6. Explain the effect of market failure on the economy. 7. Define four essential economic activities 8. Describe what is necessary for markets to function effectively. Competency: Monopolies 1. Define monopoly and explain the conditions under which it functions. 2. Analyze the behavior of firms in a monopoly and calculate the resulting changes in producer or consumer surplus. 3. Identify and graphically construct the demand, average revenue, and marginal revenue curves for a pure monopolist. 4. Compare and contrast operations of a monopoly with that of a perfect competitor. 5. Illustrate and explain market inefficiencies related to monopolies. 6. Define and explain different types of pricing in order to regulate monopolies. 7. Define and explain the nature of anti-trust laws. 8. Explain the concept of a bilateral monopoly and its effects on employment and wages. 9. Describe how a monopolist maximizes profits. 10. Discuss the historical development of public purpose organizations regarding the regulation of monopolies and trade practices. 11. Determine the role of government in preventing private monopolies and regulating public monopolies. Competency: Oligopolies and Duopolies 1. Define oligopoly and discuss firm behavior under conditions of oligopoly. 2. List characteristics of an oligopoly firm. 3. List the major barriers that keep companies from joining oligopolies. 4. Discuss the pros and cons of oligopolies. 5. Define duopolies. 6. Discuss the Cournot Duopoly, Bertrand Duopoly, and Stackelberg Duopoly. Page 3

4 Competency: Opportunity Cost 1. Define and compute opportunity cost. 2. Explain the concept of opportunity costs. 3. Differentiate between explicit costs and implicit costs. 4. Relate the marginal theory of value and the theory of time and money in production. 5. Provide an example of the application of opportunity costs. 6. Analyze the concepts of trade-offs and opportunity cost. 7. Ascertain why scarcity faces people at all times and interprets the relationship between trade-offs and opportunity costs. 8. Compare opportunity cost, marginal benefit, and marginal cost. 9. Demonstrate how opportunity costs affect economic decisions. Competency: Perfect Competition 1. Define perfect competition and explain the conditions under which it functions. 2. Learn characteristics of the categories of competition in markets. 3. Identify and determine the short-run supply curve for a perfect competitor. 4. Construct and describe the long-run market supply curve in the case of a perfectly competitive market for a constant cost and an increasing cost market. 5. Compare perfect competition with imperfect competition. 6. List the assumptions behind the traditional model of perfectly competitive markets. 7. Describe how the situation facing the individual firm relates to the overall market situation, in perfect competition. 8. Indicate how firms maximize profits under perfect competition. 9. Explain how, under certain conditions, a perfectly competitive market is economically efficient. Page 4

5 Competency: Production Factors 1. Define factors of production (e.g., labor, capital, entrepreneurship, and natural resources.) 2. Explain and show graphically how production and pricing decisions are made for firms in each of these market structures. 3. Define, explain, and calculate total product, marginal product, average product, total costs, total fixed costs, total variable costs, average costs, average variable costs, and average fixed costs. 4. Define marginal thinking and how and when it can be used to determine the optimal level of production. 5. Explain the importance of financial capital for production decisions. 6. Give examples to explain how businesses and industry depend upon workers with specialized skills to make production more efficient. 7. Define the law of diminishing returns and explain how it is depicted by the total product and marginal product curves. 8. Calculate and graph data concerning the level of production by using profit maximizing rules. 9. Define break-even point and apply break even analysis. 10. Identify resources that are used in the production process. 11. Construct a short-run demand schedule for a resource. 12. Distinguish between internal and external costs. Competency: Production and Trade 1. Evaluate consumer surplus and producer surplus in markets that import or export, and evaluate the deadweight loss from trade restrictions. 2. Describe how to analyze production possibilities of firms and countries, the sources of comparative advantages, and gains from trades. 3. Define how production possibilities schedules and graphs illustrate the concepts of scarcity, choice, and cost. 4. Define and calculate absolute and comparative advantages for production and exchange. 5. Explain how nations benefit from free trade. 6. Define ways in which societies determine allocation, efficiency, and equity. 7. Explain how and why the production possibilities frontier shifts. 8. Identify and explain various illegal trade activities. 9. Explain the impact international trade has in microeconomics. 10. Explain the concept of derived demand. Page 5

6 Competency: Supply and Demand 1. Explain the law of supply, the law of demand, and equilibrium price. 2. Learn the assumptions and determinants of supply and demand in order to use models of markets for description, analysis, and prediction. 3. Explain the basic theories behind consumer behavior (demand) and producer behavior (supply) constrained by the scarcity of valuable resources. 4. Use supply and demand to predict the likely results of changes in economic conditions and policies. 5. Identify and explain the variables which cause a change in demand. 6. Define topics of market analysis including signaling, rationing, scarcity, shortage, and inadequacy. 7. Describe the impacts of price floors and ceilings. 8. Interpret supply and demand curves that show increases and decreases in quantity supplied and quantity demanded. 9. Appraise the effects of technological changes, changes in consumer preferences, price inputs, environment, and legislation on supply and demand and price of goods/services. 10. Describe the concept of elasticity and inelasticity and analyze elasticity as it applies to supply and demand and consumer decisions. 11. Describe how relative prices affect the buying and selling decisions of consumers and producers and illustrate how a change in price affects quantity demanded or quantity supplied. 12. Discuss the effects of shortages in supply and/or demand on the relative scarcity, price, and quantity of particular products. Page 6

7 References: Career Cluster Resources for Marketing, Sales & Service National Association of State Directors of Career Technical Education Consortium. Washington, DC. Career Cluster Resources for Business, Management and Administration National Association of State Directors of Career Technical Education Consortium. Washington, DC. Career Cluster Resources for Finance National Association of State Directors of Career Technical Education Consortium. Washington, DC. Business Education Standards. National Business Education Association. Reston, VA. Microeconomics in Context Student Study Guide Global Development and Environment Institute, Tufts University Medford, MA. Principles of Economics Course Competencies. Georgia Technical College, Atlanta, GA. Principles of Microeconomics Course Syllabus. Tennessee Tech University, Cookeville, TN. Introduction to Microeconomics Course Outline. Lewis and Clark Community College, Godfrey, IL. Microeconomics Course Outline Merced College, Merced, CA. Principles of Microeconomics Course Syllabus. MIT, Cambridge, MA. Principles of Microeconomics Course Syllabus West Virginia University, Morgantown, WV. Principles of Microeconomics Course Outline. Cuyahoga Community College, Cleveland, OH. Economic and Policy Course Syllabus. Georgia Institute of Technology, Georgia Tech University, Atlanta, GA. Page 7