Your course begins with an economist's view of the world: How do you make purposeful choices under conditions of scarcity? Explore some of the ways people and companies allocate limited resources and work toward mutually beneficial trade. The discussion includes opportunity costs, production possibilities frontiers (PPF), and marginal analysis.
Starting with an ordinary deck of playing cards, Professor Weerapana shows you core microeconomic ideas about trade, surplus, and efficiency. As a benevolent dictator or an auctioneer, discover how matching high valuations with low costs can achieve economic efficiency without needing a central planner.
03: Understanding Demand Supply and demand is one of the fundamental ideas in microeconomics. The demand side starts with consumer preferences. Learn how market demand curves stem from a good or service's utility that drive the consumer's marginal willingness to pay. Reflect on consumer surplus and what guides consumer choices under budget constraints.
Shift gears to the supply side of the market. Here, you will follow a pumpkin farmer's decisions in a competitive market to see how rising marginal costs generate an upward-sloping supply curve, understand the idea of producer surplus, and discover why businesses continue to operate even when total profits are negative.
Round out your study of the supply and demand model with a look at the relationship between prices and market equilibrium. Using tennis balls as an example, Professor Weerapana analyzes conditions of market surpluses or shortages, revealing what factors shift the curves of supply and demand.
The supply and demand equilibrium model is easy to understand in normal conditions, but what happens during real-world economic shocks? Trace the impact of a rapid change in supply or demand, from N95 mask shortages and spinach scares to steel tariffs and oil disruptions.
Now that you understand the supply and demand model, it is time for a new complexity: elasticity. In a market shock, the consumer's sensitivity to price affects quantity and vice versa, which connects everything from gasoline prices to zoning reform to tariffs on bananas versus wine.
Adam Smith's "invisible hand" explains how price efficiency works without central planning. As you will learn, his key insight was that individuals pursuing their own self-interest aligns with the social interests. Uncover how millions of buyers and sellers are able to coordinate independently to create market equilibrium.
Whereas the invisible hand of the free market creates equilibrium, taxes and subsidies put a thumb on the scale to interfere with competitive markets. Although taxes are disliked and subsidies are popular, both result in deadweight loss, the size of which depends on the elasticity of supply and demand.
Although free markets generally create an efficient equilibrium, externalities such as pollution and secondhand smoke represent failures in the market, where a product's costs spill over onto third parties. Here, you will explore the role of Pigouvian taxes, tradable permits, and private negotiation to restore efficiency.
Public goods can be defined by two key traits: non-rivalry and non-excludability. Learn what these terms mean and the 2x2 classification of goods ranging from clean air and streetlights to federal grazing lands and subscription satellite radio. Then see how the free-rider problem limits the availability of public goods. Finally, consider the role of government in the system.
Even when overall market conditions appear stable, the economy is highly dynamic, with thousands of businesses opening and closing each year. Using a restaurant as an example, Professor Weerapana surveys fixed and variable costs, labor and capital allocations, scale and mergers, and other economic aspects of industry.
A monopoly exists when a single firm sells a product with no close substitutes plus barriers to entry. Here, find out why profit-maximizing monopolies produce less and charge more than a competitive market, creating deadweight loss. Then survey how natural monopolies, patents, and price discrimination shape both the problem and possible remedies.
Examine how governments combat monopoly power through antitrust enforcement and regulation. This lecture covers the Sherman and Clayton Acts, the use of the Herfindahl-Hirschman Index to evaluate mergers, the regulation of natural monopolies, and the risks of regulatory capture.
Shift your attention from business structures to the business mindset, starting with the tools of game theory. Professor Weerapana walks you through concepts such as payoff matrices, dominant strategies, and the Nash equilibrium, which are applied in the prisoner's dilemma and battle-of-the-sexes games.
Continue your study of strategic decision-making by applying game theory to an oligopoly, in which a few interdependent firms control a market. From cartel organizations such as OPEC to government efforts to regulate against collusion, see how these market dynamics emerge and the risks of having limited competition.
Labor markets shape the most important economic decisions people make. As you will discover here, the supply and demand model applies to labor: Workers are the supply, businesses have the demand, and wages are the price. Apply what you have learned in this course to the world of employment.
Wages vary widely across occupations, education levels, and demographic groups, but what accounts for these differences? In this second lecture on wage markets, Professor Weerapana traces the role of risks, discrimination, and human-capital as explanations for wage gaps, as well as the effect of minimum wages and union activity on the market.
Taxes are necessary to fund public activities, but what is the best approach to taxation? Who should pay taxes and for what goods or services? Delve into the economic effects of income taxes and why it is so challenging to design a tax system that is simple, equitable, and efficient.
Transfer payments are cash or in-kind benefits paid by the government to help relieve poverty. In this lecture, Professor Weerapana distinguishes between means-tested aid (such as Medicaid, SNAP, and the Earned Income Tax Credit) and universal social insurance (Social Security and Medicare). Review these programs and their accompanying trade-offs.
Comparative advantage is one of the most powerful ideas in microeconomics, and it is the foundation for mutually beneficial trade. At the national scale, reflect on why countries gain by specializing according to opportunity costs, what shapes trade patterns, and why overall gains may coexist with painful consequences to particular individuals or industries.
In the previous lecture, we discussed the advantages of trade. Here, consider why governments may restrict the gains from trade. Professor Weerapana's discussion includes tariffs and quotas, the recent surge in protectionism, the classic arguments for trade restrictions, and the economic trade-offs at work.
Economic analysis often assumes certainty, yet so many important choices involve unknown outcomes. Enter the field of risk: expected value, expected utility, risk aversion, and certainty equivalents. Then turn to the rise of insurance, with a look at how asymmetric information might undermine those markets.
In this final lecture, Professor Weerapana steps back to reflect on everything you have learned. He offers a few insights about where the field of microeconomics is going. Find out about the "credibility revolution," the future of behavioral insights, and how Nobel Prize winners use the concepts from this course to advance the field.