Syllabus:
UPP 504: Economic Analysis for Planning
and Management
Thursday, 6:00-8:30 pm, 2 A&D Hall
Spring, 2005
Professor: Daniel T. McGrath, PhD
Email: dmcgrath@uic.edu; Ph.: 996-5723
Office: Rm. 528, SPHW, 2121 W. Taylor
Office Hours: TBD.
Teaching Assistant: Ms. Laura Goddeeris, lgodde2@uic.edu
Course Description
Urban planners are routinely faced with the market realities of the regional economies of
their communities, and must often make decisions in the face of scarcity. The problem of
choice constrained by scarcity is the fundamental economic problem. A sound knowledge
of the fundamentals of microeconomics is essential for all planners, regardless of their
areas of concentration. This course is designed to familiarize you with basic
microeconomic theory, focusing on the theory of the consumer and firm. The applications
are drawn from different areas in urban planning and public policy.
The prerequisite for the course is the ability to handle basic high school algebra at the
level found in SAT or GRE preparation books. Many of the concepts in this course will
be explained using simple graphs. The textbook has been chosen for its emphasis on
policy-relevant examples. You are strongly encouraged to thoroughly read all the boxed
examples and case studies in the book. They are not only educational but also quite
interesting. In order to make the material as accessible as possible, I will closely follow
the required readings and will often do some of the book-examples in class.
In this course, most of the relevant handouts, assignments, and solutions will be posted
on the Course Info electronic blackboard
(http://blackboard.uic.edu/courses/1/upp504s05). This website should be checked before
every class!
Readings
Required text: Mansfield, E. and Yohe, G., Microeconomics, 11th edition .(2004). W.W.
Norton & Co.
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Other required readings will be available from links on the course website.
Course Requirements
Two exams: Midterm and Final Exam: 2 x 30 = 60% of grade
Three short (10 min.) quizzes: 3 x 10 = 30% of grade
Homework: 10%
Grading scheme: A (90% - 100%), B (75% - 89%), C (55% - 74%), D (40% - 54%).
Problems sets: You will be assigned weekly problem sets that will generally not be
graded. You will be informed beforehand if they are going to be graded. The quizzes,
however, will be entirely based on the homework problems and in-class problems
(usually the quiz problems will be exact replications of these problems); so if you do all
the homework and in-class problems thoroughly, you will be able to obtain full marks in
your quizzes rather easily. I also encourage you to study together, especially when it
comes to doing the homework problems. The exams problems, of course, will not be
exactly the same as the homework problems; they will require you to apply what you
have learned rather than simply repeat what you have learned.
Study strategy: In this course, new concepts build upon old ones; so it is important that
you work regularly and do all the homework problems. As this is an analysis/methods-
oriented course, you should plan to spend rough 9-10 hours per week studying at home
for this course. It is important that you review the lecture notes thoroughly each week.
Please do not hesitate to make use of my office hours. You should also utilize the office
hours of the assigned TA.
Course Outline
Week 1 & Week 2 (Jan. 13, Jan. 20) Introduction
to Microeconomics, Intro to Supply and Demand
Course Introduction & Requirements. The economic problem. Definitions. Economic
systems. The role of and evaluation of models. Critical review of positive economics.
Basics of demand and supply. Definition of a market, Demand and supply schedules.
Price elasticity of demand. Income elasticity of demand.
Readings: Mansfield Yohe, Chapters 1
Friedman, M. (1953). The methodology of positive economics.
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Week 3 & 4 (Jan. 27, Feb. 3). Theory of Consumer Choice and
Individual Demand
Rational consumer choice: utility, budget constraint, indifference curves, optimal bundle.
Application of rational choice and demand theories. Substitution and Income Effects.
Consumer Surplus. Cost of Living Indicies.
Monday, Sept. 6 – Labor Day -- No class scheduled
Readings: Mansfield & Yohe, Chapters 2 and 3.
Week 5 (Feb. 10). Derivation of the Market Demand Curve &
Quiz 1
Price elasticity of demand, Cross-price elasticity of demand. Marginal revenue. Industry
and firm demand curves. The Measurement of demand curves
Quiz #1: Thursday, Feb. 10, at the end of class
Readings: Mansfield & Yohe, Chapter 4.
Week 6 & 7 (Feb. 17, Feb. 24) Theory of the Firm — Cost
Functions & MIDTERM Exam
Cost functions. Optimum output of the firm. Industry price and output determination.
Empirical estimation of production functions and cost functions.
Thursday, Feb. 24 -- MIDTERM EXAM at the end of class.
Readings: Mansfield & Yohe, Ch. 7.
Week 8 (Mar. 3) Perfect Competition
Perfect Competition. Price determination in the short and long run,
Readings: Mansfield, Ch 8.
Week 9 (Mar. 10) Applying the Competitive Model
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Producer surplus and total surplus. Perfect competition and the maximization of total
surplus. The effect of a price ceiling and floor. Tariffs and quotas. Effects of an excise
tax.
Readings: Mansfield, Chapters 9
Week 10 (Mar. 20) Benefit-Cost Analysis & Quiz 2
Intro to Benefit-Cost Analysis. Time value of money. Discounting. Issues in estimating
costs and benefits.
Thursday, Mar. 20 – Quiz #2 at the end of class
Readings: Mansfield, Chapters 15 select pages & course handouts.
Spring Break: March 21 – 25
Week 11 (Mar. 31) Investment
Inter-temporal Choice – Consumption and Savings, The Interest Rate, The NPV Rule for
Investment Decisions, Internal Rates of Return, Pricing Exhaustible Resources.
Readings: Mansfield, Chapters 15.
Week 12 (Apr. 10) Monopoly
Monopoly power. Short and Long-run equilibrium Price and Output. Comparison of
Monopoly and Perfect Competition. Price discrimination. Public regulation of
monopoly.
Readings: Mansfield, Ch. 10
Week 13 (Apr. 14) The Role of Government & The Rationale
for Public Policy
Monopoly power. Short and Long-run equilibrium Price and Output. Comparison of
Monopoly and Perfect Competition. Price discrimination. Public regulation of
monopoly. Introduction to public goods and externalities, Efficient output of a public
good. Externalities: the case of environmental pollution. Property rights and the Coase
Theorem. Government Intervention
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Readings: Mansfield, Ch. 18.
Week 14 (Apr. 21) General Equilibrium Analysis and
Resource Allocation
Partial equilibrium vs. general equilibrium, The existence of general equilibrium, A
simple model, The production possibilities curve, Economic efficiency, Utility
possibilities curve, Equity considerations.
Week 14 (Apr. 28) Application of Microeconomics in Planning
Applications: Deadweight loss, The economics of zoning. Intro to urban economics.
Urban structure. Economics of traffic congestion.
Wednesday, November 24 -- Quiz 3 at the beginning of class
Readings: Mansfield and Yohe, Chapter 16
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