B

B. A. Sawtelle Economic Analysis

Office Tel. 617-521-2582 for Managers

Office: E-203 MCB GSM 411 A --- DAY

Home Tel. 781-871-2555 Fall 2006

SYLLABUS



The Economics course GSM 411, Economic Analysis for Managers, is designed to explore both

microeconomic and macroeconomic issues from an advanced theoretical and applied perspective. The course

stresses analytical reasoning and the application of quantitative techniques and economic methodology to managerial

problems. Throughout the course explicit consideration is given to alternative assumptions and goals underlying a

variety of economic models and current policy decisions. Particular emphasis is placed on the limitations, strengths,

and uncertainties of macro- and microeconomic policies in view of changing institutional and regulatory

environments, extensive global interactions and linkages, and increasingly volatile individual expectations.



Outlined in the weekly schedule below are the primary concepts and topics which will be explored through

class lectures, discussions, and problem set assignments. These course materials and the course examinations are

designed to promote the following learning objectives for each student:

 To acquire knowledge of economic concepts, institutions, theories, and models, and to apply this

information in analyzing economic events and evaluating alternative economic policy initiatives.

 To develop and demonstrate an ability to interpret data critically and to identify key relationships

among economic data.

 To refine and demonstrate general analytical skills, including logical reasoning and the abilities to

manipulate, apply, and interpret quantitative and graphical information in a problem-solving

context.

 To develop and demonstrate economic literacy through discussion of economic articles which

apply and integrate data, quantitative tools, theoretical models, and policy prescriptions.



These four learning objectives directly reflect a key goal of the Simmons MBA Program---that each student achieve

core competency in analysis and decision making. ―Simmons graduates make effective and efficient decisions within

complex and ambiguous contexts. They base their decisions on critical reasoning, using quantitative analyses and

other appropriate tools, techniques, and methodologies.‖ (Statement of Simmons MBA Program Goals, June 2006)



Economic Analysis for Managers first addresses microeconomics and then macroeconomics. For each topic

below a combination of primary text references has been suggested. (PLEASE REFER TO THE MBA

PROGRAM WEBSITE LINK TO “ECONOMICS BOOK ORDER NOTE” BEFORE PURCHASING

TEXT MATERIALS FOR THE COURSE.) Economics, 16th Edition, 2005, by Campbell McConnell and

Stanley Brue, provides an excellent introduction to economic theory and the institutional framework within which

economic policy decisions are made. At the intermediate level, R. Dornbusch, S. Fischer, & R. Startz,

Macroeconomics, 9th Edition, 2004, and Mark Hirschey, Managerial Economics, 11th Edition, 2006, delve more

rigorously into the derivations of macro and micro principles and offer interesting problem extensions and

applications. Each student should choose among text options according to her current expertise in economic

analysis. (Students should feel free to confer with me prior to selecting an appropriate text.) PLEASE NOTE:

Exams and assignments for GSM 411 will be based on the material presented in class, not on the particular

content of any one specific text. Accordingly, PURCHASE of a text or texts for the course is OPTIONAL.

However, students should arrange to have ready access to appropriate text references throughout the

semester. The text references suggested above are available from the Bookstore. The SOM Library has a copy of

each suggested reference, and certain other texts may be appropriate substitutes. Students who have an extensive

academic background in Economics should consult as soon as possible with the instructor to determine those

resource materials which would be most appropriate for course use.



In addition to primary text references for each topic, certain recommended readings have been selected to

illustrate the applications of economic analysis and techniques to managerial problems, and to examine the

assumptions and goals underlying current economic policy decisions. These readings are available full-text online

in databases accessible through the Simmons College Libraries and indicated in parentheses next to each article.

Economic Analysis For Managers---Syllabus ------DAY Page Two



Since the focus of the course is two-fold---theory and applications---problem sets will be integrated with the

course material at regular intervals. There will be two two-hour exams and one three-hour final exam scheduled

during the semester. These exams emphasize the application of those economic models and quantitative techniques

which are developed in class discussions and problem-solving assignments. Optional Review Sessions are scheduled

to provide opportunities for refining problem set methodologies and for clarifying course concepts.



Students are strongly encouraged to collaborate on an ongoing basis in study groups to explore and explain

in detail to one another the course concepts and analytical techniques, to compare and practice problem set

approaches and answers, and to prepare for course exams. Please note, however, that the exams are in-class, closed-

book, closed-note exams, and exam performance must be the individual, not collaborative, work of each student.



Grades for each exam are NOT curved for the class. Each student's exam is evaluated and graded with

reference to "objective" criteria established by the instructor. For course grade determination, the hourly and final

exams for a given student will be weighted as follows: That exam which has the highest grade will be given double

weight. (Accordingly, the highest exam's weight is 1/2, and each of the other two exams is weighted by 1/4 in the

final course grade determination.) Students are expected to be in attendance at all class sessions. Participation in

class discussions is strongly encouraged. However, if a student chooses not to participate in any discussions, she

will not be penalized in the process of final grade determination for the course. Given exceptional, extenuating

circumstances, a student's course grade may be positively adjusted by the instructor to some level higher than that

course grade determined by the weighting formula above.



All participants in this course are responsible for abiding by the standards and provisions of the Simmons

College Honor Code. Violations of the Honor Code will not be tolerated. You are expected to adhere to the highest

standards of honesty and integrity in all aspects of your academic experience, both within and outside the classroom.

Please read and take to heart the sections on the Honor System in the Simmons College Student Handbook.



Reasonable accommodations will be provided for students with documented physical, sensory, systemic,

cognitive, learning, and psychiatric disabilities. If you have a disability and anticipate that you will need a

reasonable accommodation in this course, it is important that you contact the Academic Support Center. Within the

first week or two of the semester, please call the Center at Tel. 617-521-2474 or stop by the Center at Suite 304A in

the Palace Road Building at the Main Simmons Campus. Students with disabilities who receive accommodations are

also encouraged to speak early in the semester with Mary Dutkiewicz, Director of the MBA Program, and with me to

discuss their individual needs for accommodations.



Week Beginning:



Sept. 4 Central Problems of Economic Systems; Demand and Supply

McConnell & Brue Ch. 2 (skim), Ch. 3, Ch. 6 (skim), Appendix to Ch. 1

Hirschey Ch. 1, Ch. 2, Appendix 2A, Ch. 3



Sept. 4 Elasticities; Price Ceilings and Floors

and McConnell & Brue Ch. 20

Sept. 11 Hirschey Ch. 5

―Weekend Journal/Taste--Review & Outlook: Labor Lost,‖ Wall Street Journal,

June 23, 2006 (in ABI/INFORM Global)

―Debating the Minimum Wage,‖ The Economist, February 3, 2001, p. 80 (in Business

Source Premier)

Thomas Palley, ―Building Prosperity From the Bottom Up,‖ Challenge,

September/October 1998, pp. 59 – 71 (in Business Source Premier)

Gordon Fairclough, ―Politicians Are Hooked on Cigarette Taxes,‖ Wall Street Journal,

February 20, 2002 (in ABI/INFORM Global)

Economic Analysis For Managers---Syllabus ------DAY Page Three



Week Beginning:



Sept. 18 Specific Tax and Subsidy; Foreign Exchange Rates; Utility and Consumer Surplus; Production

Patterns

McConnell & Brue Ch. 21

Hirschey Ch. 4, Ch. 8

Louis Uchitelle, ―Following the Money, but Also the Mind,‖ New York Times, February

11, 2001, Section 3, pp. 1, 11 (in Lexis Nexis Academic Universe)

Geraldo Samor, ―Dealing With the Dollar: Brazil‘s Uncharted Terrain; Currency‘s

Relentless Rise Gives Central Bank a New Headache,‖ Wall Street Journal,

March 16, 2005 (in ABI/INFORM Global)

Craig Karmin, ―Beyond the Euro: Currency Traders Bet on Asia,‖ Wall Street Journal,

January 6, 2005 (in ABI/INFORM Global)

Craig Karmin and Michael Sesit, ―Political Jitters Raise Notion of Euro‘s End,‖

Wall Street Journal, June 9, 2005 (in ABI/INFORM Global)

Jon Hilsenrath and Mary Kissel, ―Currency Decision Marks Small Shift Toward

Flexibility,‖ Wall Street Journal, July 22, 2005 (in ABI/INFORM Global)

E.S. Browning, ―Yuan Move Might Stir Big Ripples,‖ Wall Street Journal,

July 25, 2005 (in ABI/INFORM Global)

Craig Karmin and Yuka Hayashi, ―No (Dollar) Gain Without Pain?‖ Wall Street Journal,

November 2, 2005 (In ABI/INFORM Global)

Craig Karmin, ―Poor Start to ‘06 for Dollar Signals Tough Year Ahead,‖ Wall Street

Journal, January 9, 2006 (in ABI/INFORM Global)

Craig Karmin, ―Dollar‘s Slide Could Roil Stocks,‖ Wall Street Journal, May 1, 2006

(in ABI/INFORM Global)



Sept. 25 Cost Formulas and Cost Patterns; Cost Analysis---Short and Long Run Relationships

McConnell & Brue Ch. 22

Hirschey Ch. 9

Jeff Madrick,, ―The New Economy‘s ‗Network Society‘ Plays by Old-Economy Rules,‖

New York Times, July 6, 2000, p. C2 (in Lexis Nexis Academic Universe)



Oct. 2 FIRST EXAM---Wednesday, October 4



Profit Maximization; Perfectly Competitive Equilibrium in Short Run and Long Run

McConnell & Brue Ch. 23

Hirschey Ch. 10



Oct. 9 Monopoly; Comparison to Perfectly Competitive Ideal; Tax and Subsidy Regulations

McConnell & Brue Ch. 24

Hirschey Ch. 11, Ch. 12

Robert Kuttner, ―Everything For Sale,‖ Business Week, March 17, 1997, pp. 92-93

(in Lexis Nexis Academic Universe)

Economic Analysis For Managers---Syllabus ------DAY Page Four



Week Beginning:



Oct. 16 Price Setting by an External Agency; Monopolistic Competition; Cooperative Oligopoly Strategies

McConnell & Brue Ch. 25

Hirschey Ch. 13

James Hagerty, ―Ever Wonder Why Furniture Shopping Can Be Such a Pain?‖ Wall

Street Journal, November 2, 1998, pp. A1, A10 (in ABI/INFORM Global)

Neil Behrmann and Robert Block, ―De Beers to Abandon Monopoly, Aim at New Role

in Diamonds,‖ Wall Street Journal, July 13, 2000 (in ABI/INFORM Global)

Bhushan Bahree, ―In Symbolic Move, OPEC Considers a 2% Increase in Output Ceiling,‖

Wall Street Journal, September 19, 2005 (in ABI/INFORM Global)

Ellen Byron and Justin Lahart, ―Latest Deal May Spark Retailers to Start Shopping for

Partners,‖Wall Street Journal, November 18, 2004 (in ABI/INFORM Global)

Jathon Sapsford, ―High Finance: J.P. Morgan Chase to Buy Bank One,‖ Wall Street

Journal, January 15, 2004 (in ABI/INFORM Global)

John Wilke, ―Price-Fixing Investigations Sweep Chemical Industry,‖ Wall Street Journal,

June 22, 2004 (in ABI/INFORM Global)



Oct. 23 Oligopoly Strategies--- Fearful and Rival; Price Discrimination; Alternative Goals

McConnell & Brue Ch. 32

Hirschey Ch. 15

David Wessel and Susan Carey, ―Red Eyes--For U.S. Airlines, a Shakeout Runs Into

Heavy Turbulence,‖ Wall Street Journal, September 19, 2005 (in ABI/INFORM

Global)

Jonathan Baker, ―Can Antitrust Keep Up? Competition Policy in High-Tech Markets,‖

Brookings Review, Winter 2001, pp. 16 – 19 (in Business Source Premier)

Ann Zimmerman, Joseph Pereira, and Queena Sook Kim, ―Wal-Mart Fires the First Shot

In Holiday-Toy Pricing War,‖ Wall Street Journal, November 19, 2003

(in ABI/INFORM Global)

Janet Adamy, ―Grocery Stores Cut Out the Weekly Special,‖ Wall Street Journal,

July 20, 2005 (in ABI/INFORM Global)

Scott Woolley, ―I Got It Cheaper Than You,‖ Forbes, November 2, 1998, pp. 82, 84

(in Business Source Premier)



Oct. 30 SECOND EXAM---Wednesday, November 1



Measuring Macroeconomic Activity---Output and Income, Prices, Growth, Labor Market Activity,

International Transactions; Macro Models

McConnell & Brue Ch. 7, Ch. 8

Dornbusch, Fischer, & Startz Ch. 1, Ch. 2, Ch. 7

―The E-Biz Surprise,‖ Business Week, May 5, 2003 (in Lexis Nexis Academic Universe)

Jon Hilsenrath, ―Production Numbers—Behind Surging Productivity: The Service Sector

Delivers,‖ Wall Street Journal, Nov. 7, 2003 (in ABI/INFORM Global)

Jon Hilsenrath and Kemba Dunham, ―Higher-Pay Jobs Make a Comeback,‖ Wall Street

Journal, May 10, 2004 (in ABI/INFORM Global)

Jon Hilsenrath and Sholnn Freeman, ―Affluent Advantage--So Far, Economic Recovery

Tilts to Highest -Income Americans,‖ Wall Street Journal, July 20, 2004 (in

ABI/INFORM Global)

Jon Hilsenrath, ―Scant Job Growth Forces Jobless to Stop Looking Despite Recovery,‖

Wall Street Journal, January 12, 2004 (in ABI/INFORM Global)

Greg Hitt and Murray Hiebert, ―U.S. Trade Deficit Ballooned to a Record in 2005,‖

Wall Street Journal, February 11, 2006 (in ABI/INFORM Global)

Economic Analysis For Managers---Syllabus ------DAY Page Five



Week Beginning:



Nov. 6 Income Determination--- Equilibrium and Gaps

McConnell & Brue Ch. 9, Ch. 10

Dornbusch, Fischer, & Startz Ch. 9, Ch. 13, Ch. 14

Joi Preciphs, ―Consumers Spent More in December as Savings Fell,‖ Wall Street

Journal, January 31, 2006 (in ABI/INFORM Global)

G. Thomas Sims, ―Europe Sees Limits on Growth,‖ Wall Street Journal, July 22, 2004

(in ABI/INFORM Global)

David Wessel and Gerald Seib, ―Changing Course--How Reagan Recast Debate on

Markets, Taxes--and Deficits,‖ Wall Street Journal, June 7, 2004 (in

ABI/INFORM Global)



Nov. 13 The Multiplier Process and Fiscal Policy Applications; Money Demand

McConnell & Brue Ch. 12, Ch. 13

Dornbusch, Fischer & Startz Ch. 15

Greg Ip and John McKinnon, ―Bush‘s Tax Cut: Victory—At a Cost; Congressional

Compromise Would Boost Growth---And Widen Deficits,‖ Wall Street

Journal, May 23, 2003 (in ABI/INFORM Global)

Shailagh Murray, ―Tax Cut Plan Heads to Final Vote; Individuals and Businesses Would

Receive Quick Relief from $350 Billion Proposal,‖ Wall Street Journal, May 23,

2003 (in ABI/INFORM Global)

John McKinnon, ―Tax Cut Plan Heads to Final Vote; Bill‘s Price Tag Could Climb To as

Much as $800 Billion If Provisions Are Renewed,‖ Wall Street Journal, May

23, 2003 (in ABI/INFORM Global)

Deborah Lagomarsino and John McKinnon, ―Budget Deficit Doubles Level Hit in

Previous Year,‖ Wall Street Journal, Oct. 21, 2003 (in ABI/INFORM Global)

David Rogers, ―Senate Must Raise U.S. Debt Ceiling Alongside Tax Cut,‖ Wall Street

Journal, May 23, 2003 (in ABI/INFORM Global)

Deborah Solomon, ―Narrower Deficit is Likely This Year,‖ Wall Street Journal,

July 12, 2006 (in ABI/INFORM Global)



Money Creation and the Multiplier for Deposits; Monetary Policy; General Equilibrium Analysis

McConnell & Brue Ch. 14, Ch. 15

Dornbusch, Fischer, & Startz Ch. 16

Mark Whitehouse and Craig Karmin, ―Markets Brace for Japan‘s Shift on Monetary

Policy,‖ Wall Street Journal, March 1, 2006 (in ABI/INFORM Global)

Yuka Hayashi ―Delicate Moment--On Verge of Historic Rate Shift, Japan Bank Chief

Faces Scandal,‖ Wall Street Journal, July 13, 2006 (in ABI/INFORM Global)

G. Thomas Sims, ―The Outlook—Swiss Central Bank Leaves Itself with Limited Room

To Maneuver,‖ Wall Street Journal, Aug. 11, 2003 (in ABI/INFORM Global)

G. Thomas Sims, ―European Bank Defends Plan to Raise Rates,‖ Wall Street Journal,

November 22, 2005 (in ABI/INFORM Global)

Guy Chazan, ―Russia Passes a Banking Test,‖ Wall Street Journal, July 21, 2004 (in

ABI/INFORM Global)

Greg Ip, Sebastian Moffett, and Jon Hilsenrath, ―Era of Low Rates Around the Globe

May Soon Be Over,‖ Wall Street Journal, Oct. 13, 2005 (ABI/INFORM Global)

Greg Ip, ―Banker in Chief--Bernanke is Named to Lead the Fed,‖ Wall Street Journal,

October 25, 2005 (in ABI/INFORM Global)

Jon Hilsenrath, ―Banker in Chief--Nominee May Favor Explicit Embrace of Inflation

Target,‖ Wall Street Journal, October 25, 2005 (in ABI/INFORM Global)

Greg Ip, ―Fed Raises Rates by ¼ Point, Hints More May Come,‖ Wall Street Journal,

March 29, 2006 (in ABI/INFORM Global)

Economic Analysis For Managers---Syllabus ------DAY Page Six





Week Beginning:





Nov. 20 NO CLASS---Thanksgiving Holiday (Enjoy!)





Nov. 27 Monetary and Fiscal Policy Interactions, Uncertainties, and Controversies

McConnell & Brue Ch. 16, Ch. 17, Ch. 19

Dornbusch, Fischer & Startz Ch. 11, Ch. 12, Ch. 18, Ch. 8, Ch. 20

Justin Fox, ―What in the World Happened to Economics?‖ Fortune, March 15, 1999

pp. 91 – 102 (in Business Source Premier)



Dec. 4 FINAL EXAM---over entire macroeconomics section of the course---Friday, December 8

(Note that you will have three hours for taking the exam----10:30 am - 1:30 pm)