COURSE OVERVIEW
Course Description (optional)
The course examines how individuals and firms make decisions by weighing up costs and
benefits, and how the interaction of their decisions leads to market and social outcomes. The
model of market supply and demand is employed to examine the effects of taxes, subsidies,
and other government interventions in market activity. The implications of different market
structures, including perfect competition and monopoly, are examined. Public goods,
externalities and common resources are key examples of cases in which private markets may
yield socially sub-optimal outcomes. Such cases are examined and the role of government
policy in correcting for these is discussed.
Learning Outcomes
On satisfying the requirements for this course, students will:
1. understand the economic principles that underpin modern economics;
2. have a basic understanding of the way budget constrained individuals make optimising
choices and the way resources are allocated in private markets;
3. understand the role of different trading arrangements in markets and their impact on prices
and the quantities traded;
4. use basic economic principles to evaluate the effects of government interventions and other
exogenous changes in markets;
5. be able to evaluate the effects of government interventions in markets; and
6. present clearly written analysis of economic issues and problems.
Assessment Summary
Assessment Task Value Due Date Date for Return
of Assessment
Linked Learning
Outcomes
(optional)
1. Policy Brief
(Approx. 2,000
words).
15 % 27 May 2016. Available for
collection by
appointment from
11 June 2016
onwards.
All learning
outcomes.
2. Complete all
required
assessment tasks
for ECON 1101.
85 % Various. See ECON 1101
course outline.
All learning
outcomes.
3 | THE AUSTRA LIAN NATIONAL UNIVERSITY
Feedback
Staff Feedback
Students will be provided with written feedback on their microeconomic policy brief
assignment. The ECON 1101 course outline should be consulted for information about the
feedback methods for other assessment items.
Student Feedback
ANU is committed to the demonstration of educational excellence and regularly seeks feedback
from students. One of the key formal ways students have to provide feedback is through Student
Experience of Learning Support (SELS) surveys. The feedback given in these surveys is
anonymous and provides the Colleges, University Education Committee and Academic Board with
opportunities to recognise excellent teaching, and opportunities for improvement.
For more information on student surveys at ANU and reports on the feedback provided on ANU
courses, go to
http://unistats.anu.edu.au/surveys/selt/students/ and
http://unistats.anu.edu.au/surveys/selt/results/learning/
Policies
ANU has educational policies, procedures and guidelines, which are designed to ensure
that staff and students are aware of the University’s academic standards, and implement
them. You can find the University’s education policies and an explanatory glossary at:
http://policies.anu.edu.au/
Students are expected to have read the Student Academic Integrity Policy before the
commencement of their course.
Other key policies include:
• Student Assessment (Coursework)
• Student Surveys and Evaluations
Recommended Resources
There is no required textbook for this unit. A reading guide is provided at the end of this course
outline. The readings in that guide will, wherever possible, be made available online through links
from the Wattle site for this course or in hardcopy through short-loan at the Chifley Library at ANU.
4 | THE AUSTRA LIAN NATIONAL UNIVERSITY
COURSE SCHEDULE
ASSESSMENT REQUIREMENTS
The ANU is using Turnitin to enhance student citation and referencing techniques, and to
assess assignment submissions as a component of the University’s approach to managing
Academic Integrity. For additional information regarding Turnitin please visit the ANU
Online website.
Students may choose not to submit assessment items through Turnitin. In this instance
you will be required to submit, alongside the assessment item itself, copies of all
references included in the assessment item.
Assessment Tasks
Assessment Task 1: Microeconomic Policy Brief Assignment
Details of task:
Choose a microeconomic policy issue and write a “policy brief” on this issue. The policy brief
should identify the problem that might need addressing, examine the causes of this problem,
assess the significance of the problem, suggest some potential solutions to the problem, and
discuss the advantages and disadvantages of those solutions. You might consider the applied
topics that are covered in ECON 1101 and in this supplementary set of classes for ECON 7073
when choosing the topic of your policy brief, but you are not restricted to just those topics. You
should confirm with Dr Eldridge that your proposed topic is appropriate before beginning work on it.
Week Tentative Summary of Activities
2 to 7 Non-Technical Overview of Welfare Economics.
Non-technical means a combination of diagrams, logic and basic algebra.
No calculus will be required. Topics might include: Marshallian consumer
surplus, producer surplus, diagrammatic derivation of Marshallian and
Hicksian Demand Curves, equivalent variation, compensating variation,
Pareto improvements and the potential gains from trade, Pareto
efficiency, Kaldor-Hicks efficiency, distribution and equity, the first and
second fundamental theorems of welfare economics, market failures,
Arrow’s impossibility theorem, Sen’s impossibility theorem, the Condercet
paradox, and the median voter theorem.
8 to 13 Addressing Externalities.
The nature of externalities, the various types of externalities, Pigouvian
taxation, the Coase Theorem, incomplete information and arbitrary
standards, emission taxes, tradable emission permits, possible
applications to climate change policy, air pollution, water allocation and
fisheries management.
5 | THE AUSTRA LIAN NATIONAL UNIVERSITY
Word limit: No fixed limit, but approximately 2000 words is suggested as a guideline.
Value: 15 %.
Due date: Friday 27 May 2016 at 5:00 pm.
Assessment Task 2: The assessment tasks for ECON 1101.
Details of task: See the ECON 1101 course outline for details.
Assignment submission
Online Submission: Assignments are submitted using Turnitin in the course Wattle site.
You will be required to electronically sign a declaration as part of the submission of your
assignment. Please keep a copy of the assignment for your records.
Extensions and penalties
Extensions and late submission of assessment pieces are covered by the Student Assessment
(Coursework) Policy and Procedure.
The Course Convener may grant extensions for assessment pieces that are not examinations or
take-home examinations. If you need an extension, you must request it in writing on or before
the due date. If you have documented and appropriate medical evidence that demonstrates you
were not able to request an extension on or before the due date, you may be able to request it
after the due date.
Late submission of assessment tasks without an extension are penalised at the rate of 5% of the
possible marks available per working day or part thereof. Late submission of assessment tasks
is not accepted after 10 working days after the due date, or on or after the date specified in the
course outline for the return of the assessment item.
Late submission is not accepted for take-home examinations.
Returning assignments
The graded versions of the policy briefs that are written by students will be available for
collection by appointment fourteen days after the submission deadline.
Resubmission of assignments
No resubmission of assignments is allowed in this course.
Referencing requirements
All sources should be cited appropriately according to a widely used convention.
SUPPORT FOR STUDENTS
The University offers a number of support services for students. Information on these is
available online from http://students.anu.edu.au/studentlife/
6 | THE AUSTRA LIAN NATIONAL UNIVERSITY
READING GUIDE
Topic 1: A Non-Technical Overview of Welfare Economics
Core Readings
• Alchian, AA, and WR Allen (1983), Exchange and production: Competition, coordination
and control (third edition), Wadsworth, USA: Chapters 1-4 (pp. 1-86).
• Abelson, P (2012), Public economics: Principles and practice (third edition), McGraw-Hill,
China: Chapters 3, 4, 6, 7 and 9 (pp. 40-71, 92-130 and 154-166).
• Eldridge, D (2004), “Economic Efficiency”, Network Economics Consulting Group
Briefing Note, Network Economics Consulting Group, Canberra, 10 August (???).
Unpublished.
• Heyne, PR (1983), The economic way of thinking (fourth edition), Science Research
Associates, USA: Chapters 1-6 (pp. 1-119).
• Hirshleifer, J (1988), Price theory and applications (fourth edition), Prentice-Hall, USA:
Chapters 1-5, Chapter 7 (Section E) and Chapter 15 (pp. 1-157, 204-212 and 459-489).
• Johansson, P-O (1991), An introduction to modern welfare economics, Cambridge
University Press, Great Britain: Chapters 1-5 Chapter 6 (Section 4), Chapter 7 (Section 6)
and the Appendix (pp. 1-70, 79-81, 99-101 and 147-168).
• Varian, HR (1987), Intermediate microeconomics: A modern approach, WW Norton and
Company, USA: Chapters 1-6, 8-9, 15-17 and 28-30 (pp. 1-113, 132-169, 242-308 and 480-
541).
Supplementary Readings
• Bator, FM (1957), “The simple analytics of welfare maximization”, The American
Economic Review 47(1), March, pp. 22-59.
• Bator, FM (1958), “The anatomy of market failure”, The Quarterly Journal of Economics
72(3), August, pp. 351-379.
• Hilmer, FG, MR Rayner and GQ Taperell (1993), National competition policy, The Final
Report of the Committee of Inquiry into National Competition Policy, The Australian
Government Publishing Service, Canberra: pp. 2-6.
• Productivity Commission (2013), On efficiency and effectiveness: Some definitions,
Productivity Commission Staff Research Note, Productivity Commission, Canberra.
• Sen, A (1970), “The impossibility of a Paretian liberal”, The Journal of Political Economy
78(1), January-February, pp. 152-157.
7 | THE AUSTRA LIAN NATIONAL UNIVERSITY
Topic 2: Addressing Externalities
Core Readings
• Alchian, AA, and WR Allen (1983), Exchange and production: Competition, coordination
and control (third edition), Wadsworth, USA: Chapter 5 (Section on Private Property
Rights) (pp. 91-95).
• Abelson, P (2012), Public economics: Principles and practice (third edition), McGraw-Hill,
China: Chapters 11 and 13 (pp. 186-204 and 222-238).
• Barthold, TA (1994), “Issues in the design of environmental excise taxes”, The Journal of
Economic Perspectives 8(1), Winter, pp. 133-151.
• Culyer, AJ (1971), “The nature of the commodity “health care” and its efficient allocation”,
Oxford Economic Papers (New Series) 23(2), July, pp. 189-211.
• Farrell, J (1987), “Information and the Coase theorem”, The Journal of Economic
Perspectives 1(2), Autumn, pp. 113-129.
• Fisher-Vanden, K, and S Olmstead (2013), “Moving pollution trading from air to water:
Potential, problems. and prognosis”, The Journal of Economic Perspectives 27(1), Winter,
pp. 147-172.
• Fullerton, D, and R Stavins (1998), “How economists see the environment”, Nature 395, 1
October, pp. 433-434.
• Goulder, LH (2013), “Markets for pollution allowances: What are the (new) lessons?”, The
Journal of Economic Perspectives 27(1), Winter, pp. 87-102.
• Hahn, RW (1989), “Economic prescriptions for environmental problems: How the patient
followed the doctor’s orders”, The Journal of Economic Perspectives 3(2), Spring, pp. 95-
114.
• Halteman, J (2005), “Externalities and the Coase theorem: A diagrammatic presentation”,
The Journal of Economic Education 36(4), Fall, pp. 385-390.
• Heyne, PR (1983), The economic way of thinking (fourth edition), Science Research
Associates, USA: Chapters 13-14 (pp. 245-292).
• Hirshleifer, J (1988), Price theory and applications (fourth edition), Prentice-Hall, USA:
Chapter 15 (pp. 459-489).
• Ruff, LE (1970), “The economic common sense of pollution”, The Public Interest 19,
Spring, pp. 69-85.
• Stavins, RN (1998), “What can we learn from the grand policy experiment? Lessons from
SO2 allowance trading”, The Journal of Economic Perspectives 12(3), Summer, pp. 69-88.
• Varian, HR (1987), Intermediate microeconomics: A modern approach, WW Norton and
Company, USA: Chapters 31-32 (pp. 542-587).
8 | THE AUSTRA LIAN NATIONAL UNIVERSITY
Supplementary Readings
• Australian Greenhouse Office (1999), Establishing the boundaries, National Emissions
Trading Discussion Paper 1, The Commonwealth of Australia, Canberra, March.
• Australian Greenhouse Office (1999), Issuing the permits, National Emissions Trading
Discussion Paper 2, The Commonwealth of Australia, Canberra, June.
• Baumol, WJ, and WE Oates (1971), “The use of standards and prices for protection of the
environment”, The Swedish Journal of Economics 73(1), March, pp. 42-54.
• Buchanan, JM, and WC Stubblebine (1962), “Externality”, Economica (New Series)
29(116), November, pp. 371-384.
• Coase, RH (1960), “The problem of social cost”, The Journal of Law and Economics 3,
October, pp. 1-44.
• Common, MS (1989), “The choice of pollution control instruments: Why is so little notice
taken of economists’ recommendations?”, Environment and Planning A 21(10), pp. 1297-
1314.
• Cornwell, A, J Travis and D Gunasekera (1997), Framework for greenhouse emission
trading in Australia, Industry Commission Staff Research Paper, The Australian
Government Publishing Service, Canberra, December.
• Hardin, G (1968), “The tragedy of the commons”, Science (New Series) 162(3859), 13
December, pp. 1243-1248.
• Productivity Commission (2007), Productivity Commission submission to the Prime
Ministerial taskforce on emissions trading, Productivity Commission, Melbourne, March.
• McKibben, WJ, and PJ Wilcoxen (2002), “The role of economics in climate change policy”,
The Journal of Economic Perspectives 16(2), Spring, pp. 107-129.
• Samuelson, PA (1955), “Diagrammatic exposition of a theory of public expenditure”, The
Review of Economics and Statistics 37(4), November, pp. 350-356.
• Schmalensee, R, PL Joskow, AD Ellerman, JP Montero and EM Bailey (1998), “An interim
evaluation of sulfer dioxide emissions trading”, The Journal of Economic Perspectives
12(3), Summer, pp. 53-68.
• Schmalensee, R, and RN Stavins (2013), “The SO2 allowance trading system: The ironic
history of a grand policy experiment”, The Journal of Economic Perspectives 27(1), Winter,
pp. 103-122.
• Tietenberg, T (2003), “The tradable-permits approach to protecting the commons: Lessons
for climate change”, The Oxford Review of Economic Policy 19(3), pp. 400-419.
9 | THE AUSTRA LIAN NATIONAL UNIVERSITY
Advice on Writing for Economists
• Burchfield, RW (2004), Fowler’s modern English usage (revised third edition), Oxford
University Press, Great Britain.
• Fullerton, Don (Undated), General guidelines for writing research papers, Available online
at <http://www.business.uiuc.edu/dfullert/writing-general.pdf>.
• Fullerton, Don (Undated), Specific guidelines for writing research papers, Available online
at <http://www.business.uiuc.edu/dfullert/writing-specific.pdf>.
• McCloskey, D (1985), “Economical writing”, Economic Inquiry 23(2), April, pp. 187-222.
• McCloskey, DN (2000), Economical writing (second edition), Waveland Press, USA.
• Peters, P (2004), The Cambridge guide to English usage, Cambridge University Press,
Thailand.
• Roberts, R (Editor) (2012), New Oxford style manual, Oxford University Press, Great
Britain.
• Sinclair, F (2010), Australian grammar handbook: An armchair reference to correct
grammar, spelling and punctuation (second edition), Coolabah Publishing, Australia.
• Soanes, C and A Stevenson (Editors) (2006), The concise Oxford English dictionary
(revised eleventh edition), The thumb index version of the revised eleventh edition, Oxford
University Press, Great Britain.
– Or some other decent dictionary.
• Strunk, W Jr and EB White (2000), The elements of style (fourth edition), The International
Paperback Edition with a Foreword by Roger Angell, Allyn and Bacon, USA.
– Note that EB White is the author of Charlotte’s web.
• Tredinnick, M (2006), The little red writing book, The University of New South Wales
Press, Australia.
• Tredinnick, M (2008), The little green grammar book, The University of New South Wales
Press, Australia.
• Waite, M (Editor) (2002), The concise Oxford thesaurus (second edition), Oxford
University Press, Great Britain.
– Or some other decent thesaurus.
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