Connections

Why does Canadian wheat rot in grain silos when it could feed hungry people in droughtplagued countries? Why doesn't the price at the gas pump reflect the changing cost of crude oil? How can I lose when I am offered a free concert ticket?

These are some of the questions raised and answered in Microeconomics.

Microeconomics is the study of how individuals, households and companies make decisions about how to spend their money in the marketplace. These issues are complicated, even if the general concept of supply and demand is not. "It's a challenging course," admits student Rachel Martin.

Microeconomics is a compulsory introduction course in four core Business School diploma programs - Accounting, Business Administration, Business Management and Marketing - as well as in all Business degree programs. First-year students study companies and the market system in which they function. They learn how individuals operate in and affect this system, with a focus on consumer demand, supply, prices, the role of business, and the mechanisms of particular industries, such as oil. The course is a prerequisite for Macroeconomics, a later course that addresses questions on a larger economic scale.

Weighty textbooks have been written on the subject, but to bring home the concepts and apply them to real life, professors like Dr. Pierre-Pascal Gendron look to business articles and daily events. "If I find an interesting article in the business press that stresses a microeconomic principle, I give my students the article. Or I just think of something relevant," says Pierre-Pascal. "I ask them what is happening in the commodity markets, the effects of the price of oil and gas, and taxes like the GST and excises."

"Sometimes the problems Pierre-Pascal introduces are funny," says Grander Ndiweni, noting one in which the professor asked what would happen if a company sold left and right skis separately. Learning about both complementary products and the crosselasticity of demand, she realized that if the price of the left ski was too high, the company would not sell either. "I see this principle all the time in my life. I see it in the cost of printers and ink, and cellphones and time charges."

"Pierre-Pascal asked us about the real cost of a free Fifty Cent concert if it was on the same night as a $40 Snoop Dogg concert, and Snoop Dogg was our favourite performer. Going to the free concert would actually cost us the Snoop Dogg performance. So when I consider buying something, like a TV for $200, I have to think about all the other things I could buy with that money. A dress? Rent?"

Always looking for ways to match student interests with the material, the class looks at the LCBO and The Beer Store as examples of businesses with little or no competition. From this they discuss the market structure and laws supporting the industry.

The author of numerous publications - including a book entitled The VAT in Developing and Transitional Countries, written with a colleague at the University of Toronto's Joseph L. Rotman School of Management - Pierre-Pascal uploads concepts and theories to the course's website and passes handouts to the students when he feels the textbook does not adequately explain an issue.

To see if the students have absorbed the lesson, he gives them spot quizzes applying textbook knowledge to real world events. The class is broken into teams to answer a question written on the board. They get 15 to 20 minutes to write a few paragraphs, prepare bullet points and construct diagrams. "We don't know when these quizzes will come," says Rachel Martin. "It's a kind of checkup on what we are learning."

Pierre-Pascal says it's a way to bring the world of microeconomics alive.