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Regular version of the site

Introduction to Economics

2019/2020
Academic Year
ENG
Instruction in English
8
ECTS credits
Course type:
Elective course
When:
2 year, 1-4 module

Instructors

Course Syllabus

Abstract

Introduction to Economics is a two-semester course for second-year undergraduate students. The goal of this course is to introduce students to the fundamentals of economic analysis and reasoning, which will help them to understand and approach more specialized/applied courses, projects or tasks related to economics. To put it briefly, economics is the study of how society uses its scarce resources. Therefore, its aim is to provide insight into the processes governing the production, distribution and consumption of goods and services in a market economy. One of the key features of economics as opposed to other social sciences is that the principles of economic analysis are (i) simple and (ii) relatively well defined, so they can be used to analyze human behaviour in many different areas of life. Economics is, therefore, much more of a “way of thinking”. And although the course provides some information that is descriptive (e.g., how the banking system works or how one calculates the value of economic output of a country) its main focus is on introducing concepts and models which are used as tools of economic analysis. Concepts such as opportunity cost and approaches such as marginal analysis can be applied widely and prove useful in understanding various aspects of society and people’s lives. Pre-requisites: Students are expected to be competent in basic algebra and calculus and be able to plot and manipulate simple functions.
Learning Objectives

Learning Objectives

  • To introduce students to the main analytical tools which are used in economic analysis.
  • To introduce students to the main conclusions derived from economic analysis, and develop their understanding of their organizational and policy implications.
  • To enable students to understand and participate in debates on economic matters, choosing proper frameworks of economic analysis for specific cases.
Expected Learning Outcomes

Expected Learning Outcomes

  • Students will be able to define the main concepts and describe the models and methods used in economic analysis.
  • Students will be able to formulate real-world issues in the language of economic concepts and models.
  • Students will be able to apply and use economic concepts and models to analyze real-world issues.
  • Students will be able to assess the potential and limitations of the models and methods used in economic analysis.
Course Contents

Course Contents

  • Economics, the economy and tools of economic analysis.
    Scarcity. Rationality. The production possibility frontier and opportunity cost. Absolute and comparative advantage. Markets. Microeconomics and macroeconomics. Positive and normative economics. Models and theory.
  • Consumer choice.
    Preferences, indifference curves and utility function. Utility maximisation and choice. Consumer choice and demand. Comparative statics: income and price changes. Substitution and income effects. The individual demand and elasticity. Complements and substitutes. Cash transfers versus transfers in kind. Inverse demand curve and consumer’s surplus.
  • The firm.
    Firm’s objective. Production function, returns to scale, the law of diminishing marginal returns. Cost minimization: isoquants and isocost lines. Costs in the short run and in the long run. Firm’s decision in the short run. Firm’s decision in the long run.
  • Perfect competition.
    Market supply in the short-run. Market demand. Equilibrium in the short run. Entry and exit, short-run and long-run equilibrium. Comparative statics. Equilibrium and Efficiency.
  • Monopoly.
    Pure monopoly. Natural monopoly. Social cost of monopoly. Regulation of natural monopoly.
  • Market structure and imperfect competition.
    Monopolistic competition. Basic concepts of game theory. Oligopoly: Cournot duopoly, Bertrand model, Stackelberg model. Strategic entry deterrence.
  • Inputs to production: the labour market.
    Utility maximisation and the supply of labour. Profit maximisation and the demand for labour. Economic rent. Monopsony. Factors affecting labour market equilibrium (unions, minimum wages and others).
  • General equilibrium and welfare economics.
    Exchange economy and Edgeworth box. General equilibrium. Efficiency in exchange economy. Equilibrium and efficiency: welfare theorems. Equity and efficiency. Market failures: the problem of externalities and possible solutions.
  • Missing markets and the role of government.
    Market failures: the problem of externalities and possible solutions. Coase theorem. Government interventions, public goods, taxation; Income distribution, the Gini coefficient and Lorenz curves.
  • Introduction to Macroeconomics.
    The problem of aggregation, the circular flow of income, leakages and injections, national income accounting, real and nominal gross domestic product (GDP).
  • Output and aggregate demand: Keynesian cross model.
    Actual and potential output, consumption, investment, income determination, equilibrium, the multiplier, the paradox of thrift, consumption and taxation, the government budget, automatic stabilizers (the financing of government), the multiplier and taxation, the role of fiscal policy, imports and exports, the multiplier in an open economy.
  • Money and banking.
    The role of money, real balances, the liquidity preference approach and the demand for money (liquid assets), commercial banks and the supply of money (banks and the various multipliers), central banks and monetary control, equilibrium in the money market.
  • Monetary and fiscal policy in the short-run.
    Goods market equilibrium and IS curve, equilibrium in the money market and LM curve, the IS-LM model, monetary and fiscal policies in a closed economy.
  • Aggregate demand and aggregate supply.
    Keynesian and classical assumptions regarding wages and prices, aggregate supply in the long run and the short run, the effects of exogenous demand and supply shocks.
  • Inflation.
    Inflation targeting, the Taylor rule, the quantity theory of money, the Phillips curve in the long-run and the short-run, stagflation and the role of expectations, costs of inflation.
  • Unemployment.
    Types of unemployment, voluntary and involuntary unemployment, causes of unemployment, private and social costs, hysteresis.
  • Open economy macroeconomics.
    The foreign currency market, exchange rate regimes, the balance of payments, capital mobility, the rate of interest and the price of foreign currency. The effects of fiscal and monetary policies under fixed and floating exchange rates with and without capital mobility.
  • Supply-side economics and economic growth.
    Growth in potential output, the steady state, technological progress, capital accumulation, convergence, endogenous growth, policies to promote growth.
Assessment Elements

Assessment Elements

  • non-blocking 1st semester Quizzes
    in-class quizzes (typically written at the start of each class).
  • non-blocking 2nd semester Quizzes
    in-class quizzes (typically written at the start of each class).
  • non-blocking 1st Module Midterm Test
  • non-blocking 3rd Module Midterm Test
  • non-blocking Winter Exam
  • non-blocking Spring Test
  • non-blocking Home Assignments
  • non-blocking University of London Exam
Interim Assessment

Interim Assessment

  • Interim assessment (2 module)
    0.29 * 1st Module Midterm Test + 0.2 * 1st semester Quizzes + 0.51 * Winter Exam
  • Interim assessment (4 module)
    G= 0.4*(mean (Spring Test+University of London Exam))+ 0.25*3rd Module Midterm Test+ 0.2*2nd semester Quizzes+ 0.15*Home Assignments
Bibliography

Bibliography

Recommended Core Bibliography

  • Economics, Begg, D., 2011

Recommended Additional Bibliography

  • Blanchard, O., Amighini, A., & Giavazzi, F. (2013). Macroeconomics: A European Perspective (Vol. 2nd ed). Harlow: Pearson. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1418008
  • Intermediate microeconomics : a modern approach, Varian H. R., 1999
  • Lipsey, R., & Chrystal, A. (2015). Economics. Oxford University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.b.oxp.obooks.9780199676835
  • Mankiw, N. G. (DE-588)120973626, (DE-576)164048383. (2000). Macroeconomics / N. Gregory Mankiw. New York, NY: Worth. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edswao&AN=edswao.07890529X