Principles of Economics

BRIEF COURSE DESCRIPTION

The purpose of this course is to provide students an introduction to economics especially related to micro and macro economic theory and issues with a proper understanding of core concepts. Microeconomics examines how consumers and firms make decisions and how they interact with each other in markets. The major areas of focus will be supply and demand analysis. On the other hand, Macroeconomics deals with broad economic aggregates such as national income, the overall level of prices, unemployment and the money supply. The major areas of focus will be measurement of gross national product, consumption function, saving, the inputs market, goods market, money market, and economic growth.  Business cycles will also be discussed. After defining key variables such as output, prices, inflation, unemployment, and exchange rate etc., we will develop various theoretical frameworks to formalize the relationships between these variables.  The equilibrium AD-AS model will be covered with some basic applications. We will also discuss some of the readings and articles from specified journals, surveys, reports and newspapers especially on Pakistan’s Economy. This course aims to provide a solid understanding of basic economic principles and the ability to apply these tools and ideas in the fields of economics, business and management.

COURSE OBJECTIVES

  • By the end of the course, students will possess a clear understanding of how the economic theory of both micro & macroeconomics explains the economic problems faced by individual economic agents such as consumers, firms and factors of production as well as the situation of an economy. Upon completion of the course it is expected that students should be able to:
  • understand the basic concepts of economics and various issues in the theory of micro & macroeconomics at a level appropriate for a first year business studies at graduate level
  • understand the microeconomic models of demand and supply, consumer and firm’s behavior and market structures
  • understand the basic structure of the economy
  • understand the forces determining macroeconomic variables such as inflation, unemployment, interest rates, and the exchange rate
  • appreciate the role of monetary and fiscal policies in solving macroeconomic problem
  • establish a framework of basic economic theory which can be extended and applied at later stages of the degree program.
  • understand the economic related news and issues
  • provide an insight into the major policy debates in the field of  business and economics

Prerequisite(s): None

Recommended Text Books:

S.No. Title Author(s) Assigned Code
1 Economics, 17th  Edition, McGraw Hill/Irwin Publishing McConnel, Campbell and Stanley Brue Book 1
2 Principles of Economics, 4th Edition, Harcourt Publishers International Mankiw, N. Gregory Book 2

CONTENTS

Chapter No. TOPIC/CHAPTER TITLE TOPICS COVERED
 

Ch 1 (Book 2)

 

Introduction to the economics and economy

The economic perspective (scarcity & choice, rational behavior, marginalism), why study economics, economic methodology, microeconomics and macroeconomics, pitfalls to sound reasoning, graphs and their meaning
 

Ch 1 (Book 1)

 

 

Limits, Alternative and choices

 

The foundation of economics (unlimited wants/scarce resources), employment and efficiency (production possibility curve, opportunity cost, productive & allocative efficiency), unemployment, growth and the future, circular flow model, economic systems
 

 

 

Ch 3 (Book1)

 

 

Demand and Supply

 

Markets, Demand (law of demand, the demand curve, market demand, change(s) in demand and quantity demanded), Supply (law of supply, the supply curve, determinants of supply, change(s) in supply and quantity demanded), market equilibrium (surpluses, shortages, equilibrium price and quantity, changes in equilibrium), Government-Set Prices (price ceilings & price floors )
 

 

 

Ch 19 (Book2&1)

 

 

 

The Theory of Consumer Choice/Behavior

 

Consumer’s objective, Rationality, Utility concepts, law of diminishing marginal utility, consumer choice, utility maximizing rule, utility maximization and the demand curve, budget constraint,  preferences, indifference curves and their properties, consumer optimization, income and substitution effects, derivation of demand curve, some applications, Do people really think this way
 

 

Ch 20 (Book1)

 

The Costs of Production

 

Economic costs (explicit and implicit costs, economic profit, short run & long run), Short-Run Production relationships), Short-Run Production Costs, Long-Run Production Costs, Applications & Illustrations
Ch 6 (Book1)  Ch 2 (Book2)  

 

Measuring Domestic Output and National Income

Assessing the Economy’s performance, GDP (conceptual issues and measurement),  expenditure approach, income approach, other national accounts (NDP, NI, DPI etc.), Nominal GDP versus Real GDP, Shortcomings, cost of living, measuring joblessness
Ch 7 (Book1) Introduction to Economic Growth and Instability  

Economic growth, , Business cycle, Unemployment, Inflation

 

 

 

Ch 10 (Book1)

 

 

Aggregate Demand and Aggregate Supply

 

Aggregate Demand Curve, Aggregate Supply in the Long Run, Aggregate Supply in the Short Run, Equilibrium and changes in equilibrium (Demand Pull Inflation, Recession & Cyclical Unemployment, Cost Push inflation, Full Employment with Price-Level Stability )
 

Ch 11 (Book1)

 

 

Fiscal Policy

 

Meaning, Expansionary Fiscal Policy, Contractionary  Fiscal Policy, Financing of Deficits, Problems, Criticisms and Complications
Ch 14 (Book1) Monetary Policy

 

Meaning, Tools, Monetary Policy, Real GDP and the Price Level

Please note: This is a proposed schedule only and may be varied at the discretion of the instructor to give a greater or lesser degree of emphasis to particular topics.

Recommended Practical Topics

1 Economics: An Introduction and Vocabulary”, Harvard Business School. Rukstad, Michael G.
2 The Great Depression: Causes and Impact”, Harvard Business School. McCraw, Thomas K.
3 Pakistan Economic Survey, Ministry of Finance Government of Pakistan (2008)
4 State Bank Annual Report, State Bank of Pakistan, Karachi Government of Pakistan (2008)
5 There are several web sites that have interesting economic/business information and analysis. These are some useful international and Pakistani web sites/links for your interest and research in the course. www.pakistan.gov.pk (Government of Pakistan), www.statspak.gov.pk (Statistics Division)

www.finance.gov.pk (Finance Division)

www.mopd.gov.pk (Planning and Development Division)

www.sbp.org.pk (State Bank of Pakistan)

www.pide.org.pk (Pakistan Institute of Development Economics), www.ft.com (Financial Times)

www.businessweek.com (Business Week)

 

© 2017. ALL RIGHTS RESERVED. THE UNIVERSITY OF FAISALABAD.