Principles of Economics

Syllabus

Course syllabus: Lectures/seminars topics WEEK 1 Introduction to economics. Definition of economics. Micro and macroeconomics. Two approaches to economics (positive and normative economics). Principles of economic thinking, economic way of thinking, economic laws, basic issues of the organization of the economy and their solution in different economic systems. Production possibility frontier and its applications. WEEK 2 Market mechanism. Market and market system. Demand, supply and equilibrium price. Market mechanism and its functioning. Market failures, externalities, and public goods. Demand and demand curve, law of diminishing demand. Factors influencing the size of demand and the shift of the demand curve. Supply and supply curve, law of increasing supply. Factors influencing the size of supply and the shift of the supply curve. Individual and market demand. Individual and market supply. Market equilibrium, equilibrium price and equilibrium quantity. WEEK 3 Elasticity of demand and supply. Elasticity of demand – definition, factors influencing price elasticity of demand. Price elasticity of demand and its effect on total revenue. The relevance of the concept of elasticity for decision making process of companies. Price elasticity of demand and cross elasticity. Price elasticity of supply – calculation and factors influencing elasticity of supply. WEEK 4 Consumer equilibrium. Consumer equilibrium and the marginal utility theory. Consumer preferences and consumer budget constraint. Total utility, marginal utility, the law of diminishing marginal utility. Indifference analysis (indifference curve, indifference map, budget line) and consumer equilibrium. The impact of the price and income changes on consumer equilibrium. WEEK 5 Costs, revenues and profit of the firm. Firm in a competitive market. Firm and its main goal. Costs in the short run and in the long run. Total, average and marginal costs. Revenues of the firm. Main features of a competitive market. Individual demand for firm´s production. Equilibrium of a firm in a competitive market in the short and in the long run. WEEK 6 Imperfectly competitive market structures, monopoly, oligopoly, monopolistic competition. Causes of imperfection structure and its forms. Monopoly, types of monopoly. Equilibrium of a monopoly in the short and in the long run. Price discrimination. Inefficiency of a monopoly. Oligopoly and its forms. Equilibrium of an oligopoly firm. Characteristics of monopolistic competition. Equilibrium of a firm in monopolistic competition in the short-run and in the long-run. WEEK 7 Market for factors of production. Income distribution. Demand for production factors as a derived demand. Marginal productivity theory and decision of a firm on the optimal amount of inputs. Individual markets for inputs. Labour market – labour supply and labour demand. Substitution and income effect of the wage change. Imperfections on the labour market, the role of unions on the labour market. Market for land–supply and demand of land, market equilibrium. Capital market–supply and demand of capital, market equilibrium. Income distribution, measuring income inequality. Sources of income inequality. WEEK 8 Measuring macroeconomic performance, AD and AS model. Measuring of economic activity – GDP, methods of GDP calculation, nominal and real GDP. GDP imperfections and alternative ways of measuring economic performance. Definition of aggregate demand and aggregate supply, factors influencing the size of AD and AS, alternative approaches to AD and AS. The use of the AD-AS model in macroeconomic analysis. WEEK 9 Consumption, savings and investment. Consumption as the largest component of aggregate demand. Changes in consumption and their effect on AD. Consumption function, average propensity to consume and marginal propensity to consume. Savings and savings function. Average and marginal propensity to save. Expenditure equilibrium in a closed economy. Investment and its effects. Investment multiplier and its role. WEEK 10 Economic growth and business cycle. Economic growth, its measurement. Sources of economic growth. Ways to ensure sustainable economic growth. Problems of economic growth in developed and less developed countries. Business cycle – its phases. Impact of the business cycle on key macroeconomic variables. Business cycle caused by shocks to aggregate demand and aggregate supply. Business cycle in the AS-AD model. WEEK 11 Money, inflation, unemployment. The nature and functions of money. Money supply and monetary aggregates. Money demand, theories of money demand, liquidity preference theory and quantitative theory of money. Creation of bank money and money market multiplier. Inflation and its measurement. Demand pull inflation and cost push inflation. Costs of inflation. Deflation and its impact on the economy. Unemployment and measurement of unemployment. Forms of unemployment. Natural rate of unemployment. Alternative approaches to Phillips’ curve. WEEK 12 Fiscal policy. Monetary policy. Fiscal policy. Revenues and expenditures of government budget. Government budget deficit and public debt. Fiscal policy objectives and its transmission mechanism. Stabilization fiscal policy. Automatic stabilizers. Discretionary fiscal policy and discretionary fiscal policy instruments. Short-term and long-term effects of fiscal policy in the AS-AD model, impacts of the fiscal policy on AD and AS. Monetary policy, monetary policy objectives. Types of monetary policy. Monetary policy transmission mechanism. Indirect monetary policy instruments. Short-term and long-term impacts of the monetary policy in the AS-AD model. Non-standard monetary policy instruments. WEEK 13 International trade, international monetary relations. The nature and causes of the existence of international trade. Theories of international trade, absolute advantage and comparative advantage. Foreign trade policy instruments – tariffs and quotas and their effects on the efficiency of resource allocation. International movement of capital and its forms. Equilibrium on the international capital market. Balance of payments and its structure. Exchange rate, nominal and real exchange rate. Formation of exchange rate. Exchange rate systems. Introduction to purchasing power parity theory.