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Basics of Economics

Syllabus for pre-PhD Distance learning course on Economics

BASICS OF ECONOMICS

Margarita Yeghiazaryan, PhD, Associate Professor
Yerevan State University, Distance Learning Laboratory

1. Course module description
The course module provides a deep insight into historical prerequisites of development of market economy, provides a study of microeconomic as well as macroeconomic development of market economy, the basic behavioral principles of the operation of transactor units, households, business firms, governments, standard market models, the basic macroeconomic concerns and indices, balance models, the national economic policy, trends and efficiency, an overview of foreign economic policy.

2. Objectives of the course module

2.1  To introduce students with the core concepts of economics.
2.2  To provide students with sufficient knowledge and skills in the field of economics.
2.3  To introduce basic mechanisms of self-regulation of market economy and its categories.
2.4  Help the student understand and apply the economic perspective and reason accurately and objectively for invesigation of economic matters.

3. Assessment
Since this is a distance-learning course, assessment will be based only on students’ written work.

  • Weekly written essays – 60%
  • Final essay - 40%

4. Course module program

Class 1. The introduction in economics
- Key Principles of Economics.
- The economic way of thinking.
- Scarcity, alternatives and choice.
- Rationality and Self-Interest.
- Factors of production.
- Opportunity cost and Production Possibilities Curve.
- Positive and Normative questions.
- Microeconomics and Macroeconomics.
- Circular flow diagram.
- The role of government in market economy.

Readings:

  • Campbell McConnell, Stanley Brue, Economics, Publisher: McGraw-Hill/Irwin; 17th edition (October 24, 2006).
  • Paul Samuelson and William Nordhaus, Economics, Publisher: McGraw-Hill/Irwin (Jul 27, 2004).
  • Arthur O. Sullivan, Steven M. Sheffrin, Economics, Principles and Tools, 1998 Prentice-Hall, Inc. A Simon & Schuster Co.
  • Henry Hazlitt, Economics in one lesson, Three Rivers press, New York, Copyright 1979 by Henry Hazlitt.
  • Walter Nicholson. Microeconomic Theory. London, 1992.

Assignment 1:
Please, answer the following questions (up to 5 pages):

- What is Economics? What does it mean "to think as an economist"?

- What is the difference between microeconomics and macroeconomics?
- Complete the statement: As we switch recourses from the production of one good to another, we _________________ the production possibilities curve, as we add resources to an economy, we _______________ the curve. Substantiate your answer.
- Explain the principle of Opportunity Cost.
- What shows Circular Flow Diagram?

Class 2. Supply, Demand and Market Equilibrium
- Market demand, the demand curve and the law of demand.
- Determinants of Demand: shifting the demand curve.
- Market supply, the supply curve and the law of supply.
- Determinants of Supply: shifting the supply curve.
- Market equilibrium.
- The rationing and allocative functions of prices.
- Market effects of changes in demand and supply.
- The price elasticity of demand and supply.
- Determinants of elasticity.

Readings:

  • Campbell McConnell, Stanley Brue, Economics, Publisher: McGraw-Hill/Irwin; 17th edition (October 24, 2006).
  • Paul Samuelson and William Nordhaus, Economics, Publisher: McGraw-Hill/Irwin (Jul 27, 2004).
  • Arthur O. Sullivan, Steven M. Sheffrin, Economics, Principles and Tools, 1998 Prentice-Hall, Inc. A Simon & Schuster Co.
  • Walter Nicholson. Microeconomic Theory. London, 1992.
  • Hal R. Varian, Instructors Manual Intermediate Microeconomics, W. W. Norton & Company, New York, London, 2003.
  • Brian R. Binger, Elizabeth Hoffman. Microeconomics with Calculas. 1998.
  • Robert S. Pindyck, Daniel L. Rubinfeld. Microeconomics, London. 1992.

Assignment 2:
Please, answer the following questions (up to 5 pages):

- Define Law of demand and law of supply.
- Identify each of the following as (1) a change in demand or (2) a change in the quantity demanded.
a/ Grape consumption falls because of a consumer boycott.

b/ Grape consumption falls because of a tax on grape producers.
c/ Grape consumption rises because of a good harvest.
d/ Grape consumption rises because of a change in tastes.
3. What does equilibrium in a market shows?
4. How to predict price changes using the elasticity of demand?

Class 3. The Firm’s Short-run and Long-run Cost
- Economic cost, fixed and variable costs.
- Short run cost curve.
- Long run average cost.
- Economies of scale.
- Long run cost curve.

Readings:

  • Campbell McConnell, Stanley Brue, Economics, Publisher: McGraw-Hill/Irwin; 17th edition (October 24, 2006).
  • Paul Samuelson and William Nordhaus, Economics, Publisher: McGraw-Hill/Irwin (Jul 27, 2004).
  • Walter Nicholson. Microeconomic Theory. London, 1992.
  • Hal R. Varian, Instructors Manual Intermediate Microeconomics, W. W. Norton & Company, New York, London, 2003.
  • Brian R. Binger, Elizabeth Hoffman. Microeconomics with Calculas. 1998.

Assignment 3:
Please, answer the following questions (up to 5 pages):

- What key principles explain why the short- run marginal cost curve is positively sloped?

- True or false, and explain: If the labor cost per table is 20$ and material cost per table is 30, the short run average total cost is 50$.
- Explain the principles of Economies of scale and Diseconomies of Scale.
- Explain the difference between Diseconomies of scale and Diminishing returns.

Class 4. Four Types of Market and Pricing
- Perfect competition in short and long run.
- Monopoly and Price Discrimination.
- The Monopolist’s output decision.
- Natural monopoly.
- Monopolistic competition.
- Product differentiation and monopolistic competition.
- Oligopoly and antitrust policy.

Readings:

  • Campbell McConnell, Stanley Brue, Economics, Publisher: McGraw-Hill/Irwin; 17th edition (October 24, 2006).
  • Paul Samuelson and William Nordhaus, Economics, Publisher: McGraw-Hill/Irwin (Jul 27, 2004).
  • Walter Nicholson. Microeconomic Theory. London, 1992.
  • Hal R. Varian, Instructors Manual Intermediate Microeconomics, W. W. Norton & Company, New York, London, 2003.

Assignment 4:
Please, answer the following questions (up to 5 pages):

- Define perfectly competitive market. Why does perfectly competitive firm take prices as given?
- Define Monopoly market. Why is a monopolist’s marginal revenue less than price? When a natural monopoly occurs?
- Define Monopolistic competition market.
- Define Oligopoly market. Cartel Pricing and the duopolist’s dilemma.

Class 5. System of National Accounts
- Gross Domestic Product (GDP).
- The ways of measuring GDP.
- Net national product, national income, personal income, personal disposable income.
- Nominal and real GDP.
- Economic growth and growth rate.
- What GDP does not measure?

Readings:

  • Campbell McConnell, Stanley Brue, Economics, Publisher: McGraw-Hill/Irwin; 17th edition (October 24, 2006).
  • Paul Samuelson and William Nordhaus, Economics, Publisher: McGraw-Hill/Irwin (Jul 27, 2004).
  • Dornbush R. and S. Fisher, Macroeconomics, 1994.
  • Holl R. and Taylor. Macroeconomics, 1993.
  • Blanchard and Fischer, Lectures on Macroeconomics, MIT Press, Cambridge,1997.
  • Richard T. Froyen, Macroeconomics, Theories and Policies, Six Edition, London, 1999.

Assignment 5:
Please, answer the following questions (up to 5 pages):

- Give a precise definition of GDP. Three methods of calculating GDP.
- What is the difference between gross and net investment? What is the difference between GDP and Personal Disposable Income?
- Why do we distinguish between real and nominal GDP? Should we care more about the growth of real GDP or nominal GDP and why?
- What GDP does not measure?

Class 6. Economic Fluctuations, Unemployment and Inflation
- Economic fluctuations: recession, peak, trough and depression.
- Cyclical, structural and frictional unemployment.
- Measuring unemployment rate.
- Natural rate of unemployment and full employment.
- Price level and inflation.
- Measuring inflation rate.

Readings:

  • Campbell McConnell, Stanley Brue, Economics, Publisher: McGraw-Hill/Irwin; 17th edition (October 24, 2006).
  • Paul Samuelson and William Nordhaus, Economics, Publisher: McGraw-Hill/Irwin.
  • Dornbush R. and S. Fisher, Macroeconomics, 1994.
  • Barro R.. Macroeconomics, MIT Press, Cambridge, 1997.
  • Blanchard and Fischer, Lectures on Macroeconomics, MIT Press, Cambridge,1997.
  • Richard T. Froyen, Macroeconomics, Theories and Policies, Six Edition, London, 1999.

Assignment 6:
Please, answer the following questions (up to 5 pages):

- Define four periods of economic fluctuation.
- How does a depression differs from a recession? What are the reasons that recessions and depressions occurs?
- Give an example of frictional and structural unemployment. What do economists mean by full employment?
- True or false: The unemployment rate is the total number of unemployed divided by the total number of employed? Substantiate your answer.
- How is inflation rate calculated?

Class 7.  Money, Banking System and Monetary Policy
- Definition of money, three properties of money.
- Banks as financial intermediaries.
- The process of money creation.
- Monetary policy in short and long run.
- Instruments and tools of monetary policy: open market operations, discount rate and required reserves.

Readings:

  • Campbell McConnell, Stanley Brue, Economics, Publisher: McGraw-Hill/Irwin; 17th edition (October 24, 2006). 
  • Paul Samuelson and William Nordhaus, Economics, Publisher: McGraw-Hill/Irwin (Jul 27, 2004).
  • Dornbush R. and S. Fisher, Macroeconomics, 1994.
  • Blanchard and Fischer, Lectures on Macroeconomics, MIT Press, Cambridge,1997.
  • Richard T. Froyen, Macroeconomics, Theories and Policies, Six Edition, London, 1999David Romer, Advanced Macroeconomics, New York, 2001.

Assignment 7:
Please, answer the following questions (up to 5 pages):

-  Why do all societies have some form of money?
-  Which is greater M1 or M2? Why?
-  Banks are required by law to keep a fraction of their deposits as _________.
-  Explain the process of money creation by banks.
-  Complete the statement with increase or decrease. When the Central Bank buys bonds, it _____ the money supply. What is the discount rate?

Class 8. Closing exam
Based on your interest, choose any topic discussed within this course module and write an analytic essay (13 - 15 pages).

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