Download principles of economics

UNIVERSITY OF LUSAKA
SCHOOL OF BUSINESS, ECONOMICS AND MANAGEMENT
BF, BBA, BBAED, BAC, BPA, BPIR, BSM, BRE, AFIN, ECF, ECA, BIP,BIT, BITED, ACT,HRM,BPS
ECF 100 – PRINCIPLES OF ECONOMICS
COURSE OUTLINE
Course Objectives:
To examine how decisions are made by individual economic units such as households and firms and how
they interact to determine the quantities and prices of goods and factors of production and the allocation
of resources. It develops a basic understanding of a firm in a free enterprise system; theory of consumer
demand and market structures. It prepares one for further courses which require knowledge of
microeconomics.
NATURE OF ECONOMICS
i) A brief History of Economic Thought.
ii) Definition of Economics
iii) The scope of economics
iv) The basic principle of economics: Scarcity and choice
v) The basic economic questions
vi) The different economic systems and how they cope with the basic economic questions.
vii) The methodology of economics
viii) Economics, social sciences and other sciences: similarities and differences
ix) Micro and Macroeconomics: similarities and differences.
x) The use of graphs in economics.
1.0 INTRODUCTION
 Scarcity and Choice
 Positive and Normative Economics.
 Concepts of Micro and macroeconomics.
2.0 MATH REVIEW
 Tables and graphs
 Straight-line graphs
 Curved lines
 Linear equations
 Lines and curves shift
 Shifts vs. movements along a line
3.0 OPPORTUNITY COSTS, TRADE-OFFS,
 Production Possibilities Curves (PPC/PPF)
 Efficient, Inefficient, and Beyond Possibilities.
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Marginal Rate of Transformation (MRT) and
Constant and Increasing Opportunity Costs.
4.0 FUNDAMENTAL QUESTIONS AND ECONOMIC SYSTEMS
4.1 FUNDAMENTAL QUESTIONS
 Deciding what to produce,
 How to produce it, and
 For whom to produce.
4.2 ECONOMIC SYSTEMS
 The market economy :Advantages and Disadvantages
 The planned economy :Advantages and Disadvantages
 The mixed economy: Advantages and Disadvantages
5.0 THEORY OF DEMAND AND SUPPLY AND MARKET EQUILIBRIUM
5.1 DEMAND THEORY;
 Law of Demand.
 Demand Schedule and Demand Curve.
 Determinants of Demand and Determinant of Quantity Demanded.
 Shift in the Demand Curve versus Movement along the Demand Curve.
 Normal and inferior Good
 Substitute and complements
5.2 SUPPLY THEORY:
 Law of Supply.
 Supply Schedule and Supply Curve.
 Determinants of Supply and Determinants of Quantity Supplied.
 Shift in the Supply Curve versus Movement along the Supply Curve.
 Elasticity of supply
5.3 EQUILIBRIUM AND THE PRICE SYSTEM
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Effects of Changes in Demand on the Equilibrium.
Effects of Changes in Supply on the Equilibrium.
Effects of Simultaneous Changes in Demand and Supply on the Equilibrium.
5.4 GOVERNMENT INTERVENTION IN THE MARKET;
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Price floors and ceilings
Effects of taxes and subsidies on demand and supply
6.0 CONSUMER CHOICE AND DEMAND
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Utility approach; Total utility ,
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Marginal Utility Theory; The law of diminishing marginal utility
Indifference curve approach
Budget Line/Constraint.
Income Effect and Substitution Effect.
Derivation of the demand curve
7.0 ELASTICITIES
 Definition of Price Elasticity of Demand.
 The concept of elasticity of demand
 Elastic, Inelastic, and Unit Elastic Relationship.
 Calculating Price Elasticities of Demand.
 Relationship between Price Elasticities of Demand and Revenues/Expenditures.
 Determinants of Price Elasticities of Demand and Supply.
 Income, Cross, and Arc elasticities.
 Other Elasticities of Importance (optional).
8.0 THEORY OF PRODUCTION AND COSTS
8.1 THEORY OF PRODUCTION
 Production function; The Cob Douglas Production function
 Production in the short run: law of diminishing returns
 The average and marginal concept
 Production in the long run
8.2 THEORY OF COSTS AND REVENUE
 Short-run and long-run costs
 Total, average and marginal cost
 Long-run average cost (LRAC) and economies of scale
 Sources of economies of scale
 Economies of scope & Diseconomies of scale
 Revenues and costs, pricing and profits.
9.0 MARKETS AND MARKET STRUCTURES
9.1 PRODUCT MARKETS
 Types of market structures.
i) Perfect competition
ii) Imperfect competition
a) Monopolistic Competition
b) Oligopoly
c) Monopoly
 Price, output and profit determination in each structure.
9.2 FACTOR MARKETS
i) Demand for and supply of inputs under different market conditions: marginal productivity theory
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ii) Wages, economic rent, interest and profits
10. WELFARE ECONOMICS
10.1 GENERAL EQUILIBRIUM
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Contract Curve
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Edge worth Box
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Pareto optimality
11. EXTERNALITIES.
12. CALCULUS AS APPLIED IN ECONOMICS
 Differentiation; Calculation of Marginal analysis
 Rules for differentiation;
 Gradient of the curve and applied calculus. Increasing and decreasing
ASSESSMENTS:
Full Time & Part Time: Assignments 10%; Test 10%; Mid-semester 20%; Final Examination 60%
Distance: Assignments 1 -10%; Assignment 2- 10%; Mid-semester 20%; Final Examination 60%
PRESCRIBED TEXTS
1. John Slowman, 2006; Economics, 6th Edition.
2. Stephen Ison and Stuart, (2007) Wall, Economics, 4th Edition.
3. David C. Colander, (2004), 5th Edition McGraw Hill, Irwin.
4. Economics: Principles and Practices, Reading Essentials and Study Guide Student Workbook.
5. Professor Timothy Taylor, (2005), Economics, 3rd Edition, Part I The Teaching Company Limited
Partnership.
6. Dominick Salvatore, Ph.D. and Eugenea. Diulio, Ph.D., (1996) Schaum’s Outline of theory and problems
of principles of economics 2nd edition McGraw-Hill.
7. David a. Besanko & Ronald R. Braeutigam ; Microeconomics, John Wiley & Sons, Inc.
OTHER TEXTS
1. P.Samuelson: 2004, Economics,
2. J.L.Hanson A text book in Economics.
3. P Hardwick & Langmead An introduction to Modern Economics, Longman.
4. Begg, Fischer & Dornbush Economics, McGraw-Hill.
5. RG Lisey Introduction to Positive Economics.
6. Kousoyainnis Modern Microeconomics.
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