|Course Title||Principles of Economics|
|Institution||Riga Technical University, Riga Business School|
Society has to choose how to use its limited resources (land, labor and capital) to produce, exchange and consume goods and services. Every firm has to work within its economic environment. In order to be successful, the manager must anticipate and deal with changes in that environment.
To do so, it is necessary to understand the interrelations among various economic variables. Further, the likely response of government to changes in these variables and the effects on the economy of the government actions should be anticipated.
This course is aimed at gaining understanding about basic economic analysis. Throughout, we should keep the focus on how this will affect business and how business can act advantageously.
The schedule on page 2 lists the topics associated with each lecture. The chapters are to be read before that class. During class, we will discuss the current chapters. Anything you do not understand should be brought up here.
Homeworks will be handed out at the end of class. They should be turned in before the specified deadline. Discussions between students on homeworks are allowed and encouraged, however each student has to submit his/her own answers. Homework submitted after the deadline will not be accepted.
Quizzes can be given without prior warning during the first 10 minutes of the class. They will cover the assigned readings and materials from the previous lectures. If you miss a quiz without prior notice, it cannot be repeated. So, if you cannot attend a lecture, inform the instructor before it.
The Scope And Method Of Economics. Why study economics? The scope of economics. The method of economics. The fields of economics. Economic resources.
The Economic Problem: Scarcity And Choice. Scarcity. Choice. Production possibility frontier. Opportunity cost. Economic systems.
Demand, Supply And Market Equilibrium. Firms and households. Input markets and output markets. Law of demand. Law of supply. Demand curve. Supply curve. Equilibrium. The concept of elasticity.
Household Behavior And Consumer Choice. Household demand. Utility. The law of diminishing marginal utility. Budget constraint.
Behavior of Firms and the Production Process. Short run and long run. The basis of decisions. The production process. Diminishing returns. Short run costs. Fixed costs. Variable costs. Total costs. Output decisions: revenues, costs and profit maximization.
Input Markets. Labor market. Capital market. Interest rates.
Perfect Competition. General equilibrium analysis. Competitive equilibrium.
Monopoly. Imperfect competition and market power. Comparison to perfect competition. The social costs of monopoly.
Monopolistic Competition and Oligopoly. Monopolistic competition: product differentiation, advertising. Oligopoly models.
Introduction to Macroeconomics. Macroeconomic concerns – inflation, output, business cycles, unemployment. The role of government.
Measuring National Output. The concept of Gross Domestic Product (GDP). Calculating GDP. Nominal and real GDP.
Macroeconomic Problems. Recessions, depressions. Inflation. Unemployment.
Aggregate Expenditure and Fiscal Policy. Aggregate output and aggregate income. Equilibrium. The concept of multiplier. Government’s role in the economy. Fiscal policy.
Money Supply and Monetary Policy. Definitions of money. Central bank and commercial banks. Controlling the money supply.
Demand for Money. The transaction and speculation motives for holding money. Money supply. Equilibrium interest rate.
Policy Mix. The links between the goods market and the money market. Macroeconomic policy mix. IS-LM model.
International Trade. The economic basis for trade: comparative advantage, other theories. Trade barriers. Free trade and protectionism. The balance of payments and exchange rates.
Macroeconomic policy in the European Union. An overview of the macroeconomic policy in the EU. Objectives in the national policy-making (autonomy vs. centralization). The European Monetary System (EMS).
2 Homeworks (10% each) 20%
Midterm Exam 30%
Final Exam 40%