Semester I, 2012-13
Pre-requisites: CXC Mathematics (Grade II) or O’Level Maths (Grade C) or ECON0001
Anti-requisites: ECON1011, ECON1012
Lecturer: David Tennant
Description
This course seeks to give students a basic understanding of how prices are formed in markets. To this end, the basic tools of microeconomic analysis will be developed and applied to economic issues facing Jamaica and other market-oriented Caribbean economies. This course will explore how individual consumers and firms behave and how they interact with each other. In addition, the course will explore broadly how governmental policies can impact on these issues faced by consumers and firms.
Learning Outcomes
Upon successful completion of the course, the student should be able to:
- Identify the scope of economics.
- Distinguish between microeconomics and macroeconomics
- Explain the three coordination tasks that every economy must answer
- Explain the fundamental economic problem and associated core economic concepts (for example, opportunity costs and comparative advantage)
- Apply these concepts to daily life and decisions made in businesses
- Explain and apply the production possibility frontier model.
- Define, explain, and use the concepts of demand and supply.
- Distinguish between shifts of and movements along the demand and supply curves.
- Interpret observed market developments in terms of market model (demand, supply, and equilibrium) and use the model to predict market outcomes in response to observed and hypothetical developments.
- Use the market model to analyse the effect of various market interventions (such as price ceilings and floors) on prices and market size.
- Demonstrate why market outcomes can be efficient and desirable.
- Calculate the responsiveness of demand and supply to changes in factors that affect them, interpret the figures computed, and evaluate how the information derived can be useful to businesses.
- Explain theory of the consumer, and use it to analyze individual demand (this will include indifference curve analysis, budget constraint and consumer choice)
- Explain theory of the firm, and use it to analyze individual supply (this will include the theory of production, theory of cost and theory of profit maximization)
- Derive the market demand and supply curves from the individual demand and supply curves
- Identify the circumstances under which market outcomes are neither efficient nor desirable and formulate appropriate corrective actions.
Modes of Delivery
Two lecture hours and one tutorial hour per week. Problem sets (not for grading) will be provided for practice at problem solving.
Assessment
Mid-Semester examination - 40%
Final exam - 60%
The Nature of Microeconomics
- Definition of economics
- Microeconomics versus macroeconomics
- Relevant mathematical concepts
- The fundamental economic problem (scarcity, choice, opportunity cost, trade-off and efficiency)
- The production possibility frontier and its related concepts
The Market Mechanism
- Definition of a market
- Definition of demand and supply
- Distinction between demand (supply) and quantity demanded (supplied)
- The diagram of a market
- The concept of equilibrium
- Comparative statics
- Perfectly competitive versus imperfectly competitive markets
Market Demand and Consumer Theory
- Analysis of market demand (factors determining market demand and price elasticity)
- Analysis of individual demand (consumer theory: indifference curve analysis, budget constraint and consumer choice)
- Difference and relationship between individual demand and market demand
Market Supply and the Theory of the Firm
- Analysis of market supply (factors determining market supply and price elasticity)
- Analysis of individual supply (the theory of production, theory of cost and theory of profit maximization)
- Difference between individual and market supply
Market Failure
- Explanation of externalities (positive and negative externalities; producer and consumer externalities)
- Explanation of public goods
- Introduction to ways in which the government can regulate the market
- Analysis of positive and negative impacts of government intervention
Market Analysis and International Markets
- Application of market analysis to the foreign exchange market
- Application of the analysis of government regulation to the market for imports
Resources
Prescribed
W.J. Baumol and A.S. Blinder, Economics: Principles and Policy, Thomson South-Western 2011. (BB)
Recommended
- K.E. Case and R.C. Fair, Principles of Economics, 5th edition, Prentice Hall (CF)
- Frank, R.H. and B.S. Bernanke, Principles of Economics, 3rd edition, McGraw-Hill/Irwin, 2007 (FB)
The chapter readings for each unit are provided below:
The Nature of Microeconomics
BB 1, 3; FB 1, 2; CF 1
The Market Mechanism
BB 4; FB 3, 10
Market Demand and Consumer Theory
BB 5-6; FB 4, 5; CF 5
Market Supply and the Theory of the Firm
BB 4, 7-8, 10-12; FB 6-8; CF 6-8
Market Failure
BB 15, 17; FB 12, 16; CF 14
Market Analysis and International Markets
BB 34, pg. 719-726, BB 35, pg. 734-742; FB 30, pg. 863-873, FB 9
