The University of the West Indies, Mona

Semester I, 2012-13
Pre-requisites: CXC mathematics (grade II) or ECON0001
Anti-requisites: ECON1001, ECON1002
Lecturer: Damien King

Description

This course introduces you to the basic principles of economic thinking. It assumes no previous exposure to economics. All you need is curiosity and a willingness to read. During the term, we will discuss the basic ideas underlying the economic way of thinking and apply it a range of phenomena both within and outside of the areas of traditional economic analysis.

Learning Outcomes

Upon successful completion of the course, the student should be able to:
• Describe and explain the basic concepts of economics.
• Describe and explain the core principles that economist’s use to understandobserved phenomena.
• Demonstrate how observed economic phenomena exemplify the core principles of economics.
• Explain the market model
• Apply the market model to interpret price and value changes in local and global economies.
• Explain and apply the production possibility frontier model.
• Evaluate the efficacy of the market as a tool of allocation in each type of market.
• Identify the presence of market failures and select appropriate corrective policies.
• Explain in general the underlying factors that cause changes in macroeconomic variables such as inflation, interest rates, exchange rate, and the GDP.

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

In-course quizzes (summing to60%) and a comprehensive final examination (40%).

Syllabus

Concepts and Methods

• What is Economics?
• Methodology
• Concepts

The Core Principles

• People Respond to Incentives
• Resources are Scarce
• Prices Reflect Scarcity
• Returns Diminish
• Exchange is Beneficial

Production and Consumption Possibilities

• Production Possibility Frontier
• Budget Constraint
• The Gains from Trade

The Market Model

• Demand
• Supply
• The Market
• Special Cases
• Welfare

Interfering in the Market

• Price Restrictions
• Quantity Restrictions

Market Failures

• Externalities
• Public Goods
• Asymmetric Information

Inflation: the Market for Money

• Inflation
• The Market for Money
• How excess money causes prices to rise
• Why central banks print too much money
• The inflation tax
• What’s Wrong with Inflation

Finance: the Market for Loanable Funds

• Purpose of the Financial System
• Financial Institutions and markets
• The Market for Loanable Funds
• Net Present Value

Balance of Payments: the Market for Foreign Exchange

• Nominal and Real Exchange Rates
• Exchange Rates in the Short Run
• Exchange Rates in the Long Run

Economic Growth

• Growth Factors
• Production Function
• Depreciation
• Solow Growth Model

Resources

Prescribed

• N. Gregory Mankiw, Principles of Economics (any edition), South-Western, United States.
• Steven E. Landsburg, The Armchair Economist: Economics and Everyday Life, The Free Press, New York, 1993.
• Tim Harford, The Undercover Economist, Oxford University Press, Oxford, 2006.
• Damien King, “Economic Growth”, handout.

Recommended

• Robert Stonebraker, The Joy of Economics: Making Sense Out of Life,
http://faculty.winthrop.edu/stonebrakerr/book/contents.htm

• Tim Harford, The Logic of Life, Random House, New York, 2008.