This module provides the basic methods of economic analysis as a tool for decision making in a business context. The core part of this course develops a theoretical framework to study how consumers and firms make rational decisions, how they interact with each other in the market and how their behaviour determines market’s outcomes and aggregated economic variables. Different market structures and government interventions are discussed in terms of their welfare implications. The Game Theory part, extends the analysis to situations where the decisions of consumers or firms are interdependent and strategic behaviour may arise.
The course follows a theoretical and mathematical approach but emphasizes the use of economic models for systematic and critical thinking about real life economic situations. It also provides empirical facts and evidence on some selected topics.
The focus is on microeconomics but some introductory topics in macroeconomics are also discussed. The course provides an adequate foundation for further studies in business economics
Upon successful completion of the module, a student will be able to:
- Understand the main economic concepts of consumer and production theory and how economic models can be used to explain the market’s outcomes determination
- Use economic models covered during the module to analyse the effects on market behaviour of different policies like taxes and subsidies.
- Analyse different market structures and the expected behaviour of firms and consumers in different environments like perfect competition and monopoly.
- Apply the standard analysis of consumption and production theory to other settings like labour markets and intertemporal decisions.
- Understand how strategic interactions can be approached using game theory and identify the main predictions of it.
- Recognise the main aggregated economic variables, how are they measured and what are their main determinants in the whole economy.
- Introduction: Use of models in Economics. Opportunity cost. Scarcity and trade-offs.
- Consumption Theory and Market Demand.
- Applications of Consumption Theory: Labour Supply and Intertemporal decisions.
- Production Theory and Supply decisions of firms
- Market structure and equilibrium. Policies and welfare implications
- Game Theory and strategic behaviour
- Introduction to Macroeconomics.
- Economic Growth and Inequality
- Covered in multiple lectures and seminars: Empirical applications and causal analysis.
50% unseen 2-hour written examination and 50% 4 x problem sets
Current students should refer to Moodle for specific details of the current year’s assessment.
Lecture slides will be provided through Moodle before each session.
The main reference for the microeconomic part is Intermediate Microeconomics: A Modern Approach by Hal R Varian (any edition from the sixth can be used). Since the course encourages a mathematical approach, I also recommend the version “with calculus” of the same book that covers some topics with more detailed explanations on the mathematical derivations.
For the macroeconomic part, chapters 1,2,3,7,8 of Macroeconomics by Gregory Mankiw will be followed.
The module requires some basic understanding of calculus and algebra. Students are expected to be familiar with topics like functions, derivatives, simple integrals and optimization of functions.