87565 - Principles Of Economics

Learning outcomes

The course introduces students who do not have any prior knowledge of economics to the basic principles of the discipline. Topics include the basics of how markets function, of how economic agents behave, and of macroeconomic analysis. These topics will be related to examples from the real world and current economic events. At the end of the course students are expected to have acquired the knowledge necessary for more advanced economics courses, and to understand and critically evaluate economic and public policy debates.

Course contents

 Introduction

What is Economics? (2 hours)

Microeconomics

Supply, Demand and Market Equilibrium: Demand and Supply Curves and Their Shifts. The Elasticities of Demand and of Supply. The Market Equilibrium. (4 hours)

Consumer behaviour. The income expansion path and the Engel curve. The behavioural approach. (4 hours)

Consumer and Producer Surplus. Maximizing the Total Surplus: the Benevolent Social Planner and the Efficiency of Competitive Markets. (2 hours)

The tax system and its costs. The deadweight loss of taxation. (2 hours)

The Costs of Production. The Production Function. Total Revenues and Total Costs. Opportunity Costs. Economic vs Accounting Profit. Fixed and Variable Costs. Economies and Diseconomies of Scale. (2 hours)

Firms in a Perfectly Competitive Market. Profit Maximization and the Competitive Firm’s Supply Curve. Sunk Costs. The Long Run Equilibrium. (2 hours)

Monopoly. Monopoly’s Revenues and Profit Maximization. The Welfare Cost of Monopoly. Price Discrimination. Public Policy Toward Monopolies. (2 hours)

Monopolistico competition. Contestable markets. (2 hours)

Macroeconomics

Measuring the Economy’s Performance: the Gross Domestic Product. The Components of GDP: Consumption, Investment, Government Purchases, Net Exports. Real vs Nominal GDP and GDP Deflator. GDP and Well-Being. (2 hours)

The Consumer Prices Index and the inflation rate. Saving and Investment in the National Income Accounts. The Market for Loanable Funds. Budget Deficit and Government Debt. (2 hours)

Unemployment and the labor market. (2 hours)

The Role of Money in the Economy. Money Supply, Money Demand and Monetary Equilibrium. The Adjustment Process. Money Neutrality. The Fisher Effect. (4 hours)

The Keynesian cross and the IS-LM model. From the IS-LM model to aggregate demand. (4 hours)

Aggregate Demand and Aggregate Supply. The Influence of Monetary and Fiscal Policy on Aggregate Demand. (4 hours)

Readings/Bibliography

N.G. Mankiw, M.P. Taylor, Economics (4th edition), Cengage Learning, 2017. ISBN: 9781473725331

Before the course begins, students should watch the Mankiw's Ten Principles of Economics video which can be found at:

https://www.youtube.com/watch?v=PXJvyHe1aZk

Teaching methods

Lectures.

Assessment methods

Written exam (90 minutes). The exam will include 4-5 open questions. Calculators will be allowed, while any use of cell phones will be strictly forbitten.

Any form of academic dishonesty will not be tolerated.

Regular lecture attendance is strongly advised.

Teaching tools

Blackboard and chalk sticks.

Office hours

See the website of Luciano Messori