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Introduction to Economics : Micro and Macroeconomics D3/PAAP School of Economics

SYLLABUS Padjadjaran University

Sept. 2012Jan. 2013 Bandung, West Java, Indonesia

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Course Description

This course provides the economics principles necessary for the administration of a businesses.

Microeconomics, being a rather theoretical knowledge,is essential as a foundation for more specific

and applicative business courses offered further on in the semesters. The Macroeconomics half of

the course supplies the knowledge to comprehend the influence of factors external to the firm,

specifically the economy. At the least business administrators must be aware of the implications ofeconomic events in the news and the impact of economic policies.

Assignments are lecture summaries and data collection on the Indonesian economy. Homework are

numerical problem sets and the sharpening of theoretical understanding.

Textbooks

Case, Fair & Foster, 2011, Principles of Economics, 11th ed., Pearson Prentice-Hall [CF]

Mankiw, 2009, Principles of Economics, 5th ed., South-Western College Pub.

Samuelson and Nordhaus, 2009, Principles of Economics, 19th ed., McGraw-Hill/Irwin

Suggested Reading

Baye, 2009, Managerial Economics, 7th ed., McGraw-Hill/Irwin

McGuigan,Moyer & Harris, 2007, Managerial Economics, 11th ed., South-Western College Pub.

Grading

Homework + Quizzes + Class Participation (25%), Midterm Test (35%), Final Exam (40%)

Lesson Program

Class meetings areonce a week@ 150 minutes/meeting (minus a 5-10 minutes break)

Week 1 : Introduction to Economics [ CF chapters 1, 2]

What is Economics ? Definition

Micro & Macroeconomics : Unit based vs. System wide phenomena

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Positive and Normative Economics

Theory & Model

Laws in the Social Sciences/Economics & Assumptions (cet. par.)

Rationality & Marginalism

Why do we study Economics ? Illustrations

Week 2 : Microeconomics - Demand & Supply [CF ch. 3, 4, 5]

The Market Mechanism : a democratic system ? What, How & For Whom

Demand : function of Price/P and Quantity/Q

The Logic underlying the Demand Function

Demand shift and rotation, individual and market

Elasticity : Own Price, Cross Price and Income

Elasticity &Total Revenue (TR); the effect of time

Week 3 : The Market System [CF ch. 3, 4, 5]

Supply : function, shift and rotation, individual and market

The Logic behind the Supply Function

Elasticity of Supply

BREAK

Market Equilibrium(Pe &Qe)

Market adjustment : fast and slow

Market Distortion and its consequences : Ceiling & Floor Price

Week 4 : Production& Cost [CF ch. 7, 8, 9]

Production process : function of factors/input & output (Quantity)

Short-run & Long-run production function

Function with one factor/input : TP = f (L); AP and MP

Function with two factors of production : Isoquant & Isocost

Production equlibrium (+ with constant Price of output, firm equilibrium)

BREAK

Production & Cost Duality

Cost in Economics : Opportunity Cost

TC = FC + VC, AC, MC; Sunk Cost, Incremental Cost

Short-run & Long-run Cost

Week 5 : Cost & Revenue [CF ch. 7, 8, 9]

TR = P x Q; AR, MR

Profit & Loss (with constant Price/P)

Short-run & Long-run operation : Shut Down Point/SDP

Tracing the Supply Function Break Even Point/BEP & Pay Back Period/PBP

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Case Study : Micro Business (debt service/amortization burden)

Week 6 : Market Structure (1) [CF ch. 12]

Perfect Competition Market/PCM : P = MC Standard of Efficiency, Consumer & Producer Surplus

Macroeconomic effects

Week 7 : Market Structure (2) [CF ch. 13, 14, 15]

Monopoly : MR = MC

Case Study : Dead Weight Loss/DWL

Rent Seeking Behavior & Macroeconomic effects

Oligopoly, MCM, Contestable Market : other market structures

Midterm Test

Week 8 : MacroeconomicsThe Keynesian Revolution [CF ch. 1, 2, 20, 21]

Income (Y) Determination : measurement of economic activity & welfare

Brief background on Macroeconomics : History, Great Depression (1920s-1930s)

A Keynesian model : The Circular Flow of Income

GDP & GNP

AD & AS : closed & open economy

Macroeconomic performance : income per capita (YPC), income distribution, economic

stability and growth

Week 9 : The Real SectorEmployment & Investment [CF ch. 22]

Jobs & Unemployment : Income disparity, Jobs& Prosperity

Types of Unemployment

Measurement of Unemployment Costs of Unemployment, Okuns Law

BREAK

Capital (K), Investment (I) and Saving (S) : Capitalism

Personal/Household S, Corporate S & Government S

I = K formation, expansion of K stock; Gross and Net I (GDP/GNP & NDP/NNP)

Preview of the Business Cycle : the volatility of I, I-demand (I-dd)

Capital Market (Loanable Funds Market) &Real Interest Rate

Week 10 : Monetary Economics : Money & Banking; Inflation [CF ch. 25, 26]

Brief history of Money/M : forms & functions; the Barter System

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The Central Bank & the Banking System : the money multiplier

Control of the Money Supply (M-ss) : Reserve Ratio, Discount Rate, Open Market Operation

The Quantity Theory of Money : MV = PQ; Velocity of Money

BREAK

Inflation : Definition, Cost of Inflation (tax effect, income redistribution, shoe leather

cost/inefficiency, uncertainty hampers business) Measurement of Inflation : The Price Index, the Cost of Living, Real (Yr) and Nominal Income

(Yn)

Hyperinflation & Rudimentary Monetary Policy : the Sacrifice Ratio

Week 11 : The Financial Sector; Economic Growth [CF ch. 23, 25, 26 30]

The Supply of Money/M-ss and the Demand for Money/M-dd

Keynesian Motives for Holding Balances

Money Market and Nominal Interest Rate : Money/M & Bonds/B (Financial Assets)

BREAK

Economic GrowthThe Long-run View [CF ch. 22, 32]

Production Possibility Frontier/PPF and the Opportunity Cost

Technological Progress : neutral or biased ?; Employment effects

Sources of Growth (aggregate production function) : techno growth as a function of efforts

World Convergence ?

Week 12 : Short-run Fluctuations(1) - TheKeynesian Model [CF ch. 23, 24]

Aggregate Demand/AD : Y = C + I + G + NX

Keynesian Expenditure Multiplier

The Keynesian Cross

Inflationary & Deflationary Gap : the Rudiments of Fiscal Policy

Week 13 : Short-run Fluctuations (2) - The Business Cycle [CF ch. 27, 28]

Modern Model : Aggregate Demand/AD & Aggregate Supply/AS

Fluctuations in AD & AS : the Price of aMarket Economic System ? Macroeconomic short-run instability& Adjustment toward Full-employment Income

Week 14 :Open Economy Macroeconomics [CF ch. 34, 35]

International Trade : Export-Import & the Balance Of Payment

Exchange Rate Regimes; central bank intervention

Foreign Exchange Market& International Finance

Final Examination: Comprehensive, with emphasize on Macroeconomics