Entry requirements and weighting
|Credit Points:||15 credit points|
|Level:||Year 1, Core|
The aim of this unit is to introduce business students to fundamental economic principles and demonstrate their practical applications to concepts such as consumer behaviour, business decision-making, macroeconomic variables and economic principles in general. The unit also aims to introduce students to the elementary analytical tools most often used by economists. Over the course of the semester, the unit will be divided into two broad sections namely: Microeconomics and Macroeconomics. This semester, the standard of the unit has been upgraded in line and to conform to most tertiary institution around Australia. As a result most weekly lecture notes now have more content and will require considerably more study time from the students. I will encourage you to read the lecture notes prior to coming to the lectures every week.
This unit will cover the following topics:
- Topic 1: Topic 1 provides an introduction to the study of economics. More specifically at the nature of the “economic problem” and the methodologies that economists use to solve the problem. Models and graphical analysis are very important to an economic approach and this will be dealt with in topic 1 as well.
- Topic 2: Demand and supply – Topic 2 will introduce the simple market model of demand and supply. This model is used to explain trade between consumers and producers of goods and services. Attention will be drawn to the use of demand and supply to better understand economic behaviour in some markets. The interaction of demand and supply in determining the price and quantity exchanged will be looked at. Also changes in demand and supply conditions resulting in different allocation of resources.
- Topic 3: Elasticity – Topic 3 will look into using demand and supply in the context of understanding elasticity, which explains the sensitivity of consumers or producers to changes in prices, incomes and the prices of related goods. This analysis of sensitivity has important implications for the revenue earned by producers and the income spent by consumers.
- Topic 4: Market Applications – Topic 4 relates to the effect of demand and supply interaction in the market applications. Previous Economic concepts taught will be applied to particular markets and by showing how consumers and producers react by changing their choices where there are significant alterations in the market price-setting mechanism. We will look at the impact of sales taxes on market outcomes, the effect of price floors and price ceilings and so on. Also this topic covers briefly the concept of Externalities as misallocation of scarce resources occurs in the price-setting mechanism or sometimes known as market failures.
- Topic 5: Firm Behaviour and Costs – In topic 5, we look more closely into how the supply side of the basic model is derived. It focusses on the decision framework for individual producers. Students will be introduced to the structure of firms and the economic problems they all face. Students also will learn about the objectives of firms and the limits to profitability. The main purpose of this section is to show the links between the productivity of a firm’s resources and the nature of its costs of production.
- Topic 6: Market Structure – Perfect Competition, Monopoly, Oligopoly and Monopolistic Competition – In topic 6, there will be further looking at understanding the mechanics of the market by looking at how firms interact and compete with each other and how their choices are constrained by the nature of competition between firms in the market.
- Topic 7: Introduction to Macroeconomics: Measuring the size of the economy, GDP, Real and Nominal GDP and standard of living measure, Business Cycle and Economic Growth. In this section students will be exposed to the concept of calculating the nominal GDP and also the income method and expenditure method of calculating such measure. In addition the concept of real GDP will be presented as well as inflation.
- Topic 8: Inflation and Unemployment. In topic 8, the idea of inflation is further developed in a theoretical framework whereby causes and reasons are explained at length. In addition, unemployment as a macroeconomic objective is introduced together with the measurement of that variable and the different types. Also the different phases of the business cycles are presented in accordance with the economic conditions prevailing in Australia.
- Topic 9: Aggregate demand and Aggregate Supply – In topic 9, a more formal macroeconomic model is presented namely the AD / AS model. The different factors explaining the shapes of the AD and AS curves are presented. Also a number of possible changes that will cause movements and shifts in those curves are presented. Students are expected to thoroughly understand the diagrams and be able to relate to real life scenarios in an exam or assignment situation.
- Topic 10: Money and Monetary Policy – Topic 10 starts off by explaining the role and functions of money. Then we proceed to explain the role and functions of monetary policy as one of the macroeconomic tools or management policy. Constant reference will be made to the RBA website and students will be expected to regularly refer to this website.
- Topic 11: Fiscal Policy – In topic 11 we look at the other macroeconomic management tool at the disposal of the government. The concepts of Taxation and Government revenue in an Australian context will be analysed in depth. Also reference will be made to the federal budget and students will be required to study the budget and relate it to assignment questions or exam situations.
Topic 12: Balance of payments and Exchange Rate regimes – In topic 12 the open economy is analysed together with concepts of foreign exchange regimes and the impact on macroeconomic objectives.
Unit Learning outcomes
- Explain the key ideas that define economic way of thinking.
- Explain how prices are determined in a market.
- Understand the key characteristics of various market structures and market strategies adopted by firms in different market environments.
- Identify the objectives and consequences of macroeconomic policy in Australia and understand why there might be a conflict between the achievements of those objectives.
- Understand economic fluctuations and Gross Domestic Product.
- Understand the concept and consequences of unemployment.
- Understand the relationship between exchange rate and international trade.
- Understand what monetary policy and Fiscal policy are in a macroeconomics context.