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Introduction to Economics

Lecture & Tutorial

Lecturer: Dr. Duncan Roth & Jeremy Mott

Language: English

In the summer term 2018, an English alternative to "Einführung in die VWL" is offered. Unlike its German alternative, the course is scheduled for the first half of the term only (with two four-hour-sessions each week). For details regarding place and time, please see MARVIN: Lecture & Tutorial

  • Inhalt ausklappen Inhalt einklappen Learning objectives:Learning objectives:

    A bachelor-level course including introductions to and discussions of basic microeconomic concepts. Through this course, students will obtain a foundational economic basis such that further courses can build on this knowledge.

  • Inhalt ausklappen Inhalt einklappen Course overviewCourse overview

    This course introduces basic concepts of economics: In particular, the focus will be on the field of microeconomics (for example, demand, supply, and markets). Previous knowledge in economics is not required. The course closely follows the textbook "Principles of Economics" from Mankiw and Taylor.

  • Inhalt ausklappen Inhalt einklappen Detailed course contents:Detailed course contents:

    1) Introduction to Economic Thinking

    Students will learn the basic concepts of economic thinking, including the fundamentals of rational decision-making as represented in the Homo economicus model. In addition, students will work with the concept of opportunity costs. Normative and positive statements and their fit within social science will be discussed. Students will also be made familiar with the use of economic models. Applications of these include the circular flow diagram and the production possibility frontier.

    2) Interdependence and the Gains from Trade

    Analysis of benefits stemming from specialization in production. Students will learn how to derive production and consumption possibilities of a country and how to analyze comparative and absolute advantages. With examples of gains via the division of labor, it will be shown that foreign trade resulting from specialized production can be beneficial for the countries that are involved.

    3) Supply and Demand

    An introduction and overview of the market mechanism, which is the most important trading mechanism in economics. To grasp market fundamentals, students will first learn how to derive supply and demand functions. Afterwards, market allocation of scarce resources through prices and mechanisms for price determination will be discussed. In addition, the elasticity concept will be introduced and applied to determine elasticities of demand and supply functions with respect to price or income.

    4) The Efficiency of Markets

    An overview and discussion of the efficiency of the market mechanism. For this purpose, the chapter is separated into two different parts: First discussing market interventions and effects on market outcomes. In particular, this part will focus on price controls, such as price floors and price ceilings, as well as on taxes. In the second part, the concepts of consumer and producer surplus will be introduced. These concepts will be used to measure the well-being of consumers and producers and, subsequently, to evaluate the efficiency of the market equilibrium.

    5) Market Failures

    Analysis of cases in which the market mechanism does not lead to an efficient outcome. These cases include positive and negative externalities, public goods, common pool resources, and asymmetric information. In addition, potential solutions to the resulting inefficiencies (for instance, by private solutions or governmental policies) will be explored.

    6) Firms in Competitive Markets

    One of the fundamental aspects of economics is the analysis of the behavior of firms. Students will analyze firms that are active on a perfectly competitive market. Individual production costs will be identified as the key indicator for a firm’s production and pricing decision. Students will learn how to determine average and marginal costs as well as their impact on the supply curve. The chapter closes by analyzing the profit-maximizing output decision of a firm.

    7) Firms in Markets with Imperfect Competition

    The final chapter of the course deals with the behavior of firms under imperfect competition. In particular, the focus will be on monopolies. It will be discussed under which circumstances monopolies arise and how the output and pricing decisions of a monopolist are determined. Students will be shown how monopolies lead to welfare losses and potential policy interventions to prevent monopolists from exploiting their market power.1) Introduction to Economic Thinking

    Students will learn the basic concepts of economic thinking, including the fundamentals of rational decision-making as represented in the Homo economicus model. In addition, students will work with the concept of opportunity costs. Normative and positive statements and their fit within social science will be discussed. Students will also be made familiar with the use of economic models. Applications of these include the circular flow diagram and the production possibility frontier.

    2) Interdependence and the Gains from Trade

    Analysis of benefits stemming from specialization in production. Students will learn how to derive production and consumption possibilities of a country and how to analyze comparative and absolute advantages. With examples of gains via the division of labor, it will be shown that foreign trade resulting from specialized production can be beneficial for the countries that are involved.

    3) Supply and Demand

    An introduction and overview of the market mechanism, which is the most important trading mechanism in economics. To grasp market fundamentals, students will first learn how to derive supply and demand functions. Afterwards, market allocation of scarce resources through prices and mechanisms for price determination will be discussed. In addition, the elasticity concept will be introduced and applied to determine elasticities of demand and supply functions with respect to price or income.

    4) The Efficiency of Markets

    An overview and discussion of the efficiency of the market mechanism. For this purpose, the chapter is separated into two different parts: First discussing market interventions and effects on market outcomes. In particular, this part will focus on price controls, such as price floors and price ceilings, as well as on taxes. In the second part, the concepts of consumer and producer surplus will be introduced. These concepts will be used to measure the well-being of consumers and producers and, subsequently, to evaluate the efficiency of the market equilibrium.

    5) Market Failures

    Analysis of cases in which the market mechanism does not lead to an efficient outcome. These cases include positive and negative externalities, public goods, common pool resources, and asymmetric information. In addition, potential solutions to the resulting inefficiencies (for instance, by private solutions or governmental policies) will be explored.

    6) Firms in Competitive Markets

    One of the fundamental aspects of economics is the analysis of the behavior of firms. Students will analyze firms that are active on a perfectly competitive market. Individual production costs will be identified as the key indicator for a firm’s production and pricing decision. Students will learn how to determine average and marginal costs as well as their impact on the supply curve. The chapter closes by analyzing the profit-maximizing output decision of a firm.

    7) Firms in Markets with Imperfect Competition

    The final chapter of the course deals with the behavior of firms under imperfect competition. In particular, the focus will be on monopolies. It will be discussed under which circumstances monopolies arise and how the output and pricing decisions of a monopolist are determined. Students will be shown how monopolies lead to welfare losses and potential policy interventions to prevent monopolists from exploiting their market power.