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Unit title: Business Economics

Unit code:
ECO501
Credit
points:
8cp
Unit
description:
This unit offers an intensive mainstream introduction to economic
principles for a business persons understanding of the fundamental
economic problems of the firm and of the society in which that firm
operates from. This subject provides an opportunity to study a mix of
both business and economics necessary for a career in business. A strong
grounding in economic theory and applications will offer us tools of
analysis, which can then be applied to business related modules. ou will
learn the process of strategic analysis, pricing, company organi!ation and
structure, competitive advantage and innovation
Unit
objectives:
This unit is designed to enable students to"
Knowledge
#$ %ave an in&depth 'nowledge and understanding of methods and
theory in economics and its practical application to business,
industrial, financial or government environment
($ )nderstand that applying 'nowledge of economics is crucial in a
world of integrating global mar'ets and the growing influence of the
*nternet.
+$ )nderstand that economics significantly enhances strategic decision
ma'ing and problem solving for the efficient functioning of business
enterprises
Skills
#. ,mphasi!e the role of economics in the formation of policy by
individuals, companies and governments
(. -evelop an ability to use different forms of economic reasoning in a
variety of contexts
+. -evelop critical analytical problem&based learning s'ills as a
professional economist
!lues"#ttitudes
#. .articipate in a rigorous training of economic analysis
(. /ocus on business decisions rather than public policy analysis
+. Appreciate the role played by business in a modern economy
Unit
outcomes:
#. ,mphasi!e the practical business applications of economic theory
(. ,xamines how business economics can influence such areas as
business strategy
#
$e!dings:
#. 0c1onnell, 1.2. 3 4rue, 5.6. 7(88($, ,conomics, #9
th
edn.,
0c:raw&%ill
(. .ar'in, 0. 7(888$, ;,conomics<, *nternational ,dition, Addison&
=esley .ublishing 1o
Supplement!r% re!dings
#. 0an'iw, >.:. 7(88+$, .rinciples of ,conomics, +
rd
edn., 5outh&
=estern 1ollege .ublishing
(. /riedman, 0. 7(88($, 1apitalism and /reedom " /ortieth Anniversary
,dition, )niversity of 1hicago .ress
+. .indyc', 2.5. 3 2ubinfeld, -.6. 7(888$, 0icroeconomics 9
th
edn.,
.rentice %all
?. >icholson, =. 7(88#$, 0icroeconomic Theory" 4asic .rinciples and
,xtensions, 8
th
edition 5outh&=estern 1ollege .ublishing
9. @arian, %.2. 7(88($, *ntermediate 0icroeconomics" A 0odern
Approach, A
th
edn., =. =. >orton 3 1ompany
A. 0c1onnell, 1.2. 3 4rue, 5.6. 7(88?$, ,conomics" .rinciples,
.roblems, and .olicies, #A
th
edn., *rwinB0c:raw&%ill
C. 5chiller, 4.2. 7(88#$, ,ssentials of ,conomics, ?
th
edn, 0c:raw&
%illB*rwin
8. :regory, ..2. 7(88#$, ,ssentials of ,conomics, 9
th
edn., Addison
=esley .ublishing
D. 1ase, E.,. 3 /air, 2.1. 7(88+$, .rinciples of ,conomics , C
th
edn.,
.rentice %all
#8. 5amuelson, =./. 3 0ar's, 5.:. 7(88($, 0anagerial ,conomics, ?
th

edn., =iley .ublishing
##. %all, 2.,. 3 6ieberman, 0. 7(88?$, ,conomics " .rinciples and
Applications, +
rd
edn., 5outh&=estern 1ollege .ublishing
#(. /ran', 2.%. 3 , 4ernan'e, 4. 7(88+$, .rinciples of ,conomics, (
nd

edn., 0c:raw&%illB*rwin
#+. 4aumol, =.F., 3 4linder, A.5. 7(88?$, ,conomics " .rinciples and
.olicy, (88? )pdate, D
th
edn., 5outh&=estern 1ollege .ublishing
(
Fournals
#. Asia .acific Fournal of 0anagement
(. 4usiness =ee'
+. /ar ,astern ,conomic 2eview
?. /ortune
9. /orbes
A. %arvard 4usiness 2eview
C. Fournal of 0ar'eting
8. >ewswee'
D. 5loan 0anagement 2eview
#8. Time
##. The ,conomist
Unit contents: &O'(CS
#. *ntroduction to ,conomics
>ature and scope of economics
4asic economic problem
*ndividual demand and supply
The mar'et economy
The public sector
)e!rning !ctions:
Review Exercises and Problems:
(a) Why is the study of economics important?
(b) What are the 5 bi !uestions that face economists?
(c) What is the fundamental economic problem?

$e!dings:
1airncross, 5ir A. 70ay #D89$. ,conomics in Theory and .ractice,
American ,conomic 2eview, vol.C9, no.(, pp. #&#?.
4linders, A.5. 7(88?$, 0icroeconomics" .rinciples 3 .olicyG (88?
)pdate, 5outh&=estern 1ollege .ub.
+
(. 0icroeconomics
-emand, supply and price & elasticity and government controlled prices
1onsumer sovereignty & consumer behavior and maximi!ing
utility
.roduction & revenue and cost
1ompetitive models H perfect competition, monopoly,
monopolistic, oligopoly
,fficiency H technological advances and 23- innovations
5hort&run and the long&run
)e!rning !ctions:
Review Exercises and Problems:
(a) "escribe the main influences of demand and supply?
(b) Explain the determination of price and !uantity?
(c) #dentify and define the different elasticities of demand and supply?
(d) What are the obstacles to efficiency in our economy?
$e!dings:
6ancaster, E.F. 7#DC#$, 1onsumer -emand " A >ew Approach,
1olumbia )niversity .ress
4ec'er, :.5. 7#DCA$, The ,conomic Approach to %uman 4ehavior, The
)niversity of 1hicago .ress
5tiglit!, F. 3 0athewson, :./., 7#D8A$, >ew -evelopments in the
Analysis of 0ar'et 5tructure, 0*T .ress
5chrer, /.0. 3 2oss, -. 7#DD8$, *ndustrial 0ar'et 5tructure and
,conomic .erformance, %oughton 0ifflin

?
+. 2esource mar'ets
-emand and supply for resources
=age determination
2ent, *nterest and .rofit
)e!rning !ctions:
Review Exercises and Problems:
(a) $ow do firms choose the !uantities to employ labor% capital and
natural resources
(b) $ow are the prices of waes% interest and natural resources
determined in the competitive mar&ets?
$e!dings:
%amermesh, -.5. 7#DD+$, 6abor -emand, .rinceton )niversity .ress
Eennan, F. 7-ecember #DD9$. The ,lusive ,ffects of the 0inimum
=age, Fournal of ,conomic 6iterature, pp. #D?D&#DA9
9
?. 0icroeconomic issues and policies
0ar'et failure and the government role
4usiness regulation H public interest and choice
Tax and subsidies H agriculture and support policies
*ncome ineIuality and poverty
6abor mar'et H unionism, immigration and discrimination
.rovision of health care
)e!rning !ctions:
Review Exercises and Problems:
(a) What influences have caused an increasin role of overnment
intervention?
(b) $ow do we determine the volume of public oods that need to be
produced?
(c) $ow are subsidies used to achieve efficiency in the face of
external benefits?
$e!dings:
1ornes, 2. 3 5andler, T. 7#DDA$, The Theory of ,xternalities, .ublic
:oods and 1lub :oods, 1ambridge )niversity .ress
Eauffman, 4. 7#DD+$, ,conomics of 6abor 0ar'ets, ?
th
edn., -ryden
.ress.
A
9. >ational *ncome
-omestic product, national income and general price level
,conomic growth and stability
Aggregate expenditure
*mports, exports, the government
The 0ultiplier
Aggregate demand and aggregate supply
)e!rning !ctions:
Review Exercises and Problems:
(a) "escribe the e!uality between areate income% expenditure and
product'
(b) Explain how is real ("P used to measure economic rowth and
discuss the limitations of this measure'
(c) "escribe the effects of chanes in areate supply and areate
demand on economic rowth% inflation and business cycles'
(d) What is meant by economic e!uilibrium and how is it achieved?
$e!dings:
Eendric', F. =. 7#DC($, ,conomic Accounts and Their )ses, 0c:raw&
%ill
4linders, A. 5. 7(88?$, 0acroeconomics" .rinciples 3 .olicyG (88?
)pdate, 5outh&=estern 1ollege .ub.
A. 5aving, *nvestment and )nemployment
5aving decision
*nvestment decision
*nterest and 1apital
)nemployment and 2eal :-.
/ull employment
)e!rning !ctions:
Review Exercises and Problems:
(a) Explain what determines the demand and supply of labor'
(b) What determines the employment% the real wae rate and the
potential ("P of an economy?
(c) What causes unemployment in a situation of a full employment
C
economy?
$e!dings:
Anderson, :.T. 7Fune #D8#$, A >ew Approach to the ,mpirical
*nvestigation of *nvestment ,xpenditures, ,conomic Fournal, vol. D#,
0arch.
/riedman, 0. 7Fune #DCC$, >obel 6ecture" *nflation and
)nemployment, Fournal of .olitical ,conomy, vol. 89, pp. ?9#&?C(
/eldstein, 0. 7#D8C$, The ,ffects of Taxation on 1apital Accumulation,
)niversity of 1hicago .ress.
0inford, A...6., et al. 7#D89$, )nemployment" 1auses and 1ure, (
nd

edn., 4asil 4lac'well, Jxford.
C. /iscal .olicy
The :overnment role
The 4udget
/iscal policy multipliers and the .rice level
/iscal policy and Aggregate 5upply
)e!rning !ctions:
Review Exercises and Problems:
(a) Explain fiscal policy and how is it relevant to the economy?
(b) What is the difference between a deficit and surplus budet?
(c) Explain the difference between the demand)side and the supply)
side effects of a fiscal policy
$e!dings:
4linder, A. 7#DC+$, /iscal .olicy in Theory and .ractice, :eneral
6earning .ress
%illier, 4. 7#DD#$, The 0acroeconomic -ebate" 0odels of the 1losed
and Jpen ,conomy, 4asil 4lac'well, Jxford.
Blanchard, O.(2000), Macroeconomics 2
nd
edn., Prentice Hall
8. 0oney and 4an'ing
0oney and its use
4an'ing and financial system
8
0oney creation
0oney, 2eal :-. and the .rice level
)e!rning !ctions:
Review Exercises and Problems:
(a) What are the economic functions of ban&s and other financial
institutions to an economy?
(b) $ow do ban&s create money?
(c) Explain the sinificance of the !uantity of money to an economy'
$e!dings:
2itter, 6. 3 5ilber, =. 7#D88$. 0oney, ?
th
edn. 4asic 4oo's
0ish'in, /. 7#DD8$, The ,conomics of 0oney, 4an'ing and /inancial
0ar'ets, 9
th
edn., %arper 1ollins
D. 0onetary .olicy
5upply of money
-emand for money
*nterest rate determination
0onetary policy and Aggregate -emand
)e!rning !ctions:
Review Exercises and Problems:
(a) "escribe the tools used by the *entral +an& to conduct monetary
policy
(b) What is open mar&et operations and how can it affect money
supply?
(c) What determines the interest rate and how does the *entral +an&
influence the interest rate
(d) What are the determinants of the demand for money?
$e!dings:
:ordon, 2.F. 7(888$. 0acroeconomics, Addison&=esley, 2eading, 0A.
=alsh, 1.,. 7(88+$, 0onetary Theory and .olicy, (
nd
edn., The 0*T
.ress

#8. *nflation
*nflation and the price level
D
-emand&pull inflation
1ost&push inflation
*nflationary effects
*nflation and unemployment" The .hillips 1urve
*nflation and *nterest rates
)e!rning !ctions:
Review Exercises and Problems:
(a) What are the different sources of inflation?
(b) What is the short)run and lon)run relationship between inflation
and unemployment?
(c) What is the short)run and lon)run relationship between inflation
and interest rates?
$e!dings:
.ar'in, 0. 3 4ade, 2. 7#D88$, 0acroeconomics, (
nd
edn., .hilip Allan,
Jxford
-ornbusch, 2. 3 /ischer, 5. 7#D8C$, 0acroeconomics, ?
th
edn., 0c:raw
%ill *nternational
:ordon, 2.F. 7(88+$, .roductivity :rowth, *nflation, and
)nemployment " The 1ollected ,ssays of 2obert F. :ordon, 1ambridge
)niversity .ress
##. 6ong&run macroeconomic issues
Aggregate supply issues
:rowth in the new economy
.ublic -ebt H surplus and deficit
0acro policies H efficiency and burden
)e!rning !ctions:
Review Exercises and Problems:
(a) Explain the use of fiscal and monetary policies to shape economic
rowth in the lon run'
(b) $ow does fiscal policy influence unemployment?
(c) Why does recession occur when inflation is lowered?
#8
$e!dings:
4esen'o, -., -ranove, -., 5hanley, 0. 3 5chaefer, 5. 7(88+$,
,conomics of 5trategy, +
rd
edn., =iley .ub.
5haw, :.E. 7#D8?$, 2ational ,xpectations" An ,lementary ,xposition,
=heatsheaf, 4righton.
4egg, -.E.%. 7#D8($, The 2ational ,xpectations 2evolution in
0acroeconomics, .hilip Allan, Jxford.
#(. *nternational economics
*nternational trade
,xchange rates
The balance of payments
Trade surplus and deficit
Aid, growth and developing economies
)e!rning !ctions:
Review Exercises and Problems:
(a) "efine comparative advantae and explain how a country ains
from international trade'
(b) What are trade restrictions and how can it reduce our imports%
exports and consumption possibilities?
(c) Why must we have trade restrictions?
$e!dings:
%usted, 5. 3 0elvin, 0. 7(88+$, *nternational ,conomics, A
th
edn.,
Addison =esley
Erugman, ..2. 3 Jbstfeld, 0. 7(88($, *nternational ,conomics" Theory
and .olicy, A
th
edn. Addison =esley
0adura, F. 7#D8D$, *nternational /inancial 0anagement, (
nd
edn., =est
.ublishing 1o.
##
#(

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