HE 9091 Principles of Economics

July Semester 2016

Course Description and Scope
This course covers fundamental tools and applications of concepts in microeconomics and
macroeconomics. The section on microeconomics focuses on markets as a mechanism for
allocating scarce resources. Using tools of welfare economics, it analyses demand, supply,
market system and the concepts of elasticity. It also addresses market efficiency, outcomes from
market failures, production and firms with market influence. The section on macroeconomics
provides a mix of classical and Keynesian ideas, addressing the forces that shape the economy in
both the short run and the long run. Topics include the calculation of GDP, analysis of inflation
and employment, theory of economic growth, the role of financial markets, fiscal and monetary
policies and the international economy.
Proposed Lecture Schedule
Week No.
1

Topics
Lecture 1: Introduction to Economics

8 Aug 16

1.1 Scarcity and Cost-Benefit Principles

1.2 Opportunity Cost and Incentive Principle
1.3 Demand and Supply
1.4 Market Equilibrium and Price Control
1.5 Shifts in Demand and Supply
1.6 Efficiency and Equilibrium Principles

Lecture 2: Elasticity and Consumer Behaviour

15 Aug 16

2.1 Price Elasticity of Demand

2.2 Income Elasticity of Demand
2.3 Cross-Price Elasticity of Demand
2.4 Price Elasticity of Supply
2.5 Total Utility and Marginal Utility
2.6 The Rational Spending Rule
2.7 Demand and Consumer Surplus
2.8 Supply and Producer Surplus

Lecture 3: Perfect Competition and Efficiency

22 Aug 16

3.1 Perfectly Competitive Markets

3.2 Production and Cost
3.3 Profit and Loss in the Short Run
3.4 Market Equilibrium and Efficiency

Required Readings
FBL Chapters 1, 3 & 6

FBL Chapters 4, 5 &

6

FBL Chapters 6 & 7

Week No.

Topics
3.5 Taxes and Efficiency
3.6 Long Run Adjustment in Perfect Competition

Required Readings

Lecture 4: Imperfect Competition and Game

Theory
4.1 Sources of Market Power
4.2 Profit Maximization for Monopolist
4.3 Price Discrimination
4.4 Game Theory and Strategic Decisions
4.5 Prisoners Dilemma
4.6 Decision Tree

FBL Chapters 8 & 9

Lecture 5: Externalities, Property Rights and

Economics of Information
5.1 External Costs and Benefits
5.2 The Coase Theorem
5.3 Property Rights and the Tragedy of the
Commons
5.4 Optimal Amount of Information
5.5 Asymmetric Information
5.6 Adverse Selection and Moral Hazard

FBL Chapters 10 & 11

Lecture 6: Economics of Public Policy

6.1 Economics of Health Care Delivery
6.2 Environmental Regulation
6.3 Public Policy in Pollution Control
6.4 Public Good and Private Good
6.5 Optimal Quantity of Public Good
6.6 Additional Functions of Government and
Sources of Inefficiency

FBL Chapters 13 & 14

Lecture 7: Gross Domestic Product (GDP) and

Inflation
7.1 Gross Domestic Product (GDP)
7.2 The Expenditure Method
7.3 Nominal and Real GDP
7.4 Real GDP and Economic Well-Being
7.4 The Consumer Price Index
7.5 Adjusting for Inflation
7.6 Costs of Inflation
Recess
Lecture 8: Unemployment and Economic
Growth
8.1 Demand and Supply in Labour Market
8.2 Measuring Unemployment

FBL Chapters 15 & 16

29 Aug 16

5
5 Sep 16

6
12 Sep 16

7
19 Sep 16

8
9
3 Oct 16

FBL Chapters 17 & 18

Week No.

Topics
8.3 Types of Unemployment
8.4 Impediments to Full Employment
8.5 Economic Growth and Labour productivity
8.6 Determinants of Average Labour Productivity
8.7 Policies to Promote Economic Growth

Required Readings

10

Lecture 9: Capital Formation, Financial

Markets and Money Supply
9.1 Saving, Wealth and National Saving
9.2 Investment and Capital Formation
9.3 Demand and Supply of Saving
9.4 Bonds and Stocks
9.5 Commercial Banks and Money Creation
9.6 Central Bank and Money Supply
9.7 Money Demand and Money Supply

FBL Chapters 19, 20 &

23

Lecture 10: Aggregate Expenditure and

Stabilization Policy
10.1 Recession and Expansion
10.2 Potential Output and Output Gap
10.3 The Keynesian Model
10.4 Aggregate Expenditure and Multiplier
10.5 Short Run Equilibrium Output
10.6 Fiscal Policy
10.7 Monetary Policy

FBL Chapters 21, 22 &

23

Lecture 11: Aggregate Demand, Aggregate

Supply and Macroeconomic Policy
11.1 The Aggregate Demand Curve
11.2 The Aggregate Supply Curve
11.3 Aggregate Demand-Aggregate Supply
Analysis
11.4 Anti-Inflationary Monetary Policy
11.5 Response to Aggregate Demand Shock
11.6 Response to Aggregate Supply Shock
NOTE:
A Quiz will be conducted during Tutorial 10
Coverage: Lecture 1 to Lecture 10
Format: 20 Multiple Choice Questions to be
answered in 40 minutes.

FBL Chapter 24 & 25

Lecture 12: Exchange Rate, International

Trade and Capital Flow
12.1 Exchange Rate Determination
12.2 Flexible and Fixed Exchange Rates

FBL Chapter 26

10 Oct 16

11
17 Oct 16

12
24 Oct 16
Quiz period:
24 Oct 16 to
28 Oct 16

13
31 Oct 16

Week No.

Topics
12.3 Nominal and Real Exchange Rates
12.4 Purchasing Power Parity Theory
12.5 Trade Balance and Net Capital Inflows
12.6 International Capital Flows

Required Readings

Basic Text
Robert H. Frank and Ben S. Bernanke and Hon-Kwong Liu (FBL), Principles of Economics Asia
Global Edition, McGraw Hill, 2015.
ISBN: 978-1-259-01184-9 or M1-259-01184-8
Method of Instruction
Lectures
Tutorials

:
:

2 hours per week, commences in Week 1 and end in Week 13

1 hour per week, commences in Week 2 and end in Week 14

Course Assessment
Quizzes
Class Participation
Final Examination

Lecturer
*Dr Tan Khay Boon
* Course Co-ordinator

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:
:

20%
10%
70%
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100%
E-mail Address
khayboon@ntu.edu.sg