Aims

1. Acquire an understanding of fundamental economic theories, concepts and policies.
2. Apply microeconomic principles and concepts to decision making in a business environment.
3. Understand the general macroeconomic environment and its effect upon business organisations and their markets.
4. Acquire an understanding of international trade and the economic mechanisms employed to control and facilitate it.

Programme Content and Learning Objectives:

1. Define the problem of scarcity, opportunity cost, the functioning of free market, command and mixed economies and the difference between macroeconomics and microeconomics.

2. Describe and interpret the basic theory of consumer behaviour and demand including the concept of utility, the law of diminishing marginal utility, the distinction between Giffen, inferior and normal goods, the distinction between substitute and complementary goods, the difference between individual and market demand, and the notion and measurement of elasticity (own-price, cross and income elasticity).

3. Employ the theory of supply from a fundamental understanding of costs; define the difference between the short-run and the long-run; differentiate between fixed, sunk and variable costs; derive marginal, average and total costs; understand the nature and relevance of economies and diseconomies of scale and the concept of elasticity of supply.

4. Describe the application of supply and demand analysis to the working of markets both in equilibrium and disequilibrium, including examination of the effects of price restrictions, quotas, subsidies and taxation.

5. Examine the effect of different markets’ structures (perfect competition, monopoly, monopolistic competition and oligopoly) upon the conduct (particularly pricing policy) and performance of profit maximising and non-profit maximising (sales revenue, market share and managerial utility maximising) business organisations, and give examples of the forms and effects of government intervention in this area.

6. Understand how exchange rates are determined, the main alternative exchange rate regimes and their advantages and disadvantages. Explain the rationale for international trade agreements and organisations (e.g. the World Trade Organisation), tariffs, quotas and other measures of trade protectionism.

7. Evaluate national income as a measure of societal well being and derive it through its various methods of measurement. Explain the main components of National Income Accounts (Consumption, Investment, Government Expenditure and Foreign Trade.)

8. Explain the determination of the equilibrium levels of national income in terms of the simple Keynesian macroeconomic model.

9. Describe the functions of money and the role of the banking system in the creation of money. Explain the relationship between the money supply, growth and inflation.

10. Understand and interpret the main objectives of government macroeconomic policy and the rationale for the various policies used to achieve these objectives. Employ the aggregate supply and demand model to analyse the likely effects of fiscal and monetary policy upon output, employment, the price level, and the balance of payments.

11. Explain the fundamental principles of comparative advantages and specialisation and their relevance to international trade. Explain the terms of trade, balance of trade and balance of payments accounts.

By written examination. The pass mark is 40%. Time allowed 3 hours.

The question paper will contain:

Section A is composed of eight short-answer compulsory questions and Section B contains five questions of which three must be answered.

Section A is worth 40% of the total marks available and Section B is worth 60% of the total marks.