Fundamentals of Economics

In the Fundamentals of Economics course, we develop models of how households make consumption decisions and then aggregate those results to the market level. We then turn to the supply side of markets, engaging in a detailed investigation of how firms make production decisions. Next, we combine demand and supply to understand how prices of goods are determined in perfectly and imperfectly competitive markets. The course will take a closer look at economic notions of efficiency, and the ever-present tradeoff between efficiency and equity. We will also take time to consider fundamentals of utility, game theory, and market failures – such as externalities (e.g. air pollution). This is important for understanding how demand and supply is derived for various goods and services and how changes in our environment (man-made or natural), can impact the magnitude and distribution of well-being.

In addition to understanding analytical models in Microeconomics, we will turn to Fundamentals of Macroeconomics. This is the study of the economy, focusing on large-scale economic variables such as national income, overall output, unemployment, inflation, and economic growth. It examines how aggregate demand and supply interact to determine the performance of an economy, and how fiscal and monetary policies influence these dynamics. Studying macroeconomics is vital for making sense of real-world issues like financial crises, inflationary pressures, and global trade dynamics. Topics in macroeconomics that will be covered include measuring the national income and cost of living, unemployment, the open-economy model, and the trade-offs between inflation and unemployment.

The aim of this course is to learn how to think like an economist. The course will offer a lens on how individuals and firms take decisions to maximize their utility and profits subject to constraints. It will develop the tools of modern economic theory and discuss their applications, including in government policies such as taxation and international trade, perfect competition, monopoly, externalities and fundamentals of macroeconomics. Students will become familiar with real world dilemmas and tradeoffs faced by individuals, firms and governments, as well providing a rational way of understanding the consequences of decisions made by consumers, producers and policy makers.

After completing this course, students will be able to:

• Apply economic theory to real-world organizational problems and challenges.
• Understand policy instruments and the economic rationale behind them.
• Discuss the nature of markets and firms, and the issues involved in resolving market failures.
• Examine contemporary economic issues through a rational lens.

Students will build and solve mathematical models and analytical frameworks of social behavior that let them:

• Understand Utility Maximization in Consumer theory
• Evaluate Profit Maximization by Firms
• Analyze nature of competition and externalities in markets
• Apply learnings to understand impact of policies and evaluate how preferences, budget constraints on the demand-side interact with cost functions on the supply side
• Evaluate and understand Relationship between GDP, unemployment and inflation in macroeconomics.

Principles of Economics by Gregory Mankiw, Eighth Edition, Cengage Learning