Economic Principles and Skills 1 2014-15 Handout

School of Management and Business Ysgol Rheolaeth a Busnes

Module Handbook

EC10120 Economic Principles and Skills I

Semester 1

2014/2015

EC10120 Economic Principles and Skills 1 2014/15

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Contents

Module Handbook Details ............................................................................................. 3

Aims of the Module ................................................................................................... 3

Brief description......................................................................................................... 3

Learning Outcomes .................................................................................................... 4

Transferable and Employability Skills ....................................................................... 4

Lecture Programme ........................................................................................................ 5

Teaching information ................................................................................................. 7

Tutorial Programme ................................................................................................... 7

Attendance ................................................................................................................. 7

Semester Assessment ..................................................................................................... 7

Supplementary Assessment ....................................................................................... 7

Unacceptable Academic Practice Regulations ........................................................... 8

Assignment Submission ............................................................................................. 8

Penalties for Late Submission of Assessments .......................................................... 9

Submission through the Medium of Welsh ............................................................... 9

Special circumstances .................................................................................................. 10

Reading List ................................................................................................................. 11

Tutorial Topics 1 ...................................................................................................... 12

Tutorial Topics 2 ...................................................................................................... 13

Tutorial Topics 4 ...................................................................................................... 15

Tutorial Topics 5 ...................................................................................................... 16

Study Skills Topics .................................................................................................. 17


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Module Handbook Details Module Identifier EC10120

Module Title Economic Principles and Skills I

Academic Year 2013/14

Module Coordinator Peter Midmore

Office Rheidol 3.45

Email address [email protected]

Other staff involved Shafiul Azam

Checked by mSA, 30/9/14

Aims of the Module To introduce students to the principles underlying economics, using illustrations from the study of individual markets.

Brief description This module introduces the economic notion of scarcity, and provides an account of ways in which choices are made by individuals and families, firms and institutions, and the role of the state as the representative of an overall social interest. It covers consumer choice models, production theory, and market interaction, initially where markets work efficiently, and then in the context of various forms of market failure. I develop a cumulative approach to microeconomics, developing a step by step account. Because this is not topic-based, it is difficult to dip in and out of the lecture course and hope to catch up later. Consequently, students who have studied some economics before should not rely on previous knowledge.

Ysgol Rheolaeth a Busnes

School of Management and Business
mailto:[email protected]


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Learning Outcomes On successful completion of this module students should be able to:

1. Explain how markets coordinate economic activity and produce equilibrium prices and quantities;

2. Assess the mutual benefit from trade between individuals and between countries;

3. Describe optimising behaviour by households and firms; 4. Discuss the effects of alternative market structures and evaluate market

outcomes for policy purposes; 5. Identify quantitative relationships and the formulae underlying models; 6. Develop the ability to follow logical arguments; 7. Have enhanced capacity to recognise and solve problems.

Transferable and Employability Skills Skills Type Skills details

Application of Number

Use mathematical reasoning and analysis to handle quantitative relationships and apply formulae underlying problems in comparative advantage, elasticity, cost analysis and elementary game theory

Communication Develop written communication skills when submitting written coursework and in examinations. Listening effectively in lectures and speaking in tutorial classes

Improving own Learning and Performance

Cultivate preferred learning styles through self-management; develop a structured approach to learning through efficient time management

Information Technology

Use word-processing software to prepare written work; use of spreadsheet software to complete elements of tutorial questions; use of presentation software to preparing material for seminar presentations; use of e-mail and Blackboard for coursework submission and keeping in touch with the module.

Personal Development and Career planning

Identification of a variety of potential career opportunities in professional economics practice as well as the general business sector; acquisition of critical self- reflection to develop knowledge and communication skills relevant to career planning

Problem solving Tutorial classes and some lectures require the development of analytical skills to select and apply appropriate methods for solving set problems;

Research skills Development of library and other basic information accessing and researching skills, for use in writing coursework

Subject Specific Skills

Students should develop their knowledge and understanding of the microeconomics, including standard approaches to consumer decision-making, production theory, and firm strategies in different market contexts.


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Lecture Programme Topics and timing may vary but will include: Introduction

Lecture 1 What is Economics all about? Competing uses for scarce resources Thinking like an economist

Lecture 2 The Concept of Comparative Advantage Self-sufficiency and gains from trade Absolute and comparative advantage

Reading: Begg, Ch. 1-2; Lipsey, Ch. 1-2; Sloman, Ch. 1

Demand and Supply

Lecture 3 Demand and Supply: a First Look Individual and market demand and supply Market equilibrium

Lecture 4 More on Demand and Supply Comparative static analysis of changes in equilibrium Measuring the responsiveness of demand and supply - elasticity

Lecture 5 Government Intervention in Markets and its Welfare Impact Price controls, price floors, tax incidence Consumer surplus, producer surplus, market efficiency

Lecture 6 Measuring the Efficiency of Markets: International Trade Trade improves welfare Why use tariffs to restrict trade?

Reading: Begg, Ch. 3-4; Lipsey, Ch. 3-4; Sloman, Ch. 2-3

Consumer Choice: Behind the Demand Curve

Lecture 7 Influences on Decisions about What to Buy The household budget constraint what can the consumer afford? Preferences for goods and services what would the consumer like? Different types of preferences

Lecture 8 How Consumer Choices are Made What happens if income changes? normal and inferior goods What happens if (relative) prices changes?

Lecture 9 Deriving a Demand Curve Using consumer analysis to understand saving The work-leisure choice

Reading: Begg, Ch. 5; Lipsey, Ch. 5; Sloman, Ch. 4

Producer Choice: Behind the Supply Curve

Lecture 10 Profit, the Production Function and Costs The definition of profit Factors of production and the production function Total, average and marginal cost

Lecture 11 Profit Maximisation in Conditions of Perfect Competition What is a competitive market? The marginal rule for profit maximisation


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Lecture 12 Whether to Produce in the Short- and the Long-Run The short-run decision to stay in production or shut down The long-run decision to enter or exit a market Deriving the short and long-run supply curves

Reading: Begg, Ch. 6-8; Lipsey, Ch. 6-7; Sloman, Ch. 5

Different Market Structures

Lecture 13 The Market Structure of Monopoly The effects of monopolies of social well-being and public policy Charging different prices to different consumers

Lecture 14 The Market Structure of Oligopoly Interdependence: collusion or competition? Thinking strategically Game theory and the prisoners dilemma

Lecture 15 The Labour Market: Bilateral Market Power? Derived demand for factors Unions and competition The minimum wage

Reading: Begg, Ch. 8-10; Lipsey, Ch. 8-9; Sloman, Ch. 7-8

Welfare Economics

Lecture 16 Tax Efficiency The deadweight loss from taxation Taxes as a means of redistribution

Lecture 17 External Costs and Benefits Externalities in consumption and production The Coase Theorem Market solutions and government policy

Lecture 18 Public Goods and Common Property Resources How do we value public goods? The problem of free-riders The importance of property rights

Lecture 19 General Equilibrium and Economic Efficiency Pareto optimality The efficiency of perfect competition A review of the sources of market failure

Reading Begg, Ch. 15-18; Lipsey, Ch. 13-14; Sloman, Ch. 11-12

Lecture 20 Revision


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Teaching information The module will consist of two hours of lectures each week. Students can listen again to a combined audio-PowerPoint slide presentation which will become available on the BlackBoard website shortly after each lecture. Students will attend a weekly tutorial group that will incorporate an Economics study skills element. The School Undergraduate Office will allocate tutorial groups and lists will be posted on the Economics subject notice board. You should also check your email regularly: you will receive a message about which group you are in and when the tutorials start. As dates and rooms may change through the term, it is important that you check BlackBoard regularly for announcements regarding this module.

Tutorial Programme Meeting 1 (Week beginning 6 October) Study Skills: Introduction

Meeting 2 (Week beginning 13 October) Tutorial Topics 1

Meeting 3 (Week beginning 22 October) Study Skills: Presentation Topic A

Meeting 4 (Week beginning 27 October) Tutorial Topics 2

Meeting 5 (Week beginning 3 November) Study Skills: Presentation Topic B

Meeting 6 (Week beginning 10 November) Tutorial Topics 3

Meeting 7 (Week beginning 17 November) Study Skills: Presentation Topic C

Meeting 8 (Week beginning 24 November) Tutorial Topics 4

Meeting 9 (Week beginning 1 December) Study Skills: Presentation Topic D

Meeting 10 (Week beginning 8 December) Tutorial Topics 5

Attendance Tutorial classes in this module are compulsory. A register will be taken in every session. Those who fail to attend sessions will have to respond to their absences via the online attendance management system (SAMS). There may be UK Border Agency issues for those whom it applies if attendance expectations are not met.

Semester Assessment Two-hour examination (70%) and 2 assessed pieces of coursework (20% in total); an additional 10% of the assessment will be awarded for attendance at tutorials and completion of prescribed exercises. See assessment briefs for dates and other information.

Supplementary Assessment Two-hour examination (100%)


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Unacceptable Academic Practice Regulations It is unacceptable academic practice to commit any act whereby a person may obtain, for himself/herself or for another, an unpermitted advantage. The Regulation shall apply, and a candidate may be found to have committed unacceptable academic practice, regardless of a candidates intention and the outcome of the act, and whether the candidate acts alone or in conjunction with another/others. Any action or actions shall be deemed to fall within this definition, whether occurring during, or in relation to, a formal examination, a piece of coursework, the presentation of medical or other evidence to Examination Boards, or any form of assessment undertaken in pursuit of a University qualification or award. Please make yourself aware of the academic guidelines (available in the Schools general office) on unacceptable academic practice. Acts, amongst others, that will be punished include: plagiarism, collusion, fabrication of evidence or data, unacceptable academic practice in formal examinations and recycling of data or text.

Assignment Submission From September 2014, Aberystwyth University is moving to e-submission for text-based word-processed assignments. You'll be asked to submit your work through AberLearn Blackboard using one of the e-submission tools built into Blackboard. Your lecturer will tell you when and where to submit your work, but here are some helpful tips to get you started with e-submission:

If you have a chance to practice using e-submission, take it. Some staff set up a practice submission so that you become familiar with using it. Have a go before your first real assessment, so you know what to do when you submit your work.

If you are planning to use your own computer to submit work: o Check you have a supported web browser on your computer

(http://www.inf.aber.ac.uk/advisory/faq/636/ ) - if you don't, please contact [email protected] for advice;

o Use this computer when doing your practice submission; o If you encounter any problems on your own computer, you should use the

university computers available in a number of locations across the University.

Watch a video on how to submit: (http://www.inf.aber.ac.uk/advisory/faq/524/).

Don't leave it until the last minute before submitting your work - if you are stressed and working right up to the clock, mistakes are easier to make. Give yourself some extra time and submit your assignment early. That way, you won't risk missing the deadline. You can find the university policy on late submission on the AU website here (http://www.aber.ac.uk/en/student/ug-issues/)

Follow all the instructions on screen whilst you are submitting, including details of file size, file format etc. Please use a short file name (15 characters is a good length).
http://www.inf.aber.ac.uk/advisory/faq/636/mailto:[email protected]://www.inf.aber.ac.uk/advisory/faq/524/http://www.aber.ac.uk/en/student/ug-issues/


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If you are using the Turnitin tool, keep the receipt that will come to your AU email account. Please note that for all of the e-submission tools, you can also check your receipt of submission by clicking the link where you originally submitted the assignment.

If your tutors are using e-marking, you may be able to receive your feedback through the same link. Please check with your tutors to find out how you will receive feedback.

If you have any problems, contact your department straightaway with details of what happened. Technical problems can be reported to [email protected]. Please take screenshots of any error messages.

If you believe that your submission has not gone through correctly, have a look at the Failed Submission Policy at http://nexus.aber.ac.uk/xwiki/bin/download/Main/guides+%2D+Blackboard/failed%2Dsubmission%2Dpolicy.pdf

Please note that computer problems are not considered by the University to be special circumstances for late submission (http://www.aber.ac.uk/en/student/ug-issues/ ).

Penalties for Late Submission of Assessments Deadlines for written work are taken seriously. Students need to manage their time responsibly so that they can submit work on time.

Assessments must be submitted to the Department according to individual departmental requirements and published deadlines.

Work submitted after the deadline will be awarded a zero.

A resit will be allowed in Part One if the module is failed overall

Submission through the Medium of Welsh Whilst all students can submit through the medium of Welsh please be aware that if the class tutor/lecturer is not fluent in Welsh then the work will be translated into English before marking.
mailto:[email protected]://nexus.aber.ac.uk/xwiki/bin/download/Main/guides+-+Blackboard/failed-submission-policy.pdfhttp://nexus.aber.ac.uk/xwiki/bin/download/Main/guides+-+Blackboard/failed-submission-policy.pdfhttp://www.aber.ac.uk/en/student/ug-issues/


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Special circumstances Students must consult their departments published procedures for assessments that are unavoidably submitted late. Special Circumstances will normally only be considered on the following grounds, with appropriate supporting documentation:

Illness

Severe personal/family problems (e.g. family bereavement) The following will not be considered as Special Circumstances:

Computer failure (you should ensure adequate backups)

Printer queues (you should manage your time better)

Lack of access to resources (better planning will ensure this does not happen)

Illness for which a medical certificate is not available

Poor time management

More than one deadline on the same day

Inability to answer question or struggling with the material

Crisis Games, Performance Productions, or Departmental study trips

Non-academic activities Approved by Senate 13 June 2012


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Reading List There are a number of good textbooks which are suitable for this module. Those recommended below are the editions I currently have, and there may be more recent versions. Therefore, references to Chapter Numbers in the recommended reading for different parts of the module may differ slightly. You should buy one of the following: Begg, D. and Vernasca, G. (2011). Economics, (10th Edition), Maidenhead: McGraw-

Hill. Lipsey, R.G. and Chrystal K.A. (2011). Economics, (12th Edition), Oxford: Oxford

University Press. Sloman, J., Wride, A. and Garratt, D. (2012): Economics, (8th Edition), Harlow:

PrenticeHall. In the recommended reading attached to the lectures above, these are referred to, respectively, as Begg, Lipsey, and Sloman. Strongly recommended especially if you intend to take economics as a single or major subject are either Begg or Lipsey; these are easily the best textbooks on the market at present. Sloman is a British authored textbook with good coverage, recommended for those taking economics as a minor or subsidiary subject. Other textbooks (which may be available second-hand) which might be useful are: Krugman and Wells are leading US economists, while Graddy has provided a European gloss, and this book provides a clean, fresh look at economic issues; there are several permutations of Parkins text (e.g. International and European versions) which can also be used as equivalent. Mankiw has been used as a main text in past years, but its macroeconomic section is less useful for EC10320. Krugman, P., Wells, R. and Graddy, K. (2007): Economics: European Edition (1st

edition), New York: Worth Publishers. Mankiw, N.G. and Taylor, M.P. (2006): Economics, (European Edition), London:

Thomson Publishers. Parkin, M., Powell, M. and Matthews, K. (2008): Economics (7th edition), London:

Pearson. All of these textbooks have an associated website, usually containing excellent support material.


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Tutorial Topics 1 1. If a Premier League football club has had offers for their star player, developed through

its youth programme and with a number of years to run on his contract, how would you evaluate his opportunity cost? What factors would you need to take into account to explain your reasoning to the club management?

2. Explain the invisible hand. How does it work? 3. Give three examples of a market failure, and explain why government intervention is

necessary to correct it. 4. Why do markets appear to be a better way of organising economic activity than using a

central planner (as in the former USSR)? 5. Classify the following statements as normative or positive:

a) If the government raises interest rates firms will reduce their investment plans. b) The government should spend more to keep unemployment from rising. c) Lower taxes will encourage people to work harder. d) When the price of CDs rises then the quantity demanded falls.

6. The following table shows the production possibilities for Wales and England

Leeks (million tons) Potatoes (million tons)

Wales 20 10

England 60 60

a) What is the price of leeks (in terms of potatoes) in Wales and in England with no trade

between them? b) Explain why England has an absolute advantage in the production of both goods. c) Who has a comparative advantage in the production of each good? d) Suppose you are the Welsh trade minister. Describe a trading arrangement that you

might propose to your opposite number in London. 7. Suppose a student has to complete 8 pieces of coursework in an academic year. In the

first semester he has an average mark of 55. In the second semester, he gains marks of 50, 40, 30 and then fails to submit the final piece of coursework.

a) What happens to his total, average and marginal mark after the fourth and

subsequent pieces of coursework are submitted? b) Another student gains an average mark of 45 in the first semester and she then gets

50, 60, 70 and 80. What relationship is there between the average and marginal mark?


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Tutorial Topics 2 1. Using supply and demand diagrams show the separate effect of the following on the

market for CDs: a) A fall in the price of MP3 players b) The invention of a new faster CD pressing machine c) An increase in royalty payments imposed by the Musicians Union d) Sudden mass hysteria over Katy Perrys new album release 2. Explain the following statements using supply and demand diagrams: a) If there is heavy rain in the Bordeaux region in August and September, the price of

wine rises in French supermarkets. b) If Britain experiences a summer heatwave, the price of package holidays to Spain

falls. c) An exceptionally hot summer in North America causes the price of oil to rise. 3. The following table shows the number of packs of sandwiches bought each day in the

Aberystwyth Arts Centre at various prices:

Price of sandwiches per pack Number of packs purchased per day

6 5 4 3 2 1 0

0 30 60 90

120 150 180

a) Draw the daily demand curve. b) Can you write down an algebraic expression for the demand curve? c) Calculate the price elasticity of demand if the price rises from 3 to 4. d) If the Arts Centre increased the price of sandwiches from 3 to 4, what would

happen to total revenue? e) Calculate the price elasticity of demand if the price rises from 2 to 3. f) If the price rose from 2 to 3 what would happen to total revenue? g) Show on your diagram the inelastic and elastic regions of the demand. 4. Demand for the Ford Fiesta is inelastic but demand for the Mercedes Benz E-class is

elastic. Suppose that the introduction of robot technology into car plants doubles the supply of both models (that is the quantity supplied at each price is twice what it was).

a) What happens to the equilibrium price and quantity in each market? b) Which model experiences a larger change in price? c) Which model experiences a larger change in quantity? d) What happens to total consumer spending on each model? 5. What is a normal good? What is an inferior good? What is a Giffen good?


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Tutorial Topics 3 1. The United Kingdom introduced a national minimum wage in 1999. Suppose that

currently the minimum wage is above the equilibrium wage in the market for unskilled labour.

a) Using an appropriate diagram show the market wage, the number of workers who are

employed and the number who are unemployed (but willing to work). Also show the total wage payments to unskilled workers.

b) Now suppose that the Low Pay Commission proposes a further increase in the minimum wage. What effect would this have on employment? Does the change in employment depend on the price elasticity of demand, the price elasticity of supply, both or neither?

c) In the light of what you have found what might be the rationale for a minimum wage? 2. Explain how buyers willingness to pay, consumer surplus and the demand curve are

related. 3. Prior to 1992 the Brazilian market for cars was largely closed to imports and only

domestically made cars could be sold. a) Using a supply and demand diagram, show equilibrium price, equilibrium quantity,

consumer and producer surplus before 1992. b) Suppose that the world car price is below the Brazilian price before trade, and that the

Brazilian market is opened up to international competition. Show the new equilibrium price, quantity consumed, quantity produced domestically, and quantity imported. Also show the change in domestic consumer and producer surplus. Has total domestic surplus increased or decreased? Was trade liberalisation a good or bad thing?

4. A consumer has a choice between kebabs and hamburgers. Kebabs cost 3 each,

hamburgers cost 2 each. The consumer has a total weekly income of 30.

a) Draw the consumers budget constraint, and show the relative price of kebabs and hamburgers.

b) Draw the consumers indifference curves and discuss their shape. Show the marginal rate of substitution between kebabs and hamburgers and explain the concept.

c) Now suppose the consumer gets a pay rise to 42. Show the effect on the budget constraint and discuss what might happen to the consumers equilibrium choice. Explain what is meant by an inferior good. Which good is inferior? Why?

d) Start again with a weekly income of 30. Now suppose the price of kebabs doubles to 6 each. Show the effect of this (hint: draw kebabs on the horizontal axis). Decompose the effect of this into income and substitution effects. Explain carefully what these two mean.


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Tutorial Topics 4 1. What is meant by marginal product? What does it mean if it is diminishing? Explain why a

firm might experience a diminishing marginal product of labour.

2. The table below sets out fixed, variable and total costs for a chilled gourmet meals

manufacturer, which aims to maximise profits, and sells in a perfectly competitive

market.

Output/hour Total Fixed Costs Total Variable Costs Total Costs

0 10 0 10

1 10 10 20

2 10 17 27

3 10 21 31

4 10 24 34

5 10 28 38

6 10 35 45

7 10 45 55

8 10 58 68

a) Calculate Yummees average fixed, variable and total costs, and marginal costs.

b) Draw a diagram which shows how these measures of cost change according to the level

of output produced.

c) If the market price of a gourmet dinner is 9, how much supernormal profit per hour will

the firm be able to earn in the short run?

d) If the market price of gourmet dinners falls to 6, should the manufacturer cease

production? If it fell further to 5, should it stop? Explain your reasoning.

3. The monthly total cost of production, TC, is related to the level of output Q in the

following way:

TC = Q2 + bQ + c

where b and c are positive constants. In terms of Q, find expressions for the following

cost functions:

a) Total variable cost (TVC)

b) Average variable cost (AVC)

c) Average fixed cost (AFC)

d) Average total cost (ATC)

e) Marginal cost (MC)

f) Find the value of Q for which ATC is a minimum, and show that MC = ATC at the minimum

ATC


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Tutorial Topics 5 1. What are the characteristics of a competitive market? Can you think of examples of

markets that are close to perfectly competitive and examples that are not?

2. Suppose that the bottled mineral water industry is competitive. Draw the cost curves for

a typical firm in long-run equilibrium. For a given price, explain how the firm selects a

level of output that will maximise its profit.

3. Draw, and explain the demand, marginal revenue and marginal cost curves that might be

faced by Microsoft for its successor to the Vista computing operating system.

4. First Great Western and Arriva Trains Wales both operate train services between Cardiff

and Swansea; effectively, there is a duopoly on this route. Suppose that, within the

regulations which the train companies have to adhere to, there is the possibility of

charging two levels of price. The gives the pay-off matrix below shows average profit per

train service for different price strategies:

First Great Western

Low price High price

Arriva Trains Wales Low price (150, 150) (350, 100)

High price (100, 350) (250, 250)

a) What is each firms dominant strategy? Why?

b) What is meant by Nash equilibrium? What is the Nash equilibrium in this case?

c) Suppose that the Office of the Rail Regulator intervenes to set prices at a common

level. Is this sensible? Is there any reason why either form (or both) might prefer

regulation to competition?

5. What is meant if a good is excludable? What is a non-rival good? Give examples. What non-rival goods does your local authority provide? What solutions exist to the free-rider problem? Explain how the appropriate assignment of property rights might help protect non-rival goods.


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Study Skills Topics 1. Introduction (week beginning 6 October) This tutorial introduces students to the study skills to be developed in the module. Led by the tutor the group will discuss the appropriateness of the information contained in the Your Student Study Guide for their individual study needs in general and for the module requirements in terms of:

essay writing

presentation and discussion of class study topics in a group context

preparation and presentation of a portfolio of material together with writing of a report

role playing

basic research

working co-operatively

time management In this context students will have the opportunity to identify their individual study skill abilities and needs, which will be reviewed at the module end. The tutor will explain assessment procedures together with the requirements for each tutorial session, and the production and submission of assessed work, emphasising the need for students to plan and adopt an appropriate work schedule for the various tasks involved. In this session students will be allocated their study topic presentations. Presentation Topics During the course of the semester four class presentations will be given. The presentation of study topics is intended to provide students with the opportunity to practice and develop various presentational skills and to work collaboratively. The full list of study topics together with their scheduling is provided on the next page. Presentations will be made by students in groups and the individual presentations should complement each other and not involve duplication/replication. As such, the students involved in a class presentation are required to collaborate in advance of the class when collecting information and structuring the presentation. When preparing the presentation students should read the relevant sections of the recommended reading from the lecture outline together with any additional material identified by the students themselves. Students are encouraged to employ visual aids in their presentation, as appropriate, in the form of diagrams, tables or outline points on hand-outs. As well as use of chalk/white board, overhead facilities can be arranged with prior assistance of the tutor who is also available for general advice in advance of the presentation. Following the presentations the remaining group members will be involved in a group discussion of the topic. In preparation for this students are expected to prepare brief notes. The tutor will also contribute to the discussion and ask questions to elicit the knowledge of the non-presenters. Following the class the presenters will have the opportunity to meet the tutor for a de-briefing.


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Study Skills Presentation Topics Presentation Topic A: (week beginning 20 October) Describe the process through which equilibrium comes about in the market for a particular commodity. Analyse the effects on the market outcome of (a) a technological improvement in production methods adopted by all suppliers in the market, and (b) a decrease in the price of a close substitute product. What would happen if (a) and (b) were to occur simultaneously. Presentation Topic B: (week beginning 3 November) Explain what is meant by the term own price elasticity of demand. Using appropriate examples show how knowledge of its magnitude can be of use to (a) a business firm contemplating a price increase; and (b) a government contemplating a commodity tax. Presentation Topic C: (week beginning 19 November) Present a report to the class on how you might define consumer satisfaction. Describe how consumers go about achieving the objective of maximising satisfaction. Do you think it is a realistic objective? What problems do you think might arise for the consumer? Presentation Topic D: (week beginning 1 December) Describe and explain to the class the prisoners dilemma. Divide the class into groups and play the game with each group writing their choice of strategy on a piece of paper and handing it to a chairperson. Lead a class exercise on what might happen if the game is played over and over again (say, 6 times) by the same players, keeping a record of each groups cumulative score. Explain its relevance to our understanding of firm behaviour in oligopolies. What are we able to learn from it about the importance of strategic choice in economics?


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Assignment Brief

Module identifier EC10120

Module title Economic Principles and Skills 1

Module coordinator Peter Midmore

Assignment title First Assessed Essay

Weighting in module 10%

Start date Monday 7 October 2014

Submission deadline 3pm on Monday 4 November 2014

Post date for feedback Monday 24 November 2014

Required length/word limit 1500 words

Learning Outcomes for module

On successful completion of this module students should be able to:



3. Describe optimising behaviour by households and firms;

4. Discuss the effects of alternative market structures and evaluate market outcomes for policy purposes;

5. Identify quantitative relationships and the formulae underlying models;

6. Develop the ability to follow logical arguments; 7. Have enhanced capacity to recognise and solve

problems.

Learning Outcomes addressed in this assignment

1, 3, 5, 6, 7

Choose one of the following: 1. Why do countries trade with each other? Show, using examples, why this may be to

do with the principle of comparative advantage. 2. Can economics be regarded properly as a science? 3 Art collectors might be tempted to propose destruction of a significant share of

existing art works in order to increase the value of those which remain. Explain or show the effect this decision will have on the (a) total value, (b) marginal value, (c) total expenditures, and (d) consumer surplus for the remaining antiques.




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Assignment Brief

Module identifier EC10120

Module title Economic Principles and Skills 1

Module coordinator Peter Midmore

Assignment title Second Assessed Essay

Weighting in module 10%

Start date Monday 4 November 2014

Submission deadline 3pm on Monday 1 December 2014

Post date for feedback Monday 5 January 2015

Required length/word limit 1500 words

Learning Outcomes for module

On successful completion of this module students should be able to:



3. Describe optimising behaviour by households and firms;

4. Discuss the effects of alternative market structures and evaluate market outcomes for policy purposes;

5. Identify quantitative relationships and the formulae underlying models;

6. Develop the ability to follow logical arguments; 7. Have enhanced capacity to recognise and solve

problems.

Learning Outcomes addressed in this assignment

1, 3, 5, 6, 7

Choose one of the following three questions: 1. a) Using indifference analysis diagrams and appropriate examples, describe and explain

the effect of each of the following on an individual consumer: i) An increase in income on the consumption of a normal good ii) An increase in income on the consumption of an inferior good iii) A fall in the price of a good on the consumption of another complementary good iv) A fall in the price of a good on the consumption of another substitute good b) Explain carefully the difference between the income and substitution effects of a fall

in the price of a good. How will these effects differ between a normal and an inferior good?

c) Suppose a person buys only food and clothing, and has an income of 1000. Now assume that the government gives her vouchers to the value of 500 that cannot be spent on clothing. Show the consumers old and new equilibrium. Explain why the consumer might be better off with 1500 of income.




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2. Explain the possible implications of monopolies for resource allocation and welfare. Should governments legislate to prevent monopolies? Use theory and evidence to support your argument.

3. To what extent does the problem of traffic congestion arise from negative externalities

of private transport and positive externalities of public transport? Is road pricing an effective means of tackling the problem?

Documents

Economic Principles and Skills 1 2014-15 Handout