ECO 5315
ESSENTIALS OF ECONOMICS
AUSTIN EMBA
FALL SEMESTER, 2006
Professor: Dr. Tom Kelly
Phone: (254) 710-4146
Email:
COURSE DESCRIPTION:
This course presents the core concept of micro and macro economics that are essential in understanding how economic systems affect economic performance among industries and among nations in a global setting. Emphasis is placed on real world influences and policy perspectives that bridge the gap between theory and reality. Understanding these basic economic concepts will enable managers of resources to better understand how to achieve organizational or enterprise goals by applying economic theory and methodological techniques in both industry and global environments.
COURSE OBJECTIVES:
The following are the general course objectives. More specific objectives are listed within the schedule. At the end of the course each student should be able to:
A. Understand how markets operate.
B. Have sufficient knowledge to understand financial and economic reports on various economic issues.
C. Be able to analyze economic problems using the skills and knowledge acquired.
METHODOLOGY:
Lecture of text content integrated with discussion focused on current and past applications of targeted economic analysis concepts for each class period.
Student progress will be measured via written assignments, short in class quizzes on assigned topics, and faculty assessment of student’s individual in-class contributions.
COURSE REQUIREMENTS/GRADING:
A. Readings: Students are responsible for all assigned readings.
B. Class Participation/Homework: Students are expected to come to class prepared to discuss the scheduled material of the day and to answer a brief quiz on assigned material.
C. Written Assignment and Presentation. Student groups will be asked to analyze an economic issue and present their findings to the class.
REQUIRED TEXT and WEBSITES:
Bradley R. Schiller, Essentials of Economics, 6e (McGraw-Hill Irwin)
Websites:
(1) Business Week: http://www.businessweek.com/
(2) Economic News and Commentary: http://econlinks.com/
SESSIONS: Session Topic/Readings/Learning Objectives/Assignments
Mon30 Oct 06 /
Introduction to Course Requirements
REQUIRED READINGS: read Schiller, Chapters 1-2Learning Objectives:
· Understand the central problem of scarcity in economics.
· Understand the three fundamental questions.
· To contrast the mechanisms of choice.
· Understand why undesirable choices are made.
· Understand the roles of macro v. micro decisions.
· To develop a snapshot understanding of the U.S. economy.
· Understand the roles of business v. government policy.
· Understand the role of theory and to review the use of graphs to illustrate endogenous v. exogenous influences.
Related web assignment: Visit econlinks website’s news and commentary to find two articles: (1) one article related to microeconomics and (2) one article related to macroeconomics. Summarize the topic and present its conclusion in brief form. (Written summary due on Thursday, Nov. 2)
Thu
2 Nov 06 / Market Forces: Supply and Demand
REQUIRED READINGS: read Schiller, Chapter 3
Learning Objectives:
· Understand the goals and constraints of market participants.
· Understand the link among markets in the circular flow of income.
· Understand the determinants of demand for the individual versus the market.
· Understand the determinants of supply.
· Understand market clearing equilibrium, surplus, and shortages.
· Understand the determinants of disequilibrium pricing.
Related assignment: Log on to www.cnn.com or www.msnbc.com
and do a search under the key words “crude oil prices.” Find an article that discusses recent changes in the price of crude oil. Summarize the topic and present a brief written summary of reasons given by the article for changes in oil prices. Relate to a diagram of supply and demand to illustrate this impact. (Assignment is due on Mon., Nov. 6th)
Mon
6 Nov 06 / Consumer Demand and Producer Supply Decisions
REQUIRED READINGS: read Schiller, Chapters 4 & 5
Learning Objectives:
· Understand patterns and determinants of consumption.
· Understand utility theory and the concept of budget constraint.
· Understand the concept of price elasticity.
· Understand the difference between a change in demand and a change in quantity demanded.
· Understand the concept of a production function and capacity constraints.
· Understand determinants of the cost of production.
· Understand the difference between short-run production decision and the long-run investment decision.
· Relate to producer decisions to the aggregate investment demand function.
· Understand the difference between economic v. accounting costs.
Related web assignment: Do a web search to find the trend in U.S. productivity over the past 10 years. How does this trend affect cost curves of producers? (Write up a brief summary, due on Nov. 9th.)
Thu
9 Nov 06 / Competition and Monopoly
REQUIRED READINGS: read Schiller, Chapter 6 & 7
Learning Objectives:
· Understand the concept the structure-conduct-performance paradigm.
· Understand the competitive market structure and
· Understand monopoly structure and behavior.
· Understand the role of barriers to entry.
· Understand the structure and behavior of near monopolies.
· Compare outcomes of monopoly v. competition.
· Discuss possible redeeming qualities of monopoly power.
Related assignment: List two industries, (1) one that you think is highly competitive and (2) one that you think exhibits monopoly power. Identify any barriers to entry or other characteristics of the industry that exist to affect the competitive environment. Describe the logic of your selection in brief written form and turn in on Nov. 13th.)
Mon
13 Nov 06 / The Labor Market
REQUIRED READINGS: read Schiller, Chapter 8
Learning Objectives:
· Understand determinants of labor supply.
· Understand derived demand for labor.
· Understand market equilibrium.
· Understand the role of price expectations and labor market imperfections on wages.
Related web assignment: Do a web search to determine three high paying occupations. Why do they pay so much? Describe your logic in brief written form and turn in on Nov. 16th.
Thu
16 Nov 06 / Government Intervention
REQUIRED READINGS: read Schiller, Chapter 9
Learning Objectives:
· Understand the determinants of market failure.
· Understand the role of public goods.
· Understand regulation of externalities.
· Understand control of market power.
· Understand the role of equity.
· Understand the role of macroeconomic instability.
Related assignment: Log on to www.epa.gov and read a headline story that relates to an externality. Describe what the EPA is attempting to correct in the headline story in brief written form to be turned in on Nov 27th.
The Business Cycle
REQUIRED READINGS: read Schiller, Chapter 10
Learning Objectives:
· Understand measures of macroeconomic performance
· Relate cycle stability to long run growth
· Evaluate the determinants of unemployment
· Understand the sources and impact of inflation
Web assignment: Log on to http://econlinks.com and report on the Conference Board’s index of leading, coincident, and lagging indicators. What do they seem to suggest for the aggregate performance of the economy? Write a brief summary.
Mon
27 Nov 06 / Aggregate Supply and Aggregate Demand
REQUIRED READING: read Schiller, Chapter 11
Learning Objectives:
· Understand the Keynesian model v. classical model.
· Understand determinants of aggregate supply and potential output.
· Understand competing theories of short-run instability.
Related assignment: Research current conditions affecting the U.S. economy and (1) a demand shock and (2) a supply shock that are affecting the current macroeconomic performance. Prepare a brief written report.
Thu
30 Nov 06
Mon
4 Dec 06 / Fiscal Policy
Read Schiller, Chapters 12
Learning Objectives:
· Understand the role of fiscal stimulus versus constraint on aggregate demand.
· Understand the role of unbalanced fiscal budgets on the flow of funds and supply of domestic versus foreign savings.
· Understand the limits of fiscal policy
Monetary Policy
Read Schiller, Chapters 13 & 14
Learning Objectives:
· Understand the functions of money
· Understand how banks create money
· Understand the macro role of banks
· Understand the role of the Federal Reserve System.
· Understand monetary tools of the Fed
· Understand how the Fed affects aggregate demand.
· Understand the role of interest rate targets and anchored expectations.
· Understand how monetary policy affects exchange rates and global demand.
Related assignment: Log on to www.federalreserve.gov/policy.htm and click on the most recent Monetary Report to the Congress and economic outlook. Briefly summarize the Fed’s perception of the economy and their monetary response.
Thu
7 Dec 06 / Economic Growth
REQUIRED READINGS: read Schiller, Chapter 15
Learning Objectives:
· Understand measures of growth and why it is important
· Understand sources of productivity growth
· Understand how policy levers affect growth.
· Understand why some countries are rich and others poor.
Related assignment: Long on to www.worldbank.org and choose countries and data at the top. Select two countries for comparison. How do they differ in their living standards? Can you explain why?
Global Issues / During the last semester of you program we will focus in a one-hour course on the global economy and will apply many of the concepts that we learned during this semester. We will also discuss global imbalances in current accounts, the role of emerging countries like China and India, and events in the Middle East. We will also discuss the role of the IMF in dealing with a financial crisis and forces affecting financial stability in world currency markets.
As a final exercise, you will be asked to team with other members of the class to do a country assessment that identifies “hot” issues affecting their future viability as a site for investment.
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