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This course is about microeconomics, which means the economics of individual industries, sectors or markets. Concentrating on one market at a time enables us to isolate and analyse in detail the forces at work in it. We do this by determining how individual economic actors and agents (households and firms) react to stimuli. This contrasts with the study of a number of markets interrelated nationally or internationally and which is known as macroeconomics.
Once you understand how consumers and producers respond to changes in market conditions, you will be a long way towards understanding how the market works. We will deal with these main principles in Parts I and II. However, this does not mean that the course is entirely theoretical, as the theory it presents is necessary for economic problem solving. The course contains a stream of questions and exercises designed both to help your study of the theory, and to consider how it might be applied practically by analysts.
Objectives and learning outcomes of the course
By the end of the module students should have
- the ability to explain the principles of economics that are relevant to understanding how individuals make decisions about consumption and production activities
- developed a sufficient basis in microeconomics to provide a foundation for their work on other modules in the programme
- sufficient practice in using economic principles to solve relevant analytical problems
Scope and syllabus
The module is divided into three parts.
Part I of the module deals with the analysis of consumer choice. As individuals and their decisions are basic to any economic system it seems sensible to start our analysis with an investigation into how individuals make their economic decisions. This enables us to develop a theory of demand.
The subject of Part II introduces production economics: the analysis of how an individual firm organises its resources to achieve its goals, generally assumed to include maximising profits. The theory of supply results from our analysis of production economics.
The theory of demand from Part I and the theory of supply from Part II are combined in Part III in an analysis of supply and demand. We then demonstrate the concept of the equilibrium position that is reached under conditions of perfect competition.
Part III continues with an introduction to welfare economics, where criteria are developed which help us in policy decisions. Methods of measuring welfare change are introduced, which are important in helping us to better inform these types of decisions. In the final unit of the module, the assumption of perfect competition is relaxed and other forms of markets which one is likely to find in real life are discussed.