Course Content
INTRODUCTION TO ECONOMICS
Definition of economics Basic economic concepts: economic resources, human wants, scarcity and choice, opportunity cost, production possibility curves/frontiers Scope of economics: Micro and macro economics Methodology of economics: positive and normative economics, scientific methods, economics as a social science. Economic systems: free market economy, mixed economy.
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DEMAND ANALYSIS
Definition Individual demand versus market demand Factors influencing demand Exceptional demand curves Types of demand Movement along and shifts of demand curves Elasticity of demand Types of elasticity: price, income and cross elasticity Measurement of elasticity; point and arc elasticity Factors influencing elasticity of demand Application of elasticity of demand in management and economic policy decision making
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SUPPLY ANALYSIS
Definition Individual versus market supply Factors influencing supply Movements along and shifts of supply curves Definition of elasticity of supply Price elasticity of supply Factors influencing elasticity of supply Application of elasticity of supply in management and economic policy decision making
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DETERMINATION OF EQUILLIBRIUM
Interaction of supply and demand, equilibrium price and quantity Mathematical approach to equilibrium analysis Stable versus unstable equilibrium Effects of shifts in demand and supply on market equilibrium Price controls Reasons for price fluctuations in agriculture
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THE THEORY OF CONSUMER BEHAVIOUR
Approaches to the theory of the consumer - cardinal versus ordinal approach Utility analysis, marginal utility (MU), law of diminishing marginal utility (DMU) Limitations of cardinal approach Indifference curve analysis; Indifference curve and budget line Consumer equilibrium; effects of changes in prices and incomes on consumer equilibrium Derivation of a demand curve Applications of indifference curve analysis: substitution effect and income effect for a normal good, inferior good and a giffen good; derivation of the Engels curve Consumer surplus /Marshallian surplus
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THE THEORY OF FIRM
Factors of production Mobility of factors of production Short run analysis Total product, average and marginal products Stages in production and the law of variable proportions/the law of diminishing returns Long run analysis Isoquant and isocost lines The concept of producer equilibrium and firm’s expansion curve Law of returns to scale Demand and supply of factors of production Wage determination theories Trade unions: functions and challenges Producer surplus/economic rent/Marshallian surplus
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THE THEORY OF COSTS
Short run costs analysis and size of the firm’s total cost, fixed cost, average cost, variable costs and marginal cost Long run costs analysis Optimal size of a firm Economies and diseconomies of scale
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MARKET STRUCTURES
Definition of a market Necessary and sufficient conditions for profit maximization Mathematical approach to profit maximization Output, prices and efficiency of: perfect competition, monopoly, monopolistic competition, oligopolistic competition
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NATIONAL INCOME
Definition of national income Circular flow of income Methods/approaches to measuring national income Concepts of national income: gross domestic product (GDP), gross national product (GNP) and net national product (NNP), net national income (NNI) at market price and factor cost, disposable income Difficulties in measuring national income Uses of income statistics Analysis of consumption, saving and investment and their interaction in a simple economic model Determination of equilibrium national income Inflationary and deflationary gaps - The multiplier and accelerator concepts - Business cycles/cyclical fluctuations
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ECONOMIC GROWTH, DEVELOPMENT AND PLANNING
The differences between economic growth and economic development Actual and potential growth The benefits and costs of economic growth Determinants of economic development Common characteristics of developing countries Role of agriculture and industry in economic development Obstacles to economic development The need for development planning Short term, medium term and long term planning tools Challenges to economic planning in developing countries
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MONEY
The nature and functions of money Demand and supply of money Theories of demand for money: The quantity theory, the Keynesian liquidity preference theory
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THE BANKING SYSTEM
Definition of commercial banks The role of commercial banks and non-banking financial institutions in the economy Credit creation Definition of central bank The role of the central bank; traditional and changing role in a liberalised economy, such as financial sector reform, exchange rate reform Monetary policy, definition, objectives, instruments and limitations Determination of interest rates and their effects on the level of investment, output, inflation and employment Harmonisation of fiscal and monetary policies Simple IS–LM Model Partial equilibrium and general equilibrium
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INFLATION
Definition and types of inflation Causes of inflation: cost push and demand pull Effects of inflation Measures to control inflation
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UNEMPLOYMENT
Definition of unemployment Types and causes of unemployment Control measures of unemployment Relationship between unemployment and inflation: the Phillips curve
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INTERNATIONAL TRADE AND FINANCE
Definition of International trade Theory of absolute advantage and comparative advantage World trade organization (WTO) and concerns of developing countries Protection in international trade Regional integration organizations, commodity agreements and the relevance to less developed countries (LDCs) Terms of trade, balance of trade, balance of payments (causes and methods of correcting deficits in balance of payments), exchange rates, types of foreign exchange regimes, factors influencing exchange rates, foreign exchange reserves International financial institutions: International Monetary Fund (IMF) and World Bank National debt management: causes and interventions Structural Adjustment Programmes (SAPs) and their impacts on the LDCs
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CPA 004: Economics
About Lesson
  • The contemporary term “economics” comes from the Greek word “oikonomos,” which means “steward.” The two halves of this word, “Oikos,” which means “home,” and “nomos,” which means “manager,” sum up economics. How do we run our household, and what kind of stewardship account can we give to our homes and the country? Economics is a broad theory of how society functions.
  • A prominent classical economist, Alfred Marshal, defined economics as “the study of man in his regular business of life.” This, however, is an overly broad description. This is because any definition should take into account the governing principle of economics, which is scarcity.
  • As defined by the great American economist Paul Samuelson:The study of how people and society choose to use scarce resources that could be put to other uses to produce various commodities and distribute them for consumption among multiple individuals and groups in society, now and in the future.
  • According to the definition of scarcity in economics, all resources are scarce because there aren’t enough to satisfy everyone’s wants to the point of satiety. As a result, another feature of economics is that it involves choice. Human desires are limitless.
  • Economics is the branch of knowledge concerned with the production, consumption, and transfer of wealth.
  • Economics can be described as “the social science concerned with the allocation of scarce resources to provide goods and services that suit the requirements and wants of customers”
  • Lionel Robbins defined economics as “the science which studies human behaviour as a relationship between (given) ends and scarce means which have alternative uses.”
  • The economist restricts the research by focusing on four critical aspects of human existence and examining what occurs when they are all found together, as they frequently are:-
  1. Human beings have limitless desires.
  2. Those desires are of varying degrees of importance.
  3. The resources available to fulfill such desires — human time, energy, and material resources – are scarce.
  4. The means can be put to various uses, i.e., they can be employed to make various things.
  • However, the economist isn’t interested in any one characteristic in isolation. On the contrary, an economic problem arises only when all four traits are present together.
  • Resources are the materials that economists mix to create economic commodities, which are scarce in relation to demand.
  • There are two types of resources:-
  1. Economic Goods: Economists group all items that people seek together and call them economic products, which are scarce in accordance with demand.
  2. Free goods: These are goods that people can have in unlimited quantities, such as air.
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