HE 5091 Principles of Economics

July Semester 2022

Course Description and Scope

This course covers fundamental tools and applications of concepts in microeconomics and
macroeconomics. The section on microeconomics focuses on markets as a mechanism for
allocating scarce resources. Using tools of welfare economics, it analyses demand, supply,
market system and the concepts of elasticity. It also addresses market efficiency, outcomes from
market failures, production and firms with market influence. The section on macroeconomics
provides a mix of classical and Keynesian ideas, addressing the forces that shape the economy in
both the short run and the long run. Topics include the calculation of GDP, analysis of inflation
and employment, theory of economic growth, the role of financial markets, fiscal and monetary
policies and the international economy.

Proposed Lecture Schedule

Week No. Topics Required Readings

1 Lecture 1: Introduction to Economics FBAH/FBL
Chapters 1, 3 & 6
8 Aug 22 1.1 Scarcity and Cost-Benefit Principles
1.2 Opportunity Cost and Incentive Principle
1.3 Demand and Supply
1.4 Market Equilibrium and Price Control
1.5 Shifts in Demand and Supply
1.6 Efficiency and Equilibrium Principles

2 Lecture 2: Elasticity and Consumer Behaviour FBAH/FBL

Chapters 4, 5 & 6
15 Aug 22 2.1 Price Elasticity of Demand
2.2 Income Elasticity of Demand
2.3 Cross-Price Elasticity of Demand
2.4 Price Elasticity of Supply
2.5 Total Utility and Marginal Utility
2.6 The Rational Spending Rule
2.7 Demand and Consumer Surplus
2.8 Supply and Producer Surplus

3 Lecture 3: Perfect Competition, Production FBAH/FBL

and Efficiency Chapters 6 & 7
22 Aug 22
3.1 Perfectly Competitive Markets
3.2 Production and Cost
3.3 Profit and Loss in the Short Run
3.4 Market Equilibrium and Efficiency
Week No. Topics Required Readings
3.5 Taxes and Efficiency
3.6 Long Run Adjustment in Perfect Competition

4 Lecture 4: Imperfect Competition and Game FBAH/FBL

Theory Chapters 8 & 9
29 Aug 22
4.1 Sources of Market Power
4.2 Profit Maximization for Monopolist
4.3 Price Discrimination
4.4 Game Theory and Strategic Decisions
4.5 Prisoner’s Dilemma
4.6 Decision Tree

5 Lecture 5: Externalities, Property Rights and FBAH/FBL

Economics of Information Chapters 10 & 11
5 Sep 22
5.1 External Costs and Benefits
5.2 The Coase Theorem
5.3 Property Rights and the Tragedy of the
Commons
5.4 Optimal Amount of Information
5.5 Asymmetric Information
5.6 Adverse Selection and Moral Hazard

6 Lecture 6: Economics of Public Policy FBAH/FBL

Chapters 13 & 14
12 Sep 22 6.1 Economics of Health Care Delivery
6.2 Environmental Regulation
6.3 Public Policy in Pollution Control
6.4 Public Good and Private Good
6.5 Optimal Quantity of Public Good
6.6 Additional Functions of Government and
Sources of Inefficiency

7 Lecture 7: Gross Domestic Product (GDP) and FBAH/FBL

Inflation Chapters 15 & 16
19 Sep 22
7.1 Gross Domestic Product (GDP)
(Recorded 7.2 The Expenditure Method
Lecture) 7.3 Nominal and Real GDP
7.4 Real GDP and Economic Well-Being
7.4 The Consumer Price Index
7.5 Adjusting for Inflation
7.6 Costs of Inflation
Week No. Topics Required Readings
NOTE:
Quiz 1 will be conducted during the last 30
minutes of Tutorial 6
Quiz 1 from Coverage: Lecture 1 to Lecture 6
19 Sep 22 to Format: 10 Multiple Choice Questions to be
23 Sep 22 answered in 30 minutes.

8
Recess

9 Lecture 8: Unemployment and Economic FBAH/FBL

Growth Chapters 17 & 18
3 Oct 22
8.1 Demand and Supply in Labour Market
8.2 Measuring Unemployment
8.3 Types of Unemployment
8.4 Impediments to Full Employment
8.5 Economic Growth and Labour productivity
8.6 Determinants of Average Labour Productivity
8.7 Policies to Promote Economic Growth

10 Lecture 9: Capital Formation, Financial FBAH/FBL

Markets and Money Supply Chapters 19, 20 & 23
10 Oct 22
9.1 Saving, Wealth and National Saving
9.2 Investment and Capital Formation
9.3 Demand and Supply of Saving
9.4 Bonds and Stocks
9.5 Commercial Banks and Money Creation
9.6 Central Bank and Money Supply
9.7 Money Demand and Money Supply

11 Lecture 10: Aggregate Expenditure and FBAH/FBL

Stabilization Policy Chapters 21, 22 & 23

17 Oct 22 10.1 Recession and Expansion

10.2 Potential Output and Output Gap
10.3 The Keynesian Model
10.4 Aggregate Expenditure and Multiplier
10.5 Short Run Equilibrium Output
10.6 Fiscal Policy
10.7 Monetary Policy
Week No. Topics Required Readings
12 Lecture 11: Aggregate Demand, Aggregate FBAH/FBL
Supply and Macroeconomic Policy Chapter 24 & 25
24 Oct 22
(Recorded 11.1 The Aggregate Demand Curve
Lecture) 11.2 The Aggregate Supply Curve
11.3 Aggregate Demand-Aggregate Supply
Analysis
11.4 Anti-Inflationary Monetary Policy
11.5 Response to Aggregate Demand Shock
11.6 Response to Aggregate Supply Shock

13 Lecture 12: Exchange Rate, International FBAH/FBL

Trade and Capital Flow Chapter 26
31 Oct 22
12.1 Exchange Rate Determination
12.2 Flexible and Fixed Exchange Rates
12.3 Nominal and Real Exchange Rates
12.4 Purchasing Power Parity Theory
12.5 Trade Balance and Net Capital Inflows
12.6 International Capital Flows

Quiz 2 from NOTE:

31 Oct 22 to Quiz 2 will be conducted during the last 30
4 Nov 22 minutes of Tutorial 11
Coverage: Lecture 7 to Lecture 10
Format: 10 Multiple Choice Questions to be
answered in 30 minutes.

14 Revision Lecture FBAH/FBL

Relevant Chapters
7 Nov 22

Basic Text

(FBAH) Robert H. Frank and Ben S. Bernanke and Kate Antonovics and Ori Heffetz, Principles
of Economics, 8th Edition, McGraw Hill, 2022.
ISBN: 978-126-0932-89-8 or ISBN: 126-093-2893

(FBL) Robert H. Frank and Ben S. Bernanke and Hon-Kwong Lui, Principles of Economics
Asia Global Edition, McGraw Hill, 2015.
ISBN: 978-1-259-01184-9 or M1-259-01184-8
Method of Instruction

Lectures : 2 hours per week, commences in Week 1 and end in Week 13

Tutorials : 1 hour per week, commences in Week 2 and end in Week 14

Course Assessment

Quiz 1 : 15%
Quiz 2 : 15%
Class Participation : 10%
Examination : 60%
100%

Lecturer E-mail Address

*Dr Tan Khay Boon khayboon@ntu.edu.sg

* Course Co-ordinator