Course Title: Economics

Course Code: ECON 2011

Credit Hours/ECTS: 3/5
Contact Hours: 3 Lecture Hours per Week
Year: II
Semester: I
Pre-Requisite: Does not Require Pre-Requisite

Course Description:
This course provides a general introduction to economics combining elements of micro and macro
fundamentals. The first part of the course focuses on partial equilibrium aspects of theories of
consumer behavior, producer behavior as well as on the arrangements and implications of different
market structures. It will also cover the neoclassical theory of product and/or service pricing for
perfectly competitive, monopolistic, oligopoly, and monopoly market structures. In addition, topics
covered will include factor market pricing, general equilibrium analysis and distortions which relate to
asymmetric information and moral hazard problems. The second part will discuss elements of
macroeconomics that revolve around issues of measurement of aggregate economic activities,
unemployment, and inflation. Emphasis will also be given to sources, consequences and policy
responses to economic fluctuations. In the first part the course commences by highlighting the
underlying assumptions behind each theory followed by in-depth analyses of the decisions of
economic units subject to resource constraints in an effort to realize their respective objectives
assuming the prevalence of market clearing situation. Finally, students will be able to contextualize the
key analytical instruments with stylized facts from the Ethiopian economy.
Course Objectives
After completing introduction to economics, students will be able to:
➢ Describe the major economic units constituting a given society and their
corresponding roles
➢ Explain the objective functions of consumers and how they attain this objective
under resource constraints

➢ Define producers’ objective functions, describe their cost structures in the short and
the long run, and apply partial equilibrium approaches to find optimal prices and
quantities under different degrees of competition.
➢ Tabulate markets into different categories on the basis of the number of buyers
and sellers and outline the various social welfare implications of each market structure.
 ➢ Elaborate the concept of general equilibrium analysis, identify its merits and
demerits, and discuss the various market failures due to distortions arising from
imperfect information and cultivate the corresponding possible remedial measures
➢ Understand how aggregate economic measures are constructed, their weaknesses,
and alternative measures of national wellbeing
➢ Identify the sources and adverse effects of economic crises and describe the pool of
policy instruments that can be deployed to mitigate the consequences of these crises.
➢ Contextualize the key analytical instruments with stylized facts from the Ethiopian
economy
Course outline
1. Theory of Consumer Behavior and Demand
1.1. consumer preferences and choices
1.1.1. Consumer preference
1.1.2. Utility
1.2. Approaches to measuring utility
1.2.1. The cardinal utility approach
1.2.2. Assumptions of cardinal utility theory
1.2.3. Total and marginal utility
1.2.4. Law of diminishing marginal utility (LDMU)
1.2.5. Equilibrium of a consumer
1.2.6. Derivation of the cardinalist demand
1.3. The ordinal utility approach
1.3.1. Assumptions of ordinal utility approach
1.3.2. Indifference set, curve and map
1.3.3. Properties of indifference curves
1.3.4. The marginal rate of substitution (MRS)
1.3.5. Types of indifference curves
1.4. The budget line or the price line
1.4.1. Factors affecting the budget line
1.4.1.1. Effects of changes in income
1.4.1.2. Effects of changes in price
1.5. Optimum of the consumer
1.5.1. Effects of changes in income and prices on consumer optimum
 1.5.1.1. Changes in income: income consumption curve and the Engel curve
1.5.1.2. Changes in price: price consumption curve (PCC)
1.5.2. Decomposition of income and substitution effects (normal, inferior or giffen goods)
1.5.3. Derivation of market demand curve
1.6. Elasticity of demand
2. The Theory of Production
2.1. Production function
2.2. Stages and laws of production
2.3. The law of variable proportions
2.4. Laws of returns to scale
2.5. Choice of optimal combination of factors of production
2.6. Short run and long run production functions
3. Theory of Costs.
3.1. Definition and types of costs
3.2. Short-run costs
3.3. Long-run costs
3.4. Derivation of cost functions from production functions
3.5. Dynamic changes in costs- the learning curve
4. Perfect Competition Market
4.1. The concept of market in physical and econospace (e.g. Amazon, Alibaba,etc..)
4.2. The welfare costs, benefits of e-markets and their implication for regulatory mechanisms
4.3. Competitive markets, short- run equilibrium of the firm, industry, and market
4.4. The long-run equilibrium of the firm, industry and market
5. Pure Monopoly Market
5.1. Characteristics and source of monopoly
5.2. Short run and long-run equilibrium
5.3. Price discrimination
5.4. Multi-plant monopolist
5.5. Social cost of monopoly power
6. Monopolistic Competition
6.1. Assumptions
6.2. Product differentiation, the demand curve and cost of the firm
6.3. The concept of industry and product ‘group’
6.4. Short-run and long-run equilibrium of the firm excess capacity and welfare loss
 6.5. Brief introduction to oligopoly markets
7. Fundamentals of Macroeconomics
7.1. The concepts of GDP and GNP
7.2. Approaches of measuring national income (GDP/GNP)
7.3. Other social accounts (GNP, NNP, NI, PI and DI)
7.4. Nominal versus real GDP
7.5. The GDP deflator and the consumer price index
7.6. GDP and welfare
7.7. The business cycle
7.8. Unemployment and inflation
7.9. Technology (. e.g. Robots) and unemployment
7.10. Role of exchange rate, terms of trade, and other external shocks
7.11. Brief introduction to the Ethiopian Economy

Instructional Methods and Strategies: The course will involve deploying different teaching methods
that attempt to make the teaching-learning process as effective as possible. For most part of the course,
delivery method will be arranged as to make the process student-centered. There shall be full and
active participation from students and they are strongly encouraged to ask questions, to reflect on
brainstorming queries, and be involved actively and attentively in take-home assignments and peer
discussions that appear during the semester both within and outside class-room sessions. While there is
no limit to the imagination and flexibility of the instructor, the course delivery techniques will
generally involve the following items: Lecture, Brain-storming sessions, Group discussions and
Individual and group assignments

Students’ Activities: Preparedness: You must come to class prepared by bringing with you the
appropriate materials like handouts, worksheets and exercises given, text books and completed
assignments. Complete the individual and group assignments and other activities on time. You must
plan your own learning through reading various course related materials and chapters in books. You
are expected to work much individually to meet the requirement of the course. You have to use your
time for group work and home study effectively.

Participation: Make active participation during discussions (you must participate in class). You are
not participating if you are simply talking to a friend, doing homework, daydreaming, or not doing
what the rest of the class is doing. If you are working in a group or with a partner, you must talk to
your group members or partner and be a part of the group. Always be ready and willing to give
constructive feedback to partners’/group members and to listen to their comments on your work

Assessment Strategies and Techniques: At least 50% continuous assessments (quizzes, tests,
assignments, project work and/or mid-examination) and 50% final examination

Instructional Resources (Materials and Equipments): LCD, computer (desktop or laptop), course
outlines, markers, flip charts, white board, chalk board, duster.

References
1. Koutsoyiannis, Modern Microeconomics
2. D.N.Dwivedi, 1997, Micro Economic Theory, 3rd Ed., Vikas Publishing
3. R.S. Pindyck& D.L. Rubinfeld,Microeconomics.
4. Hal R. Varian, Intermediate Microeconomics: A Modern Approach, 6th Ed.
5. C.L.Cole, Micro Economics: A Contemporary Approach.
6. Ferguson & Gould’s, 1989, Microeconomic Theory, 6th Ed.
7. N.GregoryMankiw, 2007, Macroeconomics 4th edition
8. William H. Branson, 2006 Macroeconomic Theory and Policy