Face-to-face , first term, 30 hours of theory and 15 hours of exercises.

First term
Tuesday from 09:00 to 11:00 at 43 Botanique 5

The course and reference book are in French. The reference book is also available in English.

The Economy I and II courses provide an introduction to an (neoclassical) economic analysis of the functioning of a market economy. The Economy I course focuses on the microeconomic issues (see below in the course Contents section) whereas the Economy II course studies macroeconomic subjects (growth, unemployment, inflation...).

This course should enable students to acquire the following skills:

• To master fundamental concepts of economic analysis;
• To become familiar with the fundamental explanatory mechanisms of economic analysis
• To use these explanatory concepts and mechanisms to:
- Understand a number of studied economic phenomena;
- Explore the implications of some (recommendations of) economic policies;
- Grasp the virtues and limitations of free trade;
- Consider with a critical eye certain common beliefs relative to the functioning of markets;

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The Economy I course studies first of all the economic determinants of individual behaviours (whether it be physical persons or companies). It will afterwards analyse the functioning of competitive markets, by studying issues such as the determination of prices and level of activity in these markets, the impact of price control or indirect taxation on the functioning of these markets,...

Then it will study how and under what conditions free trade can be an «efficient» way of organising the economic life of a human society composed of a very large number of agents. From a certain point of view, perfectly competitive markets would appear to be a sort of ideal functioning of markets.

In reality, the validity conditions of this idealised representation are however not necessarily verified on many markets, and the course will then study the cases of market functioning failures (even competitive) as well as the cases of imperfect competition.

The question of the role played by the State in the functioning of a market economy runs through almost the entire course.

Through their very nature, the problems and questions studied in this course are «concrete». But this does not mean that the course is only concerned with news topics or the history of economic facts: analysing economic problems requires reflection keys - explanatory concepts and models - that are necessarily abstract. The course aims to help the students understand some of these abstractions and to teach them how to use them to explain concrete facts.

Part I: Introduction

Chapter 1: Fundamental ideas and concepts (Mankiw, chapters 1 and 2)
Chapter 2: Interdependence and advantages of trade (Mankiw, chapter 3)

Part II: The functioning of competitive markets:

Chapter 3: Offers and Demands: market forces (Mankiw, chapter 4)
Chapter 4: Elasticity and its applications (Mankiw, chapter 5)
Chapter 5: Supply, Demand and Public Policies (Mankiw, chapter 6)

Part III: The behaviour of the competitive company

Chapter 6: Technology and production costs (Mankiw, chapter 13)
Chapter 7: The perfect competition company (Mankiw, chapter 14)

Part IV: Efficiency or failure of competitive markets?

Chapter 8: Efficient competitive markets (Mankiw, chapters 7 and 8)
Chapter 9: Non-pecuniary externalities (Mankiw, chapter 10)
Chapter 10: Public goods and common resources (Mankiw chapter 11)

Part V: Competition imperfections

Chapter 11: Monopoly (Mankiw, chapter 10)
Chapter 12: Other competition imperfections (Mankiw chapter 11)
Depending on the pace of the course and the vagaries of the academic calendar, the sequence between Parts IV and V may be modified. The presentation of Part V may sometimes be postponed to the Economics II course.

a) Lecture

The lecture consists of the presentation of explanatory concepts and mechanisms, illustrated by concrete cases inspired by the news or economic history. The lecture follows the general outline detailed above and is also very close to the structure of the reference book quoted below. The different sections of the course may however be presented in a slightly different order than the one mentioned in the reference book.

b) Exercise sessions

The exercise sessions in small groups allow us to verify the acquired knowledge and to apply it to exercises and case analysis. In order to make the most out of each tutorial, the students must have previously revised the subject matter related to the session.

c) Personal work

Regular individual work is essential to pass the examination. As the course progresses, each student should devote sufficient time to personal study to make sure that he/she understands the subject matter. The student should not discover the course at the end of the term, during the exam preparation period; this time should be used to revise a subject matter that has already been understood.

The personal work should not be a simple memorisation. The student will not be assessed on his/her restitution capacity but rather on his/her understanding of the explanatory concepts and mechanisms, and his/her ability to use them.

In order to help the students in their daily work, the professor and assistants will meet with the students that request it. Appointments should be requested by email.

The final evaluation is a written examination. It includes theoretical questions, exercise solving (similar, but not identical to those made in class) and simple applications of the theory to problems inspired by historical and current economic issues. Examples of previous examinations are available on the course website (see paragraph Supports below).

Reference book: Mankiw, Gregory et Mark Taylor, Principes de l'Economie, de Boeck, collection Ouvertures économiques, 1ère édition 2010 ou 2ième édition 2011.Mankiw,

Supports:
1) A copy of the slides used during the lecture is available at the reprography service and on the course website at the following address: cours.fusl.sc.be in the directory of this course.

2) A copy of the exercises made in class will also be available at the reprography service and on the course website.

3) A number of other documents relating to the course (e.g. assessments of previous years, lists of questions relating to comprehension of the course subjects…) are available on the course website. Incidentally, students are encouraged to register as users of this website (online registration), which will allow them to be informed of any additional documents made available and of the content of the exercise sessions as they progress.