Principles of Economics

This module provides an introduction to the basic concepts of economics. It is divided into two parts: micro- and macroeconomics. Microeconomics deals with the behavior of individual agents, such as households, firms, and public institutions and with their interaction on markets. How can market demand be derived from the consumption choices of households? How can market supply be derived from the production decisions of firms? Which mechanisms give rise to an equalization of demand and supply? What are the consequences of market failure, and what can the state do about it? Macroeconomics takes an aggregated perspective; it analyzes the economy as a whole. How can economic activity, inflation, and unemployment be measured? What are the factors that determine economic growth? Which mechanisms give rise to economic fluctuations, and how can these fluctuations be mitigated through fiscal and monetary policy?

At the end of the module the students will be able to understand and explain the basic principles of economics. On the micro level, this includes consumer behavior as well as firms' production decisions. The students will be able to analyze basic mechanisms that give rise to the equalization of supply and demand in competitive markets. Having attended the module, the students will be able to understand the interrelation between market power and social welfare and will be able to explain market failures. On the macro level, students will be able to identify and explain the main sources of growth, unemployment and inflation. Moreover, they will be able to analyze the basic tools of monetary and fiscal policy.

Students receive credit for the module by passing a multiple choice exam (written, 120 minutes). The exam is a means to measure the participants' understanding of fundamental micro- and macroeconomic concepts and methods. Moreover the exam assesses the students' ability to apply economic theory to concrete problems. Hereby, participants demonstrate their capacity for abstraction (thinking in economic models) and concretization (interpreting and applying the results of the model).

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The module consists of a lecture as well as an integrated exercise. The lecture content will be conveyed to the students by means of a verbal presentation. In the exercise participants apply the acquired knowledge by solving exercises and implementing case studies. The course aims at encouraging students to independently deliberate the economic problems, which are discussed in the lecture and in the relevant literature.