Economics provides systematic explanations for why individuals, firms and governments behave in the way they do. It is the science of scarcity and provides thinking tools for understanding how scarce resources are allocated and should be allocated in society. Planning is generally concerned with fostering economic prosperity and societal harmony often by modifying people’s behaviour to alleviate undesirable effects of wealth-generating activities. Understanding basic economic principles is therefore of crucial importance for all planning and policy making activity, whatever the focus of intervention – land and land use, transport, natural environment, housing, employment and so on. This module introduces the foundations of applied economic thought, covering the foundations of micro and macro economics, welfare economics and game theory. It aims to deepen students’ understanding of how individuals make decisions, how markets operate, how economies work and how they may be managed in various ways. It lays the foundation for more sophisticated applied analysis in the 2^nd year module Planning Markets and Land.

1. identify and describe typical micro-, macro- and welfare economic problems;
2. explain how individuals and firms make basic economic choices;
3. explain the determinants of supply and demand and the operation of markets;
4. discuss typical welfare economic problems;
5. understand the role of value judgements in economic policy prescriptions;
6. assess the general allocational and distributional consequences of market outcomes and government interventions and explain how policies which raise total incomes may nevertheless not benefit certain groups;
7. understand the determinants of economic prosperity and evaluate monetary and fiscal policy choices, with a particular view to contemporary issues;
8. diagnose social dilemmas which arise from strategic interdependence;
9. analyse economic issues facing contemporary policy makers.
10. derive solutions for contemporary micro-, macro and welfare economic problems and social dilemmas;
11. develop and present diagnostic and explanatory arguments about contemporary economic problems, based on the application of economic principles and the adoption of  a rigorous approach to problem-solving.

The module content will be delivered through lectures and a comprehensive set of lecture handouts.  These will be supported by tutorials where the students can engage with the course content in an interactive way. Students are given questions and analytical problems for discussion in the tutorials in order to allow them to apply the course content. Students will also be guided to web access to economic information. 

Students will have an opportunity to develop and will be expected to demonstrate the following skills through contributions to debates and written in-class tests and exams:

Academic skills:

• an ability to analyse basic economic problems and isolate relevant factors and causal relations;
• an appreciation of conflicting values and interests that characterise economic policy-making;
• an ability to describe basic economic problems and develop appropriate solutions;
• an ability to appraise the stance taken by policy-makers and society toward key economic problems.

Subject-specific skills:

• an ability to apply economic analysis to policy issues;
• an ability to present explanation of economic issues;
• an ability to reflect in tying economic analysis to policy and planning problems;
• an ability to access relevant web-based economic information. 

 Employability skills

•  Analysis: an ability to analyse choice situations through application of economic principles;
• Judgement: an ability to provide reasoned judgment on choices over the use of scarce resources;
• Constructive and creative thinking: an ability to develop solutions to real world problems;
• Communication: an ability to communicate ideas clearly and succinctly.

Students receive formative feedback during the tutorials every teaching week.
 

The summative assessment – two in-class tests and two exams - is timed in a way that students can benefit from feedback thourghout the two semesters. Students are required to achieve an average pass mark of 40% across all four assignments and pass at least three of them.

Reassessment will normally take place in the form of an exam during the exam period at the end of the second semester. Depending on the number of elements that a student has failed, this exam will have a duration of 60, 120, 180 or 240 minutes.

 After a general introduction to the principles of economic analysis, the first third of the module provides an introduction to micro-economic analysis:

• Theory of the household
• Theory of the firm
• Price theory: Demand, supply and the working of markets; elasticity of demand and supply

 The second part of the module introduces the students to the foundations of welfare economics:

• Consumer and producer surplus and the impact of policy interventions
• Market failure and the case for government intervention: Negative and positive externalities, public goods
• Equity and efficiency; distributional aspects of government spending and revenue

 The third part of the module covers the principles of macro-economics:

• The circular flow model of the economy
• Output and Aggregate demand
• Money, credit and banking
• Fiscal and monetary policy

 The final  part of the module addresses problems of strategic interdependence and introduces the students to the basic concepts of game theory:

• The prisoners’ dilemma
• Static and dynamic games; coordination and conflict; mixed motive games; the role of information
• How to solve game theoretic decision problems

After a general introduction to the principles of economic analysis, the first third of the module provides an introduction to micro-economic analysis:

• Theory of the household
• Theory of the firm
• Price theory: Demand, supply and the working of markets; elasticity of demand and supply

 The second part of the module introduces the students to the foundations of welfare economics:

• Consumer and producer surplus and the impact of policy interventions
• Market failure and the case for government intervention: Negative and positive externalities, public goods
• Equity and efficiency; distributional aspects of government spending and revenue

 The third part of the module covers the principles of macro-economics:

• The circular flow model of the economy
• Output and Aggregate demand
• Money, credit and banking
• Fiscal and monetary policy

 The final  part of the module addresses problems of strategic interdependence and introduces the students to the basic concepts of game theory:

• The prisoners’ dilemma
• Static and dynamic games; coordination and conflict; mixed motive games; the role of information
• How to solve game theoretic decision problems

Required text book is:

• David Begg, Gianluca Vernasca, Stanley Fischer, Rudiger Dornbusch: Economics, 10^th ed., London : McGraw-Hill Higher Education, 2011.

 Key online sources:

•  Lecture handouts on Learning Central
• Office of National Statistics: http://www.statistics.gov.uk/hub/index.html
• Bank of England: http://www.bankofengland.co.uk/
• European Central Bank: http://www.ecb.int/home/html/index.en.html
• Organisation of Economic Cooperation and Development (statistics and country reports): http://www.oecd.org
• US Federal Reserve: http://www.federalreserve.gov/