Principles of Economics

International Islamic University, Islamabad

Department of Political Science and International Relations
Dr. Rehana Naheed

Course Objectives: The key objectives in this introductory course include:

1. The student should develop a solid foundation of basic economic concepts pertaining to the
market system. The nature and method of decision-making units -- consumers, producers,
and governments--to make choices while constrained by limited resources will be carefully
analyzed. Additional constraints to the decision making process-government regulations,
imperfect competition, etc.--will also be investigated.

2. The student will develop the ability to apply basic economic concepts and principles to
problem situations. In order to accomplish this problem solving aptitude, the student will
acquire the basic methodology and tools of analysis necessary to formulate economic
decisions. Often the ability to select and utilize economic data to reach a solution will be
required as well as a comprehensive justification of the solution.

4. The student will develop the ability to communicate the logic of economic thinking
qualitatively and quantitatively. Through the use of objective, problem set and essay testing
techniques, the student will be expected to utilize the principles of economics, to analyze and
synthesize answers to problem situations.

5. Finally, the student will develop a better understanding of the role of economics in our
society as well as the role economics plays in decision making processes which crossover to
other disciplines -- the arts, natural sciences, and other social sciences. Such knowledge is
important to gain awareness of the overall operation of society.

Total Maximum Points

2 Homework Assignments @ 5 points each 10 (10%)

2 Quizzes @ 5 points each 10 (10%)
Midterm Examination 30 (30%)
Final Examination 50 (50%)
Total Course Points 100 (100%)

Homework Assignments

Students will be given one week to complete each of 2 homework assignments. Late homework
assignments will not be accepted. In case of absence or urgency, try to submit your assignment
one day before the due date to the class representative.

Quizzes
There will be 2 quizzes throughout the quarter. The quizzes can be surprised or declared, and
conducted in first thirty minutes of the class. Students who arrive late on a day of quiz will not be
given additional time. There are no makeup quizzes unless the student provides a written
documentation of a serious and unavoidable reason.

Examination

The course taught one week before the exam will be included in the exam.

Course Outline

Introduction to Economics

Week 1
 What is economics
 Nature, Scope, and Importance of Economics
 Relationship between economics and economy
 Sectors of Economy
 Types of Economy

Part A: Microeconomics

Chapter 1: Limits, Alternatives, and Choices

Week 2
 Economic perspectives of Microeconomics v/s Macroeconomics
 Society Economizing problem
 Budget line
 Production Possibility model and frontier

Chapter 2: Demand, Supply, and Market equilibrium

Week 3
 Factors of production
 Demand, Law of demand
 Supply, Law of Supply
 Market equilibrium

Week 4
 Shift in demand and supply of goods
 Normal, Inferior, Substitute, and Complementary goods and demand and supply curves
 Shift in market equilibrium and special cases

Chapter 3 : Elasticity
Week 5
 What do you mean by Elasticity of demand and supply
 Price elasticity of demand and supply
 Income elasticity of demand and supply
 Total Revenue effect

Chapter 4 : Utility Maximization

Week 6
 Law of diminishing marginal utility
 Theory of consumer behaviour
 Utility maximization and demand curve
 Income and substitution effect

Chapter 5 : Business, and Cost of Production

Week 7
 Economic cost and its types
 Short run, long run production cost
 Utility maximization and demand curve
 Income and substitution effect

Chapter 6 : Businesses and Cost of Production

Week 8
 Economic cost and its types
 Short run, and long run production cost
 Utility maximization and demand curve
 Income and substitution effect

Week 9
Mid-term Examination

Part B: Macroeconomics

Chapter 7 : Introduction to Macroeconomics

Week 10
 Modern Economic growth
 Saving, Investment, and choosing between present and future investment
 Uncertainty, Expectations, and Choices

Chapter 8 : Measuring Domestic Outcome and National Income

Week 11
  Gross Domestic Product (GDP), and its measurement
 Expenditure and Income approach
 Nominal v/s Real GDP
 Shortcomings of GDP

Chapter 9 : Economic Growth

Week 12
 Economic growth
 Modern measures of economic growth
 Determinants of economic growth
 Accounting for growth
 Growth desirable or sustainable

Chapter 10 : Business Cycles, Unemployment, and Inflation

Week 13
 Business Cycle, and Phases of Business Cycle
 Unemployment: Types and measures of unemployment, economic cost of
unemployment
 Inflation, measure and types of inflation, Redistribution effect of inflation, and Inflation
& Economic growth

Chapter 11 : Fiscal Policy

Week 14
 Aggregate demand (AG) and Aggregate Supply (AS) model
 Problems and Criticism of Fiscal policy
 Implementation of fiscal policy

Chapter 12 : Monetary Policy

Week 15
 Money, and its functions
 Banks, types of banks, 2007-08 financial crisis

Chapter 13 : Monetary Policy and Interest rate

Week 16
 Interest rate and monetary policy
 Tools and types of monetary policy

Week 17

Final term Examination