EC221-Economic Theory

Module Provider: School of Politics, Economics and International Relations
Number of credits: 20 [10 ECTS credits]
Level:5
Terms in which taught: Spring term module
Pre-requisites:
Non-modular pre-requisites: EC128 or EC128NU for all students, except those taking BSc Mathematics and Economics
Co-requisites: EC201 Intermediate Microeconomics and EC202 Intermediate Macroeconomics or EC201NU Intermediate Microeconomics and EC202NU Intermediate Macroeconomics
Modules excluded:
Current from: 2023/4

Module Convenor: Dr Carolyn Molesworth-St Aubyn
Email: c.molesworth-staubyn@reading.ac.uk

Type of module:

Summary module description:

This module builds upon the previous microeconomic, macroeconomic, and mathematics courses studied. It is intended to introduce students to the basic concepts of economic modelling by applying previously learned economics in a more formal, structured way. In particular, students will learn what constitutes a formal model, how micro-foundations form the basis of modern macroeconomic models, and how to use formal mathematical models to answer economic questions and analyse real world policies. 

Aims:

The primary focus of this course is twofold: (1) understanding what constitutes a formal economic model and how they are constructed and (2) applying these modelling techniques to answer basic economic questions and to analyse real-world policies. This includes having a detailed understanding of the various parts of an economic model, expressing a formal model mathematically, understanding the application of microeconomic theories to macroeconomic models, understanding the differences between partial and general equilibrium models, and being able to use mathematical models to understand real-world economics. Additional content covered may include 1) application of theories such as the permanent income hypothesis and Ricardian equivalence 2) understanding the role of the First and Second Welfare Theorems in modelling 3) proving the existence and uniqueness of both steady state and dynamic equilibria and 4) understanding the impact of policy (for example fiscal and monetary policy) on equilibria and transitional dynamics. 

Assessable learning outcomes:
Students should be able to understand the basic issues underlying the creation of a mathematically based economic models. In addition, they should be able to understand how basic microeconomic theories provide the underpinning for modern economics and how the concept of equilibrium (whether in steady state or dynamic) embodies both the mathematical and economic 'solution' to the question being asked. Finally, students should be able to apply simple economic models to real world situations andpolicy analysis.

Additional outcomes:
Students will be required to complete coursework such as problem sets, tests, essays, presentations, etc. In the process of completing these types of assignments, they must learn skills required to do relevant research, write reports, produce concise relevant presentations, understand technical articles, and apply theoretical knowledge to real world situations. In particular, students will better understand the role of rigorous, mathematical precision in modern economic theory.

Outline content:

Basic topics include: defining and understanding the basic components of an economic model, understanding the role of utility and profit maximization in a well-define economic model, understanding how all aspects of an economy are expressed precisely and mathematically, understanding the solution concept of equilibria, understanding the different types of equilibria and their properties, and using simple models to answer questions and analyse policies. Additional topics may include: application of theories such as the permanent income hypothesis and Ricardian equivalence, understanding the role of the First and Second Welfare Theorems in modelling, and proving the existence and uniqueness of both steady state and dynamic. 

Brief description of teaching and learning methods:

Detailed guidance on the topics covered will be provided in the 25 weekly lectures, together with examples, exercises and solutions to facilitate understanding of key concepts. Students may be required to do exercises corresponding to each topic, to read a significant amount of journal articles, and to undertake research using the library, internet, etc.

Contact hours:

	Autumn	Spring	Summer
Lectures		25	1
Guided independent study:		155	19
Total hours by term	0	180	20
Total hours for module	200

Summative Assessment Methods:

Method	Percentage
Written exam	50
Set exercise	25
Class test administered by School	25

Summative assessment- Examinations:

One 3-hour unseen written paper. Part 2 examinations are held in the Summer term.

The examination for this module will require a narrowly defined time window and is likely to be held in a dedicated exam venue.

Summative assessment- Coursework and in-class tests:

The details underlying the coursework weighting given above are as follows.  Set exercises will be accessed by means of problem sets.  Problem Sets are short assignments requiring students to provide short answers and numerically solve relevant problems using mathematical and graphical means.  There will be two problem sets, equally weighted which when combined make up the 25% weighting of set exercises.  The class test will also be constituted by two pieces of work.  These will be a mid-term test and an end-of-term test – equally weighted.  These tests are designed to be either an in-class, closed book and no lecture notes or on-line, open book and with lecture notes – depending on external factors prevailing at the time.  Tests are aimed primarily at ascertaining a student’s understanding and comprehension of a subset of the materials covered during lectures, in the textbook, and on non-graded problem sets.  In addition, they are intended to give students a better understanding of what they actually know – as a means for helping students to further determine those areas where additional studies are required.  The details of the coursework and weightings is also laid out in detail in the syllabus, available at the beginning of the course via Blackboard.

Formative assessment methods:

In addition to the graded assessments mentioned above, there will also be numerous non-graded problem sets throughout the term.  The objective of these will be to provide further means for practicing and getting comfortable with the ideas, concepts and procedures we use throughout the course.  Although not forming part of the formal grade, these pieces of work are graded and discussed so that students have detailed information about those concepts they have and have not understood.

Penalties for late submission:

The Support Centres will apply the following penalties for work submitted late:

• where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of five working days;
• where the piece of work is submitted more than five working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

The University policy statement on penalties for late submission can be found at: https://www.reading.ac.uk/cqsd/-/media/project/functions/cqsd/documents/cqsd-old-site-documents/penaltiesforlatesubmission.pdf
You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Assessment requirements for a pass:
A minimum overall mark of 40%.

Reassessment arrangements:
Re-examination for all modules takes place in August/September of the same year.
Re-assessment is by examination only; coursework is not included at the second attempt.

Additional Costs (specified where applicable):

1) Required text books: 

Macroeconomics, 10th edition, by N. Gregory Mankiw, 2019, Worth Publishers, ISBN: 9781319243586 (Estimated Price: £64.99)

Modeling Monetary Economics, 4th edition, by Bruce Champ, Scott Freeman, and Joseph Haslag, 2016, Cambridge Publishers, ISBN: 978-1-3165-0867-1 (Estimated Price: £35.99)

2) Specialist equipment or materials:  None

3) Specialist clothing, footwear or headgear:  None

4) Printing and binding:  None

5) Computers and devices with a particular specification:  None

6) Travel, accommodation and subsistence:  None

Last updated: 22 August 2023