• Microeconomics

• Macroeconomics

• Labor Economics

Requirements

Good knowledge of mathematics and graphs.

Academic Integrity

Maintaining academic integrity is one of my top priorities. Thus, my students should avoid the following:

• Acquiring answers for any assigned work or examination from any unauthorized source.

• Observing the work of other students during an examination.

• Working with another person or persons on any assignment or examination when not specifically permitted by me.

• Informing any person or persons of the contents of any examination prior to the time the examination is given.

Any problems of academic integrity on an individual assignment will result in a failing grade for the assignment or the whole course and further treatment according to the university regulations.

Assessment

The process of assessment will be based on the performance during the term (two non-cumulative two-hour exams plus homework assignments) and the final exam.

Course Policies

	MICROECONOMICS
	1. Introduction. Economic approach to human behavior. The nature of microeconomics. Scarcity and choice. Four key economic problems. Use of economic modeling. Production-possibility frontier: land, labor, and capital. Alternative costs. Positive vs. normative economics. Pitfalls in economic reasoning. 2. Fundamentals of demand and supply. The market mechanism. Factors behind demand. The supply side of the market. Market equilibrium and the price system. Comparative static analyses. Consequences of controlled prices. 3. Elasticity and market adjustment. Price elasticity of demand: measurement, determinants, and effects. Cross elasticity of demand. The income elasticity of demand. Elasticity of supply. Market adjustment to change in demand: the path to equilibrium and the cobweb diagram. 4. Marginal utility approach to consumer behavior. Human wants and consumer's preferences. Cardinal theory of marginal utility. The paradox of value. Consumer surplus. Derivation of market demand curve. 5. Ordinal theory of consumer choice. Preferences and their presentation with indifference curves. Consumer limits and the budget line. The optimal consumer choice. Comparative static analyses of rational choice: reactions to change in income and prices. 6. Applications of the theory of consumer choice. Lump-sum or excise taxes. Choice under imperfect information. Equivalent and compensating variations. 7. Production and marginal product. Technology and inputs. Production function. Production in the short-run: marginal and average products of variable input; the law of diminishing marginal return. Production in the long-run. The optimal combination of inputs. 8. Production costs. Production expansion path in the short and in the long run. The nature of economics costs. Short-run cost functions. Cost curves in the long run. Relations between short- and long run costs. 9. Perfect competition. The assumptions of perfect competition. Profit maximization. Short-run and long-run equilibrium. Reactions to the change in demand. Efficiency. 10. Price and output under pure monopoly. Characteristics and sources of monopoly power. Profit maximization in the short run and in the long run. Static and dynamic efficiency. Comparison of monopoly with perfect competition. Multi-price monopolist: price discrimination. Public regulation of monopoly. 11. Oligopoly and monopolistic competition. Characteristics. Prisoner’s dilemma. Oligopoly models of strategic behavior in the case of homogeneous products: Cournot, Bertrand, Stackelberg, collusive oligopoly, entry barriers to competition. Models of product differentiation. 12. Labor market. Labor market demand and supply. Equilibrium wage in different market structures. Wage differences across groups. Discrimination in labor markets. The effects of minimum wage laws. Internal labor organization. The roles of labor unions and government in labor relations. 13. Rent, interest, and profit. Sources and determinants of rent. Capital: rental and purchasing price, marginal efficiency of capital, capitalization. Interest as a price of capital. Definition and sources of economic profit. 14. Inequality and redistribution of incomes. Measurement of degree of social inequality: Pareto and Lorenz curves. Reasons for inequality and necessity for its limitation. Economic results from taxes and antipoverty policy of income support and welfare programs. 15. Externalities and public goods. Positive and negative externalities. Externalities and efficiency. Optimal pollution control. Different approaches to externalities. Property rights and Coase's theorem. Public goods: characteristics, optimal quantity, provision, and distribution. The economics of a lighthouse.

	MACROECONOMICS
	1. Introduction. Defining Macroeconomics. Macroeconomics and our everyday life. Basic macroeconomic problems: unemployment, inflation, productivity, interest rate, budget balance, trade deficit. The evolution and development of Macroeconomics. What can and can't Macroeconomics do? 2. The national income and product accounts. Measures of output and income. Definitions of national income and product. Calculating GDP and their components. Other national accounts - Net National Product, National Income, Personal Income, Disposable Income. Price indexes. Real and nominal GDP. Application of GDP as a measure of the society's welfare. 3. Basic macroeconomic problems. Macroeconomic instability and macroeconomic cycles -  phases, indicators and development. Unemployment - definitions and measures. Full employment, potential production and natural level of unemployment. Inflation: definition and measures. Redistributive effects and macro consequences. Expected versus unexpected inflation. 4. Classical theory and Keynesian revolution. Classical theory of unemployment and the price adjustment paradigm: Say's law, role of interest rates, prices and wages. Keynesian critique and Keynesian revolution. Aggregate expenditures. Consumption: consumption and saving functions, marginal and average propensity to consume and to save. Effects of  income, wealth, expectations, demographics, and taxes on consumption spending. Investments: role of interest rate and expected rate of return. Other determinants of investment: technological change, cost of capital goods, and capacity utilization. Accelerator model. 5. Equilibrium production in the simple Keynesian model. "Aggregate production - aggregate expenditures" and " Leakages - injections" approaches. Keynesian cross. The spending multiplier and multiplier effect. Equilibrium and potential output. The spending multiplier and equilibrium: recessionary and inflationary gap. Paradox of savings. Effects of interest rates on equilibrium production. IS function. Path to equilibrium. Introduction of the fiscal policy instruments: taxes, government spending, transfer payments. Fiscal policy multipliers. Fine tuning and automatic stabilizers. 6. Money and banking. What is "Money"? Money as a medium of exchange, unit of account and store of value. Standard of deferred payment. Money liquidity, monetary aggregates and their components. Structure and functions of the banking system. Money supply and monetary policy of central banks. Tools of monetary policy and mechanics of intervention. Money multiplier. Transaction demand for money. Elasticity of money demand: Keynesian view of speculative demand, portfolio model, Baumol - Tobin model. 7. Static analysis of money market equilibrium. Equilibrium of money market. Derivation of the LM function. Path to equilibrium. Interest elasticity of money demand and the LM curve. Effects of changes in demand and supply for money. Money and equilibrium income: effects of monetary policy on investment and consumption spending. Final and intermediate goals of central banks. 8. General equilibrium in the goods and in the money markets and Aggregate demand curve. IS-LM model.  Path to equilibrium. Comparative static analysis and equilibrium adjustments in the IS-LM model. Analysis of fiscal and monetary policies: fiscalist, monetarist and money substitutes cases. Liquidity trap. Targeting of fiscal and monetary policy in the conditions of unstable IS and LM functions. Aggregate expenditures and changing price levels: derivation of the Aggregate demand (AD) curve. Shifts in the aggregate demand  curve as results of exogenous changes in fiscal and monetary policies. 9. Aggregate supply and general equilibrium. The classical aggregate supply function. The classical model. The Keynesian aggregate supply function. The Keynesian model. Neoclassical synthesis. Long-term equilibrium. Supply and demand shocks. 10.Comparative static analysis and equilibrium adjustments in the classical and Keynesian models. Effects of fine tuning, automatic stabilizers, and monetary policy on production, interest rate, employment, and price stability - classical, Keynesian and neoclassical views. Problems of government interventions. 11. Inflation and unemployment - alternative theories. Introduction of dynamics in the Keynesian model. Wage expectations and unemployment: the original Philips curve. Expectations of inflation in the Philips curve. The expectation-augmented Philips curve. Long-rum equilibrium. Impact of expectations on long-run trade-off. Results with adaptive and rational expectations. 12. An introduction to the New classical economy. Lucas's monetary misperception theory.  The new classical model and the role of rational expectations and market clearing. Effects of fiscal and monetary policies in the conditions of rational expectations. The policymakers' role. Credibility hypothesis and time inconsistency. Taylor's relative-prices theory. Fisher's sticky-wages theory. The political business cycle. Real business-cycle theory. Lucas's "critique". 13. Budget deficits and government debt. The budget process. Deficits and the national debt. Deficits, interest rates, and investment. The Ricardian equivalence controversy. Money and bond-financed budget deficits: AD considerations. Transaction crowding out. Portfolio crowding out. Financing budget deficits: AS considerations. Desirability of bond-financed deficits. 14. International trade. Basic theories of international trade: Adam Smith's theory of absolute advantage. Ricardo's theory of comparative advantage. The Heckscher-Ohlin theory. The gains from trade. Trade policy and restrictions: the effects of tariffs, quotas and subsidies. 15. Introduction to the open-economy macroeconomy. Financing of international trade. Exchange rates and the foreign exchange market. Exchange rate and the changes and international trade. International reserve currencies: the emergence of the European currency unit. Accounting for international transactions and the Balance of payments. What would be gained if countries adopted a single currency? The standard Mundel/Fleming model with full capital mobility. The effects of fiscal and monetary policies in fixed and flexible exchange rate regimes. Price flexibility and the open economy.

	LABOR ECONOMICS
	1. Introduction. Economic approach to labor behavior. The nature of labor analysis. Course description and some basic concepts. Requirements for the course. 2. A simple model of labor supply. Utility maximization by individuals and labor supply. Factors for labor force participation and hours of work. The individual labor supply curve - income and substitution effects. Modeling the situations with monetary ant time costs for work. 3. Applications of the simple model of labor supply. The effects of income tax system on labor supply. The benefit system and labor supply decisions. Consequences of unemployment compensations. Pensions and choice of retirement. 4. Models of household behavior. Rational foundations for household production and marriage. The neoclassical theory of household production. Becker's model for altruistic allocation of household goods. Models with egoistic behavior. 5. Quality of labor supply and education. The concepts of human capital. Individual demand for education: cost and benefits, the return to human capital. Government role in education and state subsidies. Problems of private investments in education and their solutions. 6. Theory of labor demand. A simple model of labor demand: sort-run and long-run decisions. Labor demand elasticity. Role of technological changes. Applications to the analyses of geographic mobility and migration. 7. The competitive labor market. Boundaries of labor markets. The labor market mechanism and job matching process. Wage differentials in competitive labor markets: the equalization of the net advantages of different jobs. The economics of labor market discrimination. 8. Internal labor organization. Transaction costs in the labor market. The development of organizational hierarchies. Efficient contracts. Problems of internal organization. 9. Hiring, layoffs, and buyouts. The need for personnel selection. Hiring the right people: self-selection, screening and signaling. Education as a screening devise. Asymmetric information and statistical discrimination. Strategies for hiring, layoffs, and buyouts. Optimization of hiring and dismissal costs. 10. The level and the structure of wages as stimulus for the productivity. Principal-agent problem. A simple model of economic stimuli. Payment by input and payment by output. Efficiency wage and market equilibrium. Structure of compensations. 11. Seniority-based and promotion-based incentive schemes. Seniority-based incentives and the role of upward-sloping wage curve. The problem of mandatory retirement. The Lazear's tournament model. Labor market segmentation as a result of motivation schemes. 12. Labor unions and labor relations. Roles of labor unions. A model of collective bargaining. Economics of strikes. The effects of unionization on the wages. Government role in labor relations.

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