Lectures:           Tuesday 8:00 -- 9:00 Lecture Theater 2
                            Thursday 12:00 -- 13:00 Lecture Theater 3
    Practical:          Tuesday 14:00 -- 14:00 Lecture Theater 2

    Lecturers:         Lawrence Rubey (first part of first term)
                            Dr. Anne Conroy {second part of first term)
                            Mr. Lovemore Rugube (second and third terms)

 I. Course Objectives and Structure

This is an economic theory course and will concentrate on giving students a solid grasp of microeconomic and macroeconomic principles. The microeconomic and macroeconomic theory taught. in this course will serve as the foundation of virtually all third year courses. Whenever possible,examples will be drawn from the Zlmbabwean context.

There will be 25 weeks of lectures with 5 weeks revision at the end of the year. Students are expected to attend lectures and participate inpracticals. Assessment will be based on the November Examination (70 percent) and a course assessment (30 percent). Questions and classdiscussion are strongly encouraged. On examinations, students are expected to demonstrate a clear understanding of intermediate economic theory and not merely replicate their lecture notes.

II. Readings

Required readings are an essential element of this course. The required readings should offer complementary explanations to the materials covered in class. However, students will be expected to do the required readings as not all of the material upon which the final examination is based will be covered in lectures. Required readings will be assigned prior to beginning each section.

Further reading is very important to those students who wish to receive a first or upper second. A list of further reading will be available for cacti section. Students can also supplement or replace some of the further readings with some of their own texts. The course texts (at available in the Resource Information Center) are:

Ritson, C. Agricultural Economics: Principles and Policy (1977)   Granada Publishing, London (particularly Chapter 1 through 6  on microeconomic principles).

Hill, B. An Introduct1on to Economics for Students of Agriculture   (1980) Pergammon Press, Lon4on. An excellent reference text   for first year economic principles.

Dornbusch R. and S. Fischer. Macroeconomlcs. (1987) Fourth edition.McGraw Hill, New York.

Timmer, et. al. "Macroeconomic Policies and the Food System"    (Chapter 5) 1n Food Policy Analysis {1983). World Bank,   Washington, D.C.

III. Course Content

PART A: MICROECONOMICS

WEEK 1: Introduction and History of Economic Thought

Implications of scarcity and choice. Using theoretical models.
Positive versus normative economics. The development of a theory of value, the labor theory of value, the marginalist revolution, and the rise of neo-classical economics. (2 lectures).

WEEKS 2-4: Consumer demand

Definition and measurability of utility, assumptions about consumer preferences, marginal rate of substitution, using indifference curves to depict preferences, the budget constraint, and the utility maximization hypothesis. Graphic analysis of utility maximization. Applying the utility maximization principle to farm-level decision-making.
Demand functions and factors which affect demand, effects of changes in income, effects of changes in prices, demand elasticities, Engel curves, normal goods, inferior goods. Constructing and manipulating individual demand curves. Market demand. (6 lectures).

WEEKS 5-7 The supply of agricultural products

A brief overview of the production function, costs of production and profit maximization, the supply function, supply elasticities, characteristics of agricultural supply. The emphasis in this section will be on the factors which affect supply, rather than on the theory of the farm firm which is covered in AGEC 202 and AGEC 302. (6 lectures).

WEEKS 8-10: The market mechanism for agricultural products

1) Pricing in competitive markets: short-run supply curve and price determination, shifts in supply and demand, the long-run supply curve. 2) Pricing in monopoly markets: causes of monopoly, profit maximization, measuring monopolistic distortions, price discrimination. 3) Pricing in imperfectly competitive markets: pricing of homogeneous goods, product differentiation, factors limiting entry by new firms. (6 lectures).

WEEKS 11-12: Agricultural resource use

Pricing of factors of production, the supply and demand of agricultural inputs (labor, capital, and land), firm responses to changes in input prices, responsiveness on input demand to price changes, and equilibrium in factor markets. Also a discussion of economic rent and monopsony. (4 lectures).

WEEKS 13-15: Welfare economics

Welfare economics within the perfectly competitive price system. Efficiency in exchange, efficiency in production, and efficiency in output mix. Pareto optimality, including graphical analysis.
Why do markets fail to achieve economic efficiency?  Discussion of imperfect competition, externalities, public goods.  Also brief overview of efficiency versus equity debate. (6 lectures).

PART B: MACROECONOMICS

WEEK 16: Introduction to the Macroeconomy

What is macroeconomics?, definition of key concepts, and measures of economic performance (output and income). (2 lectures).

WEEKS 17-18: Economic Fluctuations: Unemployment and Inflation

The business cycle, measuring unemployment, price changes and inflation, measuring inflation (price indexes and deflators), and anticipated versus unanticipated inflation. Trade-offs between inflation arid unemployment and the Phillips curve. The dilemma of stabilization policy. (4 lectures).

WEEKS 19-20: Aggregate demand: Consumption, Saving, and Investment

The income identity, the consumption function, marginal propensity to consume, multipliers, determinants of consumption and saving, investment and its determinants. (4 lectures)

WEEKS 21-22: Fiscal Policy: Government Spending and Taxation

The government budget, deficits and surpluses, and the principles of discretionary fiscal policy. Use of multipliers. Effects of fiscal policy or, consumption, savings, and investment. Implications for economic growth, in the short and long run. (4 lectures).

WEEKS 23-24: Monetary Policy: The Money Supply and Interest Rates

The nature of money and the primary functions of banks. The demand for money, interest rates, money supply, and interactions of supply and demand in the money market. Monetarist view of how the management of the money supply affects output, employment, and prices. (4 lectures).

WEEKS 25: The Effects of the Macroeconomy on the Agricultural Sector

Analysis of the effects of changes in the macroeconomy on agricultural producers and consumers. Impacts of inflation, changes in interest rates, and government budget policy. Brief discussion of trade and exchange rate policy. (2 lectures).

WEEKS 26-30: Revision and examination preparation