EC221-Economic Theory

Module Provider: School of Politics, Economics and International Relations
Number of credits: 20 [10 ECTS credits]
Terms in which taught: Spring term module
Non-modular pre-requisites:
Co-requisites: EC201 Intermediate Microeconomics and EC202 Intermediate Macroeconomics and EC206 Intermediate Mathematics for Economics or EC201 Intermediate Microeconomics and EC202 Intermediate Macroeconomics and MA2DE Differential Equations and MA2RA1 Real Analysis I
Modules excluded:
Current from: 2020/1

Module Convenor: Dr Mark Guzman


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. 


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 and policy 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: applicati on 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 20 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 2
Guided independent study: 155 18
Total hours by term 0
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.

Summative assessment- Coursework and in-class tests:

Coursework may include a number of different methods for assessing student’s knowledge. These may include, but are not limited to: Problem Sets: Numerous short assignments requiring students to provide short answers and numerically solve relevant problems Quizzes: Short tests intended to ascertain students understanding of recent topics discussed in class. Tests: An in-class exam aimed primarily at ascertaining a student’s understanding and comprehension of a subset of the materials covered during lectures. The exact requirements of the module for a given term (i.e. essay specifics, etc.) will be explicitly detailed in the syllabus handed out at the beginning of each term in which the module is offered. Coursework will count for 50% of the overall grade. The exact weights of the different pieces of coursework required will also be explicitly stated in the syllabus.

Formative assessment methods:

Penalties for late submission:

The Module Convenor 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[1] (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:
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, 9th edition, by N. Gregory Mankiw, 2016, Worth Publishers, ISBN: 978-1-4641-8289-1 (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)

Last updated: 4 April 2020


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