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National University “Kyiv-Mohyla Academy”

Faculty of Economic Sciences



(designed for students of the Faculty of Law)

LOAD, hours 108 Trimester – 4

  • Lectures 26

  • Seminars 12 Form of evaluation: final examination

  • Consultations   2

  • Self-study 68 Number of credits – 2


The course “Fundamentals of Economic Theory” calls attention of students to the basic concepts of economics. The aim of the course is to ensure comprehension by students of the general economic problems and fundamentals of microeconomics (demand and supply, utility and costs, opportunity costs, market models, resources, efficiency and equity, etc.) and those of macroeconomics (gross domestic product, aggregate demand and aggregate supply, multiplier effect, fiscal policy, monetary policy, unemployment and inflation, economic growth, etc.). In the course of instruction, an interrelation between theoretical economics and economic policy is emphasized.



LECTURE 1 The economizing problem. Market mechanism versus command economy (1)

Demand and supply (1)

Optional: Elasticity of demand and supply

LECTURE 2 Theory of consumer choice (1)

Costs of production (1)

Optional: Production and the marginal product

LECTURE 3 Market models: perfect (pure) competition, pure monopoly,

oligopoly, monopolistic competition. (2)

LECTURE 4 Productive resources (1)

Pricing and employment of resources (1)

Optional: Labor market

LECTURE 5 Market failures (1)

Theory of public choice (1)

Optional: Government regulation and the market economy

LECTURE 6 Efficiency versus equity (1)

Income inequality and poverty (1)

Optional:Market equilibrium

LECTURE 7 Macroeconomic indicators (2)

LECTURE 8 Aggregate expenditures model. The multiplier effect (1)

Aggregate demand and aggregate supply (1)

LECTURE 9 Fiscal policy (2)

Optional: Budget deficit and the national debt

LECTURE 10 Monetary policy (2)

Optional: Money and banking

LECTURE 11 Business cycles. Unemployment and Inflation (2)

LECTURE 12 Economic growth (2)

LECTURE 13 International economics. Ukraine in the context of

economic globalization (2)

Seminar 1.

Principal Concepts of Economic Theory. Market Mechanism and the Role of Government.

The concept of scarcity: infinite needs and finite resources. Positive and normative economics. Microeconomics and macroeconomics. The production-possibility frontier. Opportunity costs. Efficiency and its aspects. The concept of market. The invisible hand. Trio of economic problems and the market. The economic role of the government: efficiency, equity, and macroeconomic growth and stability.

[S] Chapter 1. The fundamentals of economics

[S] Chapter 2. Markets and government in a modern economy

Seminar 2.

Demand and supply. Concepts of the utility and costs.

Demand schedule and demand curve. Quantity demanded and the demand. Demand shifters. Supply schedule and supply curve. Quantity supplied and the supply. Supply shifters. The demand/supply equilibrium. Total costs. Fixed and variable costs. Average costs: total, fixed, and variable. Marginal product and marginal costs. Economic costs and accounting costs; explicit and implicit costs. Opportunity costs (reviewed). Short-run and long-run periods. Economies of scale.

[S] Chapter 3. Basic elements of supply and demand

[S] Chapter 7. Analysis of costs

[M/B] Chapter 5. Private and public sector

Seminar 3.

Market models. Factors of production.

Perfect competition. Demand for a competitive seller’s product. Profit maximization in the short run and in the long run. Pure competition and the market efficiency. Pure monopoly. Monopoly market. Natural monopolies. Monopoly demand. Economic effects of the monopoly market. Oligopoly and monopolistic competition

Factors of production (inputs, resources): definition. Labor. Natural resources. Capital. Entrepreneurship. Technological change. Investments and investment climate. Demand for resources from the standpoint of the theory of marginal productivity. Elasticity of demand for resources. Optimality criteria of resource use. Nominal and real wage. Factors determining the level of wage. Wage under competition and under monopsony. Minimal wage: “pros” and “cons”. Economic rent. Single land tax: “pros” and “cons”. Factors determining the interest rate. Essence of the entrepreneurial income. Sources of the economic profit. Functions of profit.

[S] Chapter 8. Analysis of perfectly competitive markets

[S] Chapter 9. Imperfect competition and its polar case of monopoly

[C] Chapter 20. Who gets what? The distribution of income

Seminar 4.

Gross domestic product and other macroeconomic indicators. Aggregate demand and aggregate supply model.

Macro versus micro. Types of macroeconomic policy. Classifications of macroeconomic indicators. Gross domestic product (GDP). Expenditures approach to computation of the GDP. Income approach to computation of the GDP. Price indexes and the GDP-deflator. Nominal and real GDP.

Consumption and saving. Average and marginal propensities to consume and to save (APC, APS, MPC, MPS). Determinants of consumption and saving. Investment. Expected rate of net profit and the real interest rate. Investment demand shifters. Investment instability factors. Net export as a component of the aggregate expenditures model. Net exports and the equilibrium GDP. Government sector as a component of the aggregate expenditures model. Full-employment GDP. Equilibrium GDP: two ways of its computation. The multiplier effect.

Aggregate demand (AD). AD curve and determinants of its down-sloping. AD shifters. Interrelationships between the aggregate demand curve and the aggregate expenditures model. Aggregate supply (AS). AS curve. AS shifters. Equilibrium real domestic output and the equilibrium price level. Changes in equilibrium: shifting AD and AS. Ratchet effect.

[S] Chapter 20. Overview of macroeconomics

[S] Chapter 21. Measuring economic activity

[M/B] Chapter 11. Aggregate demand and aggregate supply

Seminar 5.

Fiscal policy. Money and banking. Monetary policy. Business cycles.

Fiscal policy (FP) and its types. Discretional FP: expansionary and contractionary FP. Non-discretionary FP: built-in stabilizers and full-employment budget. Crowding-out effect.

Money and its functions. Factors of the money supply. Demand for money: Dt, Da, Dm. The money market. Central bank and its role in the economy. Classifications of banks. The bank reserves. The bank deposits. Money multipliers.

Tools of monetary policy: (1)- open market operations (transactions with bonds); (2)-changing the reserve requirement; (3)-changing the interest rate. Easy-money/tight-money policies. Effectiveness of monetary policy: merits and demerits. Monetary policy in Ukraine.

Business cycle (?!) and its phases. Causes of business cycles (external and internal theories). Theories of business cycles: classical, Keynesian. Full employment. Types of unemployment. Economic and social cost of unemployment. Okun’s law. Problems of unemployment in Ukraine. Inflation: definition and measurement. Classifications of inflation: by rate, by type. Causes of inflation. Socioeconomic implications of inflation. Phillips curve. Ways of striving against inflation.

[M/B] Chapter 12. Fiscal policy

[C] Chapter 30. Monetary policy and the debate about macro policy

[M/B] Chapter 17. The inflation-unemployment relationship

Seminar 6.

Budget deficit and public debt. Economic growth. Open economy.

Budget deficit and public debt: definitions. Balanced budget. Causes of the public debt. Public debt and macro-indicators. Budget deficit and public debt: economic implications. Cause-effect between budget deficits and trade deficits. Policy solutions to the problem of budget deficit.

Factors of economic growth. Factors counteracting the economic growth. Economic growth policies. Socioeconomic growth (!?). Specific features of the economic development and economic growth in Ukraine.

Amounts and shares of international trade. Economic justification of the international trade. Comparative advantages and the specialization. Trade barriers. Balance of payment. Nominal and real exchange rates. Fixed and floating exchange rates. Multilateral trade agreements, free-trade zones, and international monetary organizations. Global economic system and Ukraine. Economic relationships of Ukraine with ROW. World labor market and Ukraine. New ecological policy and Ukraine.

[M/B] Chapter 18. Budget deficit and public debt

[S] Chapter 27. The process of economic growth

[S] Chapter 30. Open-economy macroeconomics


  1. Elasticity of demand and supply (3 hrs)

  2. Production and the marginal product (3 hrs)

  3. Government regulation and the market economy (3 hrs)

  4. Market equilibrium (3 hrs)

  5. Economic systems: the politico-economic context (3 hrs)

  6. Ownership as an economic category. Ownership reform in Ukraine (3 hrs)

  7. Budget deficit and the national debt (4 hrs)

  8. Money and banking (4 hrs)

  9. The main economic schools (6 hrs)

  10. The leading Ukrainian economists of XIX-XX centuries (3 hrs)

  11. Approaches to economic systems based on values and on economic modes (3 hrs)

  12. Private and state sectors as the component parts of a mixed economy (3 hrs)

  13. Transition from the command economy to the market economy in Ukraine (6 hrs)

  14. Antitrust legislation in Ukraine and in USA (4 hrs)

  15. Key issues of agricultural economics (4 hrs)

  16. Key issues of health care economics (6 hrs)

  17. Key issues of environmental economics (4 hrs)

  18. Economic growth in the less developed countries (3 hrs)

Разом: 68 hrs



Principal sources:

  1. [S] Economics / Paul A. Samuelson, William D. Nordhaus. – 17th ed.

  2. [M/B] Economics – principles, problems and policies / Campbell R. McConnell, Stanley L.Brue. – 13th ed.

  3. [C] Economics / David C. Colander. – 4th ed.

Additional sources:

  1. Н. Грегори Мэнкью Принципы экономикс. – СПб: Питер Ком, 1999. – 784 p.

  2. Bradley R. Schiller The Economy Today – 4th ed.,Random House, NY, 1989

  3. O.I.Ястремський: Основи економічної теорії. // Київ, 2007.

Performance assessment




Maximal score (pts)

Preparedness for seminars




Interim test 1 (Lect.1-5)


3rd seminar


Interim test 2 (Lect.7-11)


6th seminar


Final test








* “Blitz –tests”, quizzes, discussions, and other activities.

NOTE: The minimum pre-exam passing grade shall amount to 35 points.

Compiled by E.M.Orel _________________________[signature]

C.Sc.(Econ.), Docent [=Associate Professor]

Department of Economic Theory, FES/NaUKMA

Approved by the Department meeting “___” ____________ 200_ р.

Yu.M. Bazhal ____________________________ [signature]

D.Sc.(Econ.), Professor [=Full Professor]

Head, Department of Economic Theory, FES/NaUKMA


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