The course provides an overview of the main principles, theories and techniques of economics and their relevance to the management of enterprises in market economies. It includes a review of the: fundamentals of business economics, how markets work in a free enterprise economy, the role of governments in regulating and managing the economy, the economics of government/business/ consumer relations, the economics of firms and industries, enterprise economics and economic techniques to assist management decision making including the basics of cost-benefit analysis. The course also introduces students to the study of financial markets and the role of stock exchanges and the different equity and borrowing sources of funds for firms.

Subject Description

The course assumes no previous knowledge of economics.  It aims to provide an overview of the main principles, theories and techniques of economics and their relevance to the management of enterprises in market economies.  The subject includes a review of the fundamentals of business economics: how markets work in a free enterprise economy, the role of governments in regulating and managing the economy, the economics of government/business/consumer relations, the economics of firms and industries, enterprise economics and economic techniques to assist management decision making, including the basics of cost-benefit analysis. This course places special emphasis on a review of policy measures to promote green business enterprises and corporate environmental and social responsibility.

Learning Outcomes

After successfully completing the unit, students will be able to:

• Apply economic tools and techniques for the analysis of business decisions
• Analyse the sustainable competitive advantage of firms
• Recommend strategies to Pacific business enterprises to achieve environmental and social corporate responsibility and reduce their carbon footprint.
• Demonstrate a sound knowledge of green business, the clean tech revolution and measures to harness renewable materials and energy sources to reduce the use of natural resources by using them more efficiently and productively.
• Analyse industries in terms of market structure, the degree of strategic and price competition, barriers to entry, economies of scale, and value creation
• Demonstrate an understanding of the impact of the macroeconomic policy measures on industry growth prospects.
• Analyse the operations of markets and the impact of market forces, government regulation and international competition.
• Demonstrate an understanding of economic policy instruments for the managing of the economy, the business cycle, the role of economic forecasting, monetary and fiscal policy and the role of the government budget.

Course Content

The syllabus is composed of the following five modules

3.1. Understanding how markets work

• This module provides an analysis of the operation of markets in free enterprise economies.  It covers the following topics:
• The operation of the market, market forces and market equilibrium
• Individual choices, the supply of and demand for goods and services
• Demand and factors that influence demand
• Demand and supply principles – elasticity, consumer and producer surplus, price ceilings and price floors, impact of taxes and subsidies on price, quotas and tariffs

3.2. Market structures and the firm

• This module provides an analysis of market structures.  It covers the areas of:
• Factors that influence a firm’s behaviour and performance
• How businesses are organised and structured
• How businesses are influenced by their national and global market environment
• The aims of businesses, owners versus managers
• How markets operate and how firms compete for customers
• The competitive market model.  Characteristics of perfect competition monopoly, oligopoly and monopolistic competition
• The revenue curves of the firm
• The costs of production.  Economies and diseconomies of scale

3.3. Enterprise Economics

• Competitor analysis, industry analysis, making strategic decisions
• The search for value and firm’s investment decisions
• Value creation and sustainable competitive advantage
• Ownership, management and the search for value
• Pricing policy and objectives
• Public and private goods
• Dealing with externalities

3.4. Economic techniques to assist management decisions

• This module provides training in economic techniques that may be applied to assist management decision making.
• Cost-benefit analysis, identifying and measuring costs and benefits, time-value of money, externalities, transfer and shadow prices.
• Cost-effectiveness analysis

3.5 Promoting Corporate Environmental and Social Responsibility

• Introduction to Corporate Environmental and Social Responsibility
• The clean tech and green business revolution
• Measuring carbon footprint of business enterprises
• Waste and energy reduction measures
• Pollution taxes and incentives for green business
• Carbon trading systems

3.6       Business, Government and Economic Policy

• This module provides an overview of economic policy and its impact on enterprise development
• The firm and the macroeconomic environment
• Measuring Gross Domestic Product (GDP)
• Economic policy instruments for managing the economy
• The business cycle
• Fiscal policy and the government budget
• Monetary Policy, the Central Bank, government regulation
• Economic growth strategies, employment and inflation
• Overview of government microeconomic policy – labour market policy, programmes to promote employment, skills training and technology policy, women in the labour market

3.7      Role of the International Organisations and Aid Donors

• World Bank
• Asian Development Bank
• International Monetary Fund
• UNDP,ILO,UNESCAP
• Aid Donors
• G20 

Text Book

Allan Layton, Tim Robinson and Irvin Tucker, Economics for Today, fourth edition, Thomson, 2012
(The book can be purchased from the USP Book Centre)

Professor James McMaster, 2012