Economics Access Course Sylvain Barde Spring term 2008-2009

Course Outline Part 1: Overview Week Week Week Week

1: 2: 3: 4:

Introduction The use of models in science Functions, variables and models Reading and drawing data graphs

Part 2: Algebra in economics Week Week Week Week

5: 6: 7: 8:

Functions, equations and algebra Solving an equation with one unknown Systems of two equations (and more): supply and demand Linking graphs and systems of equations

Part 3: Calculus in economics Week Week Week Week Week Week

9: Maximum and minimum in economic models 10: Functions and their derivatives 11: Partial derivatives, total derivatives 12: Finding a free maximum (graphically and algebraically) 13: Finding a constrained maximum (graphically and algebraically) 14: Application to economics: examples

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Week 1 - Introduction Learning outcomes: - Introductions - Seminar structure and assessment - Why economics contain so much maths Seminar material: No seminar material for this week.

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Week 2 - The use of models in Science Learning outcomes: -

The scientific approach How a model works Choosing valid simplifications Building a simple model

Seminar material: You are asked by the Ministry of the Interior to identify a cost-effective way of reducing the number of deaths on the road due to car accidents. Based on the methods used in the lecture, you are to build a model that identifies the causes of car accidents. Use the kind of structure presented below. Throughout the process, try and provide sources from the internet as justifications of your choice of variables. Variable name of var. 1 name of var. 2 etc...

Direction of effect increases accidents decreases accidents -

Size of the effect important minor -

Can it be affected by policy? N Y -

1. List all the variables that can explain why people have car accidents. For all of these, provide an indication of the direction of the link (does it increase or decrease the number of accidents?) 2. Give a ranking of the importance of the various variables you have chosen: which are the more important variables, and which are of lesser importance? 3. Which of the variables can be affected by public policy, and which cannot? 4. Based on your two previous answers, try and simplify your model down to the main variables that explain car accidents and on which one can intervene. In other words which are the main variables that the Ministry of the Interior should target in its attempt to reduce the number of deaths on the road?

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Week 3 - Functions, variables and models Learning outcomes: - Defining functions - Defining variables - Functions and variables in models Seminar material: Economists use certain specific variables when analysing/modeling the economy. Some examples of such economic variables are the unemployment rate, the rate of inflation, the rate of growth of the economy, the interest rate, the level of income inequality. Using sources from the internet or economic textbooks, do the following of all of the variables listed above: 1. Give the theoretical definition of the variable. In other words what is this variable used for in economics? 2. Find out how the variable is defined and measured in practice. When several practical definitions / measures exist, point them out 3. Find out how often the variables are measured, and give the current value of the variable for the USA and France. 4. In the case where there are several possible definitions or several possible measures of the variable, what does this tell you about the difficulty of assessing the state of an economy?

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Week 4 - Reading and drawing data graphs Learning outcomes: - Understanding graphs - Graphing data in a dataset - Interpreting graphed data Seminar material: Based on last week’s exercise, below is a tables containing data for the United States about the size of GDP (economic output), the level of unemployment, and the consumer price index. Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

US GDP Bill. $ 6690 6926 7055 7041 7276 7472 7776 7973 8271 8648 9013 9417 9765 9839 9998 10250 10624 10937 11241 11468

US Unemployment Thousands 6701 6528 7047 8628 9613 8940 7996 7404 7236 6739 6210 5880 5692 6801 8378 8774 8149 7591 7001 7078

US CPI 68,67 71,99 75,88 79,09 81,48 83,89 86,08 88,49 91,09 93,22 94,66 96,73 100,00 102,83 104,46 106,83 109,69 113,41 117,07 120,41

1. For each of these three variables, draw the diagram showing the evolution of the data through time (Be careful how you choose your units when you draw the diagram) 2. In a new table similar to the one provided above, calculate the growth rate of these three variables. Use the formula provided below for the growth rate xt of a variable in levels Xt (this implies the growth rate cannot be calculated for the 1st year): Xt − Xt−1 × 100 Xt−1 3. In a new diagram, draw the graphs for all three growth rates (growth rate of output, prices and unemployment). Why is it possible to draw all three on the same diagram, while that was not possible in q.1? 4. Using both the first set of diagrams and the growth rate diagram, try and identify the year for which the US economy performed the worst. xt =

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Week 5 - Functions, equations and algebra Learning outcomes: -

Understanding arithmetic rules Understanding arithmetic notation The four basic operations Calculating basic results

Seminar material: Based on the examples examined during the seminar, work out the solutions to the following calculations. Make sure you detail the steps taken. 4(6 + 8 − 15) 50 − 4(4 + 5) 2(6 + 8 − 7) − 3(6 − 8) 3(2(4 + 8 − 3) + 5(7 − 3)) −3(2(2 − 7 − 3) − 6(4 − 2)) − 5(3(2 + 8) + 4(18 − 9 + 3)) 10 − 6 − 2(3 + 2) −6 + 4 + 8 4(11 − 6) + 2(4 − 2) 4(2 − 5) + 3(8 − 6) 7 8 − 3 + 2 7 − 12 4× 3×

9×4 6+7−3 −3× 15 − 9 12 − 7

7(16 − 12) 4(17 − 11) −2× 2(4 + 3) 6(7 − 5)

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