Economics 2

Introduction

Economics II provides you with concepts and models to understand both global and national challenges and opportunities that industries and society as a whole face. The course covers topics such as trade, markets, and price formation, various types of market failure, and instruments to correct them. Additionally, it explores how strategic behavior can be modeled within a simple game theoretical framework. You will also learn how the Norwegian economy is influenced by international conditions, as well as the background for economic policies implemented by the Government and Norges Bank. In this context, models explaining phenomena like economic fluctuations, unemployment, and inflation are discussed, along with how economic policy can be used to influence economic development.

Course content

• Trade. Absolute and comparative advantage.
• Game theory. Strategic behavior. Simultaneous moves. Sequential moves (dynamic games).
• Consumer surplus, producer surplus, societal economic surplus. Pareto optimality. Distribution and equality.
• Price regulations. Taxes and subsidies.
• Market failure: Monopoly and price discrimination.
• Market failure: Externalities. Correction of externalities. Coase's theorem.
• Market failure: Public goods.
• International trade and trade policy. Partial market theory and trade. Import regulations: Tariffs and quotas.
• Labor market.
• Money and credit.
• Business cycles, inflation, and fiscal policy.
• Inflation and the Phillips curve.
• Business cycle theory: Monetary policy. The multiplier model for an open economy and the AS-AD model.