176. MBA Economics - Exam prep

EXAM PREPARATION:

The following should be regarded as key areas for a student in Economics:

The Production Possibility Frontier is a useful tool to explain “opportunity cost”, efficiency (productive and allocative) and can be used to demonstrate economic growth through technological innovation and the benefits of trade.

Then measuring the Economy – Understanding the circular flow (Goods/services and factors)

and  Gross Domestic Product (GDP) as a key component in measuring the flow of income and spending goes without saying.

This too will have a bearing on the Economic policies (Fiscal, Monetary and regulatory policies) that can be used to ensure the achievement of all macro-economic objectives.

Unemployment is regarded as a key Macro-economic objective and should therefore be regarded as important – the micro-economic argument for the cause of unemployment in the case of Government intervention in the market through minimum wages (price floors) is crucial.

As a backdrop to this – the various types of unemployment should be known and policies to reduce unemployment.

It is also useful to be able to relate unemployment to the AS/AD Model.

Specifically with regards to Micro-economics it is important that the student understands how the price mechanism works in the market (supply and demand and the market clearing price – the equilibrium)

This includes price elasticity, the equilibrium position of a firm under perfect market conditions as well as under monopolistic and to a lesser degree the other two conditions (oligopoly and monopolistic competition). The conditions for perfect markets should be known.

Then the issues surrounding Economic growth (in particular those factors that affects shifts in the position of the aggregate demand curve (point b on page 89 of the MBA study guide). The meaning of “sustainable economic growth”  (the “advantages and disadvantages” of economic growth) as well as the economic growth v economic development argument.

Other important areas are International trade, exchange rates and  barriers to trade (p 112) – protectionist pressures and the negative effects thereof. As part of this the concepts of Absolute and Comparative advantage should be understood. The concept of globalisation  should be undertood.

A basic understanding of economic systems (Free Markets, Socialist and economies).

AS/AD and how it relates to Inflation, production, income/expenditure (45-degree graph and the consumption function) and employment as well as a detailed knowledge of the concepts, the effects and how these may be affected by Monetary, Fiscal and Regulatory policies. Also how these relate to the Economic growth of a country.

The learner should also be aware of the effect of policies as they relate Nationalisation and  Privatisation.