MA127-4-FY-CO:
Economics for Actuaries

The details
2023/24
Mathematics, Statistics and Actuarial Science (School of)
Colchester Campus
Full Year
Undergraduate: Level 4
Current
Thursday 05 October 2023
Friday 28 June 2024
30
03 January 2024

 

Requisites for this module
(none)
(none)
(none)
(none)

 

(none)

Key module for

BSC N233 Actuarial Science (Including Placement Year),
BSC N323 Actuarial Science,
BSC N323DF Actuarial Science,
BSC N324 Actuarial Science (Including Year Abroad),
BSC N325 Actuarial Science (Including Foundation Year),
MSCIN399 Actuarial Science and Data Science

Module description

This module introduces students to the core economic principles and how these can be used in a business environment to help decision making and behaviour.


In the first half of the module, it provides the fundamental concepts of microeconomics that explain how economic agents make decisions and how these decisions interact. In the second half, the module explores the principles underlying macroeconomics that explain how the economic system works, where it fails and how decisions taken by economic agents affect the economic system.

Module aims

The aims of this module are:



  • To show a systematic knowledge and critical awareness of economic theory in the areas of syllabus covered by the subject.

  • To apply a range of techniques to solve problems in the areas of syllabus covered by the subject.

  • To understand the relevance of economic theory to the business environment and the links between economic theory and its application in business.

  • To appreciate recent developments and methodologies in economics.

  • To apply basic microeconomic theory to business problems.

Module learning outcomes

By the end of the module, students will be expected to:



  1. Understand the core economic concepts

  2. Apply elementary economic principles to the analysis of problems in both microeconomics and macroeconomics

  3. Understand how decisions are made by individuals, firms and governments

  4. Demonstrate the knowledge of markets with perfect competition, imperfect competition and monopoly

  5. Evaluate the appropriateness of various types of government intervention

  6. Demonstrate the knowledge of globalisation and understand the importance of international trade

  7. Describe and evaluate the macroeconomic environment

  8. Describe various types of macroeconomic policy and evaluate their appropriateness

  9. Understand the recent macroeconomic history

Module information

Indicative syllabus:


This module covers 100% of required material in the Business Economics (CB2) syllabus accredited by the Institute and Faculty of Actuaries (IFoA ).


Discuss the relevance of economics to the world of business.
Describe what is meant by opportunity cost and scarcity and their relevance to economic choice.
Discuss the core economic concepts involved in choices made by businesses relevant to selection of outputs, inputs, technology, location and competition.
Contrast microeconomics and macroeconomics.


Discuss the workings of competitive markets:
Discuss how the markets operate.
Describe the factors which influence the market demand and supply.
Describe and discuss how market equilibrium quantity and price are achieved.
Discuss how markets react to changes in demand and supply.
Define and calculate price and income elasticities of demand and price elasticity of supply.
Discuss the factors that affect elasticity.
Explain the effect of elasticity on the workings of markets in the short and long run.
Discuss how firms deal with risk and uncertainty about future market movements.
Describe price expectations and speculation and how price bubbles develop.


Discuss consumer demand and behaviour:
Describe the concept of utility and representation of consumer preferences as indifference curves.
Discuss rational choice and how optimal consumption choice is determined by using indifference curves and budget lines.
Discuss the concepts of rational choice, perfect information and irrational behaviour in behavioural economics.


Discuss the importance of advertising for a firm:
Explain the effects of advertising on sales and demand.


Discuss the production function, costs of production, revenue and profit in order to understand a firm's price and output decisions:
Explain how the production function reflects the relationship between inputs and outputs.
Define average and marginal physical product.
Describe the meaning and measurement of costs and explain how these vary with output in the short and long run.
Define total, average and marginal costs.
Describe what is meant by "economies of scale" and explain the reasons for such economies and how a business can achieve efficiency in selecting the level of its inputs.
Describe revenue and profit and explain how both are influenced by market conditions.
Define and calculate average and marginal revenue.
Describe how profit is measured and explain how the firm arrives at its profit maximising output.
Explain what is meant by the "shut-down" point in the short and long run.


Discuss profit maximisation under perfect competition and monopoly:
Explain what determines the market power of a firm.
Describe the main features of a market characterised by perfect competition.
Explain how output and price are determined in such markets in the short and long run.
Describe how monopolies emerge, how a monopolist selects its profit maximising price and output and how much profit a monopolist makes.
Describe the barriers to entry in an industry and a contestable market and explain how these affect a monopolist's profit.


Discuss profit maximisation under imperfect competition:
Describe the behaviour of firms under monopolistic competition and explain why in this type of market only normal profits are made in the long run.
Describe the main features of an oligopoly and explain how firms behave in an oligopoly.
Discuss if firms in an oligopoly act in consumers' interest.
Discuss if firms in an oligopoly act in consumers' interest.


Assess various pricing strategies that firms can adopt.
Describe how prices are determined in practice and factors that affect the ability of a firm to determine its prices.
Describe average cost pricing and price discrimination.
Discuss pricing strategy for multiple products and explain how pricing varies with the stage in the life of a product.


Discuss the reasons for government intervention in the market.
Explain and discuss the extent to which businesses meet the interests of consumers and society in general.
Explain in what sense perfect markets are "socially efficient" and why most markets fail to achieve social efficiency.
Explain why externalities can lead to inefficient markets.
Describe the ways in which governments intervene in markets in order to influence business behaviour and explain the drawbacks of such intervention.
Explain and discuss whether taxation or regulation could be more useful in correcting markets' shortcomings.


Discuss the relationship between the government and the individual firm.
Describe the main targets of "competition policy" and explain the extent to which it is effective.
Explain why a free market fails to achieve the optimal amount of research and development.
Describe the various forms of intervention that the government can undertake in order to encourage technological advance and innovation.


Discuss globalisation and multinational business.
Describe what is meant by globalisation and its impact on business.
Explain what is driving the process of globalisation and whether the world benefits from globalisation of business.


Discuss the importance of international trade.
Describe the growth of international trade and its benefits to countries and firms.
Explain the advantages of specialisation.
Discuss the arguments for trade restriction and protection of domestic industries.
Explain the role of the World Trade Organisation (WTO) in international trade.


Discuss the macroeconomic environment of the business.
Describe the main macroeconomic variables that governments seek to control.
Explain what determines the level of economic activity and hence the overall business climate.
Describe the effect on business output if a stimulus is given to the economy.
Contrast actual and potential growth.
Describe the factors that determine economic growth and explain the reasons for differences in different nations' growth rates.
Discuss the relationship between economic growth and environmental sustainability.
Describe why economies experience periods of boom followed by periods of recession and explain factors which influence the length and magnitude of the phases of a business cycle.
Describe the causes and costs of unemployment and how unemployment relates to the level of business activity.
Discuss the determination of the price level in the economy by the interaction between aggregate supply and aggregate demand in a simple AS-AD model.
Describe the causes and costs of inflation and how inflation relates to the level of business activity.
Explain what is meant by GDP and describe how it is measured.
Discuss the representation of the economy as a simple model of the circular flow of income.


Discuss what is meant by the balance of payments and how exchange rates are determined.
Describe what is meant by "the balance of payments" and how trade and financial movements affect it.
Explain how exchange rates are determined and how changes in exchange rates affect business.
Explain the relationship between the balance of payments and the exchange rates.
Discuss the advantages and disadvantages of fixed and floating exchange rates.
Explain how governments and/or central banks seek to influence the exchange rates.
Describe the implications of such actions for other macroeconomic policies and for business.
Describe the purpose and examine the effectiveness of monetary union and single currencies, with reference to the European Economic and Monetary Union, the Exchange Rate Mechanism and the creation of a single currency.


Discuss the role of money and interest rates in the economy.
Describe the function of money.
Describe what determines the amount of money in the economy, what causes it to grow and what is the role of banks in this process.
Discuss the concept of the money multiplier in the real world.
Describe how interest rates are determined.
Explain the relationship between money and interest rates.
Explain why central banks play a crucial role in the functioning of economies.
Describe how a change in the money supply and/or interest rates affects the level of business activity.


Discuss the role, structure and stability of the financial system.
Describe the different financial systems.
Evaluate how effectively different financial systems operate, with reference to the UK and China.
Describe the role of the financial markets and how financial markets help to achieve a nation's objectives.
Describe the different participants in the financial markets.
Discuss the development of financial systems and the factors affecting the stability of financial systems.


Discuss what determines the level of business activity and how it affects unemployment and inflation.
Discuss how the equilibrium level of income is determined within a simple aggregate demand-expenditure model.
Describe the concept of the multiplier and calculate its value.
Describe the effect of a rise in money supply on output and prices.
Describe the relationship between unemployment and inflation and whether the relationship is stable.
Discuss how business and consumer expectations affect the relationship between unemployment and inflation and explain how such expectations are formed.
Describe how a policy of targeting inflation affects the relationship between unemployment and inflation.
Describe what determines the course of a business cycle and its turning points.
Discuss whether the business cycle is caused by changes in aggregate demand, or changes in aggregate supply (or both).


Assess how macroeconomic policies impact on businesses.
Describe the types of macroeconomic policy that are likely to impact on business and explain the way in which this impact takes effect.
Describe the impact of fiscal policy on the economy and business, and factors that Determine its effectiveness in smoothing out economic fluctuations.
Describe the fiscal rules adopted by the government and discuss if following these rules is a good idea.
Explain how monetary policy works in the UK and the Eurozone and describe the roles of the Bank of England and the European Central Bank.
Explain how targeting inflation influences interest rates and hence the economic activity.
Discuss the merits of following a simple inflation target as a rule for determining interest rates, and suggest an alternative rule.


Assess how supply side policies impact on businesses.
Describe the effect of supply side policies on business and the economy.
Describe the types of supply side policies that can be pursued and discuss their effectiveness.
Explain the impact on business of a policy of tax cuts.
Describe the major types of policy open to governments to encourage increased competition.


Assess the main strands of economic thinking.
Classical
Marxian socialism
neo-classical, Keynesian, neo-Keynesian and post-Keynesian
Monetarist
Austrian


Analyse the recent macroeconomic history.
Describe the progress of the world economy since the Great Depression.
Discuss the banking crisis of 2008, the Great Recession and recovery.
Describe the effectiveness of the monetary policy in the 2008 financial crisis and the governments' actions to combat recession.
Discuss the aftershocks in Europe following the 2008 financial crisis.
Assess the stimulus-austerity debate and regulatory action after the 2008 crisis.

Learning and teaching methods

Teaching in the School will be delivered using a range of face to face lectures, classes, and lab sessions as appropriate for each module. Modules may also include online only sessions where it is advantageous, for example for pedagogical reasons, to do so.

Bibliography

The above list is indicative of the essential reading for the course.
The library makes provision for all reading list items, with digital provision where possible, and these resources are shared between students.
Further reading can be obtained from this module's reading list.

Assessment items, weightings and deadlines

Coursework / exam Description Deadline Coursework weighting
Coursework   Assignment 1 (Autumn term)  12/12/2023   
Coursework   Assignment 2 (Spring term)  19/03/2024   
Exam  Main exam: In-Person, Open Book (Restricted), 180 minutes during Summer (Main Period) 
Exam  Reassessment Main exam: In-Person, Open Book (Restricted), 180 minutes during September (Reassessment Period) 

Exam format definitions

  • Remote, open book: Your exam will take place remotely via an online learning platform. You may refer to any physical or electronic materials during the exam.
  • In-person, open book: Your exam will take place on campus under invigilation. You may refer to any physical materials such as paper study notes or a textbook during the exam. Electronic devices may not be used in the exam.
  • In-person, open book (restricted): The exam will take place on campus under invigilation. You may refer only to specific physical materials such as a named textbook during the exam. Permitted materials will be specified by your department. Electronic devices may not be used in the exam.
  • In-person, closed book: The exam will take place on campus under invigilation. You may not refer to any physical materials or electronic devices during the exam. There may be times when a paper dictionary, for example, may be permitted in an otherwise closed book exam. Any exceptions will be specified by your department.

Your department will provide further guidance before your exams.

Overall assessment

Coursework Exam
20% 80%

Reassessment

Coursework Exam
20% 80%
Module supervisor and teaching staff
Dr Junlei Hu
j.hu@essex.ac.uk

 

Availability
Yes
No
Yes

External examiner

No external examiner information available for this module.
Resources
Available via Moodle
Of 51 hours, 51 (100%) hours available to students:
0 hours not recorded due to service coverage or fault;
0 hours not recorded due to opt-out by lecturer(s), module, or event type.

 

Further information

Disclaimer: The University makes every effort to ensure that this information on its Module Directory is accurate and up-to-date. Exceptionally it can be necessary to make changes, for example to programmes, modules, facilities or fees. Examples of such reasons might include a change of law or regulatory requirements, industrial action, lack of demand, departure of key personnel, change in government policy, or withdrawal/reduction of funding. Changes to modules may for example consist of variations to the content and method of delivery or assessment of modules and other services, to discontinue modules and other services and to merge or combine modules. The University will endeavour to keep such changes to a minimum, and will also keep students informed appropriately by updating our programme specifications and module directory.

The full Procedures, Rules and Regulations of the University governing how it operates are set out in the Charter, Statutes and Ordinances and in the University Regulations, Policy and Procedures.