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ECO501 - Business Economics

Session 3 2010
Faculty of Business
School of Business
Albury-Wodonga Campus
Distance Mode
Subject Coordinator Rowan O'Hagan

Subject Overview
Welcome to a new session of study at Charles Sturt University.
This subject introduces economic principles essential to a business person's
understanding of the fundamental economic problems of the firm and to the society in
which that firm operates.

Your subject coordinator

Rowan O'Hagan

Academic biography
Dr Rowan OHagan has a background in agricultural science and a doctorate in regional
economics. She has previous experience teaching economics, finance and accounting at
the University of Melbourne and La Trobe University.
Dr OHagans research interests include regional economics, regional labour markets
and women in agriculture. Her most recent research has focused on the socio-economic
impact of drought and water policy on rural communities. She has published widely on
these subjects and presented her research at national and international conferences. In
addition, she has twenty years experience in small business, primary production and
community development in rural Australia and is a graduate of the Australian Institute of
Company Directors.

Learning objectives
- be able to discuss the basic theoretical principles (concepts) concerned with the
economic decision making of producers and consumers and their interaction in the
market place;
- be able to discuss the theoretical basis of government economic policies as they relate
to Australia's macroeconomic problems of inflation, unemployment, budget and current
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account deficits and external debt;

- be able to apply economic theory to practical business problems that any business
manager or accountant is likely to face, eg incremental cost analysis, pricing decisions,
the impact of government economic policy change on business profitability, etc.
- be able to discuss the nature of international business environment and globalisation;
- be able to explain issues relating to sustainable development in Australia.

Contact Procedures

Academic enquiries
Any questions concerning the teaching of this subject can be made by contacting your
subject coordinator.
Subject Coordinator Rowan O'Hagan
Phone To be advised.
Fax To be advised.
Campus Albury
Building/Room number 764/206

Consultation procedures
The subject coordinator will be available for student consultation. You will normally be
informed of the details of such consultation via your subject site or other method.

Minimum standards of consultation

According to the Minimum Standards for Communication with Students Policy (http://, students can expect that the subject
coordinator or nominee of the distance education forums will respond to their postings at
least once a week during the teaching weeks of the session.

Contact procedures
Messages for Rowan may be left at the School Office by phone on (02) 6051 9866
To avoid your email being jettisoned with SPAM, it would help if you placed the subject
code and your name in the email title.
The best method for non-personal enquiries is contact via the online forum.

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Subject Delivery

Learning, teaching and support strategies





Read through your Study Guide quickly at first to see what you are expected to
Then, read the Specific Learning Objectives for the topic (they won't make much
sense until you have first read the Study Guide) and re-read the Study Guide
Next, read the relevant parts of your prescribed texts (some parts of your text are
not relevant to the Subject Outline and/or to the scope of work that is covered in
your Study Guide).
Read the relevant articles from your Readings and the relevant parts of any
supplementary text you have. This should broaden your understanding of the topic.
Re-read your Study Guide, integrating them with your text, and keeping in mind the
learning objectives you have been given.
Do not leave your assignments to the last minute. As soon as you have covered the
topic relevant to a part of your assignment make notes and do a trial run (draft) of
your answer.
There is no denying that there is a lot of work to be done but keep things in
perspective. If you 'chip away' at work and don't let yourself fall too far behind at
any stage, it will be achievable. Contact the subject coordinator by ringing the
school secretary and leaving a message (phone (02) 6051 9866) if you have
difficulty or cannot make contact by email.

Subject Content
This is a very intensive introductory study in Economics and effectively covers the
material of at least two undergraduate subjects. As such, you will be expected to work
very hard indeed. You have 12 topics to cover in the 9 weeks, with a three week break
over Christmas/New Year. Some topics require more work and reading than others. To
cover the subject, we are getting down to serious work early before the end of year rush.
Don't be discouraged by the first couple of weeks or the unfamiliarity of the economic
jargon - immerse yourself and enjoy.
List of topics
Topic 1 The nature and method of economics
Topic 2 The essentials of market theory (microeconomics)
Topic 3 Economics of the consumer
Topic 4 Economics of the producer/firm
Topic 5 Cost concepts for decision making
Topic 6 Market structures 1: Perfect competition
Topic 7 Market structures 2: Imperfect competition
Topic 8 The essentials of macroeconomics

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Topic 9 Demand side equilibrium and the Keynesian model

Topic 10 Fiscal policy
Topic 11 Money, monetary policy and monetarism
Topic 12 Contemporary macroeconomic issues (exchange rates, current account deficits
and the foreign debt)

Session Week

Week commencing Topic

15 November


The nature and

method of
economics & The
essentials of market

Important dates

22 November

Economics of the

29 November

Economics of the

6 December

Cost concepts for

decision making

13 December


Market structures
Assessment item 1
1: Perfect market
due 17 December
Market structures
2: Imperfect market

Break Weeks 6-8


10 January


The essentials of
macroeconomics &
Demand side
equilibrium and the
Keynesian model


17 January


Fiscal policy


24 January


Money, monetary
policy and


31 January



Assessment item 2
due 4 February

Examination period - No examination scheduled for this subject

The essential reading for each topic is listed at the beginning of that topic in your Study
Guide and/or throughout the text. You might like to reproduce the above guide and add
in beside each topic all of the essential and suggested readings, taking into account the
changes in 6th edition of the text.

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Residential school
There is no residential school for this subject.

Text and Learning Materials

Prescribed text(s)
McTaggart, D., Findlay, C., & Parkin, M. (2007). Economics (6th ed.). Sydney [MFP]:
Pearson Education.

The CSU Study Guide is based on the 5th edition of the prescribed text as it was
prepared and printed prior to the University being notified of the new edition of the text.
The required reading from the 6th edition of the text for each topic or part of the topic
will be supplied via Interact subject resources. The whole of Chapters 1-4 should be read
to begin with. It is a great textbook and easy to follow.

Required reading / resources

Accompanying your Study Guide is a book of Readings. These Readings are either
journal articles or short articles from other publications or chapters from other relevant
texts. These Readings represent a most important part of your work. They often provide
you with up-to-date material that is not yet available in the textbooks. In fact, much of
the literature on recent changes to monetary policy in Australia and on Australia's
balance of payments and external debt problem is yet to be incorporated into the standard
texts. In addition, Topic 13 is not covered in this session but the information and
readings are available for your interest. Voice over PowerPoint resources will also be
available on selected topics. Watch the Interact resources site and the subject forum for
more information.
You should also search out and collect regular publications from the main banks,
newspaper articles by leading economics writers (Gittins, Wood, Burrell, Colebatch,
Davidson, Stutchbury, etc.), main supplements in the Financial Review and any other
reliable sources of economic data, analysis and opinions that you can find. The very
topical nature of economics makes it an extremely interesting discipline that is
constantly brought alive in the press and on the news.
This subject aims to make you one of the informed discussants on economics issues, give
you an ability to sift out the erroneous and ill-considered opinion and to think
systematically through an issue on the basis of a logical theoretical framework. It is an

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exciting prospect and I hope you make the best of it.

Recommended reading / resources

Baye, M.R. (2005). Managerial economics and business strategy (5th ed.). Sydney:
McGraw Hill.
Brooks, R., & Fausten, D. (1998). Macroeconomics in the open economy. Melbourne:
Addison Wesley.
Chamberlin, G., & Yueh, L. (2006). Macroeconomics. UK: Thomson Learning.
Crompton, et al. (2007). Macroeconomics. Melbourne: Thomson, Nelson, Australia Pty
Dornbusch, R., & Fischer, S. (2001). Macroeconomics (8th ed.). NY: McGraw Hill.
Douglas, E.J. (1992). Managerial economics: Analysis and strategy (4th ed.). Sydney:
Prentice Hall.
Feast V., & Adams, K. (2001). Real world economics (2nd issue). Sydney: Irwin/
McGraw Hill.
Ferrario, G.P. (2005). The cultural dimensions of international business (5th ed.) USA:
Pearson-Prentice Hall.
Gans, J. (2006). Core economics for managers (1st ed.). Melbourne, Australia: Thomson.
Gordon, R. J. (2006). Macroeconomics (10th ed.). Pearson International.
Guell, R. C. (2003). Issues in economics today. Sydney: McGraw Hill.
Hansen, J., & Owens, D. (2000). Microeconomics: The answers. Sydney: McGraw Hill.
Harris, N. (2001). Business economics: Theory and applications. UK: Butterworth
Jackson, J., & Mc Iver, R. (2007). Microeconomics (8th ed.). Sydney: McGraw Hill.
Keinst, P., & Burgess, J. (Eds) (2000). Introduction to microeconomics. Australia:
Littleboy, B., & Taylor, J. (2006). Macroeconomics (3rd ed.). Melbourne, Australia:
Mankiw, N.G. (2003). Macroenonomics (5th ed.). NY: Worth.
Miller, R.J., & Vanhoose, D. (2004). Macroeconomics (3rd ed.). Melbourne, Australia:
Sloman, J., & Norris, K. (2002). Economics. (2nd ed.). Sydney: Prentice Hall.
Sloman, J., & Norris K. (2005). Principles of economics (1st ed.). Sydney: Prentice Hall.
Swann, M., & McEachern, W. (2001). Microeconomics: A contemporary introduction.
Melbourne: Thomas Nelson.
Taylor, B.J., & Frost, L. (2006). Microeconomics (3rd ed.). Qld, Australia: John Wiley.
Taylor, B.J., & Moosa, I. (2000). Macroeconomics (1st ed.). Brisbane: Wiley.
Tregarthen, I., & Rittenberg, L. (2000). Economics (2nd ed.). USA: Worth.

Assessment Information

Pass Requirements

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Your assessment in this subject will be based on two assignments worth 100% of the
available marks.

In order to meet terms for this subject, you must submit both assignments, failure to
submit an assignment will result in a failed grade in the subject.
In order to obtain a passing grade in this subject, you must meet the terms and
obtain at least 50% of the aggregate (total) marks for the subject.

The Academic Senate has approved the following definitions and guidelines for the
awarding of grades within subjects taught at Charles Sturt University.

High Distinction (85-100%)

an outstanding level of achievement in relation to the assessment process.
Distinction (75-84%)
a high level of achievement in relation to the assessment process.
Credit (65-74%)
a better than satisfactory level of achievement in relation to the assessment process.
Pass (50-64%)
a satisfactory level of achievement in relation to the assessment process.
Fail (0-49%)
an unsatisfactory level of achievement in relation to the assessment process.

Norm and criterion referencing

It is standard practice for you to be assessed in subjects on the basis of a combination of
norm and criterion referencing, with marks and grades being awarded by referencing to a
combination of predetermined standards and the performance of other students in the
Norm referencing means awarding marks and grades by reference to the performance of
other students in the subject. The relationship between performance and grades is
entirely dependent on the standards of the other members of the student cohort.
Criterion referencing means awarding marks and grades by reference to a set of
predetermined observable performance outcomes and standards. It provides a focus for
learning and teaching and specifies for you and the subject coordinator what is required
from the assessment task. At its extreme this results in pass/fail discrimination only,
based on mastery of competencies. It can also, however, produce graded responses
where the criteria can be evaluated at varying standards of performance.
Note: The notional percentages specified above should be viewed only as guidelines for
the awarding of final grades. It may be necessary for raw score totals to be scaled so that
the distribution of final grades in the subject conforms to University expected norms.

Assessment Requirements
Students will be assessed in subjects on the basis of a combination of norm and criterion
referencing with marks and grades being awarded by a combination of predetermined
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standards and the performance of other students in the subject. Subjects that have a
satisfactory/unsatisfactory grading scale will be clearly spelt out in this Subject Outline.
For further information please consult the Academic Regulations of the Academic

Presentation of an assessment task is an integral component of the task and will be part
of many marking criteria.

To ensure that correct grammar and spelling is used throughout the assessment task.
That any tables/ charts/diagrams or images when used are labelled appropriately
and the source is referenced correctly using the APA or any other accepted
referencing style unless otherwise indicated within the assessment instructions.

All source material must be referenced appropriately and be included in the

bibliography or reference list at the end of the document.

Include a cover sheet where this is required check the Due dates table to clarify if
this is required.

Where appropriate include a summary or abstract of the report or essay.

Ensure that any essay has a title page, and includes an introduction - which sets the
scene, the body - which identifies and supports your stance and a conclusion
which includes your summary and recommendations.
Further information on these and other learning skills is available at:
Expectations and requirements for the presentation of economics assignments
Your essay should meet the following expectations:



Answer the Question set, keep to the topic and include all relevant issues.
Consult as many writings on the topic as you can. Comprehend and synthesise the
ideas expressed and then attempt to present them in your own words. Eventually,
you should be able to analyse and criticise other work and cogently argue your own
point of view. You should always support your arguments and opinions with
extensive referencing.
Show in the content of your essay that you have read the set texts and that you have
consulted a reasonable range of books and journals.
Be clear and concise in your expression paying particular attention to sentence
structure. Put yourself in the reader's position and ask, 'Is the meaning clear'?
With economics essays it is usual and often desirable to use a graphical or an
algebraic presentation of certain key points. Ensure that graphs are clearly labelled
and annotated and referred to in the text of the essay.
Include an introduction in your opening paragraph and a conclusion in the final one.
Pay attention to the rules of writing in relation to paragraphing, punctuation,
spelling, etc.
Use headings for sections of your essay where appropriate (see recent journal

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articles for example).

9. Generally avoid direct quotations except short ones used for a particular effect. It is
better to express the idea in your own words.
10. Acknowledge the sources of both direct quotes, ideas of others, and background
information by the use of footnotes at the bottom of the page on which the quote,
idea or information occurs.
11. Attach a bibliography of the books and journal articles used in the assignment. If
there is sufficient evidence to prove that the essay has been copied from another
student or from a book without proper acknowledgment of the sources (plagiarism),
such an essay will receive a fail grade.
12. Adhere to the word limit. If an assignment 'turns out' much longer than required,
rewrite it concisely. Marks will be deducted from essays exceeding the word limit.
13. For further advice on assignment writing see Anderson et al. (1970). Thesis and
assignment writing. Sydney: Wiley.
14. 'The University does not want to discourage students from collaborating or
cooperating with each other when preparing for assignments, however, the
production of final assignment answers must be the result of a student's
independent, intellectual effort (unless otherwise advised by the subject
Preparation and submission of essays
Essay assignments should be prepared according to these Notes. Although there are
several good methods of preparing essays, one specific method has been chosen. The
rationale behind this decision is that, if adhered to by all students, it forces the marker to
confine marking to content. If any array of essay structure is received, poorly structured
essays distract from content in such essays.
Essay deadlines must be strictly adhered to. Students should expect marks to be lost for
late assignments.
Essays should be approximately the suggested length and should be compact. This
means that final drafts should involve cutting back, rather than padding, an earlier draft.
At least one copy should be made of the final draft copy. Keep this copy of your
assignment in case the original is lost.
Quality essays cannot be written in a 'one draft only' basis. At a minimum, the essay
writer should:

start with a rough outline to topics that will be covered in the paper. Topics should
be arranged in a logical sequence. At this stage the paper will look something like a
'rough' table of contents;
expand each topic into sentences and paragraphs that include all the thoughts the
writer can find or create related to the topic;
pare down this rough draft, eliminating unrequired statements, using annotated
diagrams in lieu of verbose statements, correcting errors in spelling and grammar,
and adding the bibliography; and
in many cases one or more additional redrafts will still be required as new material
is found or thoughts are re-organised.

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Use A4 paper if possible (otherwise foolscap), single sheets (separated along the top and
sides). Blank paper should be used for typed essays, and narrow-lined paper should be
used for handwritten essays. They may be handwritten only if your writing is easily read
by others.
The front cover
The front cover of your assignment should include:

your name and address;

subject, assignment number and topic; and

date posted.
Note: there is no need to present your work in a folder or binder.
The left-hand margin must be at least 3.5cm to allow for marker's comments. Unless
you specifically request otherwise, the marker reserves the right to place ink comments
in the margins.
All assignments (whether typed or handwritten) must be double-spaced to allow for
marker's comments.
All pages (except cover page if there is one) must be numbered. Use only one side of the
paper. Fasten pages securely in the top left-hand corner.
A synopsis (precis) of approximately 200 words should be presented on a separate page
at the beginning of part B of your 2nd Assignment. It should indicate the main thrust and
direction of your argument and the conclusions reached.
Note: the synopsis is excluded from essay word requirements.
A bibliography is compulsory.
The bibliography should appear on a separate page immediately after the actual essay.
The following formats are usual:
Blende, R. (1979). Youth unemployment. Australian Bulletin of Labour, 5, November,
Corden, W.M. (1974). Trade policy and economic welfare. Oxford: Clarendon Press.
Rowse, T. (1981). Culture and democracy: The economists and the performing arts. In J.
Allen et al. (Ed.), Media interventions (pp. 25-42). Sydney: Intervention Publications.
Seaman, B.A. (1981a). Economic theory and the positive economics of art financing.
American Economic Review, 71, May, 35-40.
Seaman, B.A. (1981b). An assessment of recent applications of economic theory to the
arts. Journal of Cultural Economics, 5, November, 36-52.
Notice the elements of the bibliography that are clear to the reader.

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Easy to find the author because of alphabetical order.

'Up-to-date' references are easily noticed because of date of publishing being
3. Title of book or journal is distinct by being in italics (or underlined).
4. Easy to distinguish Australian from English and American references.
5. Publisher is noted.
6. If reference is made to an author who has published more than one work in a single
year, the two are distinguished by using the letters 'a' and 'b' (see Seaman example
For most purposes, 'Bibliography' is synonymous with 'Reference List'. No books or
articles should appear in the bibliography unless they are actually used in preparing the
essay. On the other hand, all books consulted and used in some ways in the essay (not
necessarily quoted) should be acknowledged in the essay and/or included in the
It is optional as to whether to mix books and periodicals (as in the example above) or the
split the bibliography into 'Books' and 'periodicals'.
This is an essential requirement of all essays. Essays without adequate referencing
cannot achieve a high grade.
For further information on referencing styles, visit the library website at http://www.csu.
The main requirement on references is that the reader should not have to turn a page to
find the source of quotations and other references.
Make the reference immediately after the focal sentence or quote. All that is required is
the referred-to author, the year of publication of the work and the page number of the
statement (quote) referred to. If the author has published more than one work in a single
year, see Note 6 and the following examples:

Seaman (1981a) was not the first to question the application of neoclassical theory
to resource allocations within the performing arts.

In another study (Seaman 1981b, p. 37), this point was again taken up and used.
If a direct quotation is made, the page of the quote should also be included:

'Changes in organisational dependencies threaten some coalitions and make new

ones possible' (Thompson 1967, p. 127).
It should be recalled that all works referenced in an essay must be listed in the
bibliography whether books or journals.
Direct quotations should be avoided if possible. It is preferable to rethink and condense
a referred-top passage (see examples above). If long (more than three lines) direct quotes
are used, they should appear in indented form.
'I' or 'The Writer'
Both the use of 'I' (too personal) and 'the writer' (too pompous) are not recommended. It
is much better to make the essay totally impersonal by avoiding both. This means that
careful and, in some cases, considerable thinking must be put into some sentences to
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achieve impersonality.
Abbreviations, non-English phrases and slang
If one can say it in English, one should do so. Latin phrases and other non-English
colloquialisms should be avoided if possible. Abbreviations (unless a translation is made
with the initial use) and slang should be avoided.

It is unfair to honest students that other students cheat or plagiarise. Charles Sturt
University takes a serious view of plagiarism and cheating in any form of assessment,
and will take appropriate steps to detect plagiarism including using electronic plagiarism
Plagiarism consists of a person using the words or ideas of another as if they were his or
her own. That is, using, or attempting to use, another person's work without
acknowledgement. The important message here is that if you use the work of another
person then it must be acknowledged. The phrase "using another person's work"
includes, but is not limited to:

using study guide material without acknowledgement;

paraphrasing the work of another person;

directly copying any part of another person's work;

summarising the work of another person;

using or developing an idea or theme derived from another person's work;

using experimental results obtained from another person's work; and

in the collaborative projects, falsely representing the individual contributions of the

collaborating students where individual contributions are to be identified.

Other forms of cheating will also be treated with the utmost seriousness. The University
reserves the right to electronically scan students' assignments for the purposes of
verifying originality.
Penalties for plagiarism are listed in the Academic Regulations under the Student
Academic Misconduct Rule. The penalties include: a caution or reprimand; awarding of
zero marks in the assignment, essay, project, test, examination or other work in respect
of which academic misconduct has occurred; a fail in the subject; a fine; suspended
enrolment; or exclusion from the University.
The Faculty of Business has acquired computer software which can link electronic or
scanned assignments to online data to accurately detect plagiarism. The software can
also detect situations when students submit assignments which include the work of other
students. The software system used by the Faculty is called "Turnitin". The Faculty
reserves the right to require submission of assignments in electronic form. More details
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of this software can be found at the following web sites:
Please note that we would much prefer to encourage students to submit assignments
which clearly acknowledge sources rather than to detect plagiarism and to impose
penalties. Recent penalties applied to plagiarism have included automatic failure and
suspension from the University.
A guide to the APA style of referencing (the style now used by the Faculty of Business)
is available at:
Further details on how to reference and avoid unintentional plagiarism can be found at
the Student Services website.

Collaboration on any assessment items is not permitted in this subject.

Assignments should reach the University no later than the due date. Assignments,
therefore, need to be posted some time in advance of the due date to arrive on time.
You are requested to do all in your power to meet assignment deadlines. Extensions will
only be given if you face unforeseen and unavoidable problems. Extensions cannot be
given towards the end of session. In this case you need to apply for an incomplete grade
or course withdrawal. Work and family related pressures do not normally constitute
sufficient reasons for the granting of extensions or incomplete grades.
If it becomes obvious that you are not going to be able to submit an assignment on time
because of an unavoidable problem, you must submit your request for an extension in
writing prior to the due date. Extensions will not be granted on or after the due date.
Assignments received more than two weeks after their due dates, without an extension
having been granted, will be returned with no marks awarded. Pro-rata reductions in the
awarded mark (10% per working day) will be made for items received late without a
granted extension. Extensions, for students resident in Australia, can only be granted by
the subject coordinator.
The last date for receipt of assignments at the University is the last day of the teaching
session (prior to the exam period), in circumstances where your lecturer has granted an
approved extension.

Online Submission

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Assessment tasks can be submitted electronically to the CSU Assignment Section via
EASTS (Electronic Assignment Submission Tracking System).
In order to access EASTS, click on the EASTS link in the menu bar on the left hand side.
This will take you to the EASTS site where you are provided with step-by-step
instructions to guide you through the online submission process. EASTS has a help
function that will allow you to print out instructions to assist you in this process if

A message will be sent to the email address, as recorded on the system under 'My
Email', confirming the receipt of your assessment task via EASTS.
A duplicate assignment cover sheet will be attached to the assessment task on
receipt at CSU.
Assessment tasks submitted electronically via EASTS will be returned, after
marking, (in most cases) by post, not electronically.

Postal Submission
It is recommended that your name and your student number be included in the header or
footer of every page of any assignment. Charles Sturt University has a centralised
assignment receipt centre. Unless they are submitted electronically all assignments
should be accompanied by a completed assignment cover sheet and mailed to the
following address:
Assignment Section
Division of Learning and Teaching Services
Charles Sturt University
Locked Bag 600
Building 483, Nathan Cobb Drive
Wagga Wagga NSW 2678
The Assignment Section will record the receipt of your assignment on the computer
system and date stamp it. It will then be forwarded directly to the marker. If you wish to
confirm receipt of your assignment you can do so online through my.csu (http://my.csu.

Hand Delivered Submission

Distance Education Students can lodge their assignments at any campus via the special
assignment post box located outside the Divsion of Learning and Teaching Services on
each campus. These boxes are cleared at 5 pm each week day.
The Assignment Section will record the receipt of your assignment on the computer
system and date stamp it. It will then be forwarded directly to the marker. If you wish to

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confirm receipt of your assignment you can do so online through my.csu (http://my.csu.

Faxed / Emailed Assignments

The Faculty of Business has resolved not to accept faxed or emailed assessment tasks
under any circumstances.

Penalties for Late Submission

Please contact your subject coordinator for details.

Resubmission of assignments will not be permitted.

Assignment Return
You should normally expect your marked assignment to be despatched/returned to you
within three weeks of the due date, if your assignment was submitted on time. If an
assignment is submitted on time but not returned by the return date, you should make
enquiries in the first instance to the subject coordinator. If the subject coordinator is not
available, contact Student Services Support Central on 1300 734 654.

Assessment of assignments is provided as a numerical mark out of the designation value
given to the assignment. Normally feedback will be provided in general comments on the
cover of the assignment while specific comments of feedback will be offered within the
text of the assignment. On occasion, a general feedback sheet on each assignment is
provided to all students.

Sample exam paper

Appendix 1: Sample Assessment Task

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Value: 50%
Covers: Topics 6-12
Short answers questions (50 marks) - all questions are of equ
Answer all questions. Use diagrams wherever applicable. Answer to each question
should not exceed one page in length and may be shorter.






'No firm is completely sheltered from rivals; all firms compete for the dollars of
consumers. Pure monopoly, therefore, does not exist.' Do you agree? Explain your
reasoning and the limits to your arguments. Does this make the study of monopoly
Explain why the effectiveness of an expansionary monetary policy in increasing
aggregate output is partially dependent on the interest sensitivity of the demand for
Identify whether each of the following would lead to an appreciation or depreciation
of the dollar. In each case, explain why the currency either appreciates or
a. Australian citizens switch from buying stock in US companies to buying stock in
Australian companies.
b. The inflation rate in Australian increases relative to the inflation rate in the US.
c. The money supply is increased in Australia.
d. Income in Australia increases.
Explain how the current account of the balance of payments is likely to vary with
the course of the business cycle.
Imagine that you had to determine whether a particular period of inflation was
demand pull, or cost push, or a combination of the two. What information would
you require in order to conduct your analysis?
Critically evaluate the following statement: 'it is socially desirable for households to
attempt to increase their rate of saving whenever a recession begins. In this way
households will be able to accumulate the financial resources to pay their way
through bad time'.
What can we expect to happen to the aggregate demand curve if the foreign
exchange rate increase?
Investment is usually modelled as autonomous and yet is negatively related to the
real interest rate. Explain why these facts are not inconsistent.

Appendix 2: Model answer to sample assessment tasks

1 Students are expected to explain the concepts of monopoly using a diagram.
The first part of the above statement is true. All firms, be they large or small, monopoly
or purely competitive are beholden to consumers 'dollar votes'. If monopolists truly
wanted to they could charge higher prices than they do, but the monopolist avoids this

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solely because it entails a smaller than maximum profit. Total profits are the difference
between total revenue and total costs, and each of these two determinants of profits
depends upon the quantity sold as much as upon the price and unit cost. However, the
remainder of the statement is false. Monopoly, though less pervasive currently than in
the past, is evident in certain industries in Australia. Australia Post, for example, has a
government-prescribed monopoly on small mail items such as letters. In most states
water is still a government-owned monopoly.

2 Discussion on monetary policy. As the money supply is increased, the interest rate
decreases, planned investment increases, and the equilibrium level of output increases.
The effectiveness of expansionary monetary policy in reducing the interest rate will
depend on how much the interest rate is reduced as a result of the increase in the money
supply. If the demand for money is perfectly elastic with respect to the interest rate, a
change in the money supply will have no effect on the interest rate. The more inelastic
the demand for money, the larger the reduction in the interest from a given change in the
money supply. The larger the change in the interest rate, the larger the potential increase
in investment and aggregate output.

3 Definition of depreciation and appreciation

a. This causes the supply of dollars to decrease and the value of the dollar to appreciate.
b. An increase in the inflation rate in Australia relative to the USA causes the demand for
dollars to decrease and the supply of dollars to increase. This leads to a depreciation of
the dollar.
c. An increase in the money supply leads to lower interest rates, which reduces the
demand for dollars and increases the supply of dollars. This leads to a depreciation of the
d. When income in Australia increases, the supply of dollars increases. This leads to a
depreciation of the dollar.
4 Discussion on current account and balance of payment.
During the boom, the current account will tend to deteriorate. There are two reasons. The
first is the direct result of higher incomes. Part of the extra incomes will be spent on
imports. The second is the result of higher inflation. Higher prices of domestic goods and
services relative to foreign ones will lead to both an increase in imports and a decrease in
The opposite effects are likely to occur during a recession. Lower incomes and relative
prices of domestic goods and services will cause a fall in imports and a rise in exports:
the current account will improve.
In both cases we are assuming that other countries are not at the same time experiencing
similar effects. If other countries were the same phase of their business cycle, the above
effects could be neutralized. For example, any falling demand for imports by country A
from country B could be offset by a fall in demand for imports by country B from
country A. Imports and exports of both countries would fall (but not necessarily by the
same amount).

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5 Discussion on basic concept of inflation

In practice, it is very difficult since most periods of inflation have a number of different
but inter-connected causes. Nevertheless, if there are clear independent rises in demand
(say, for example, the government decides to cut income tax and increase benefits just
before election) then it would be fair to categorise any resulting inflation as 'demand
pull'. Likewise if there are clear independent rises in costs or reductions in aggregate
supply (say, for example, a major oil price increase or a natural disaster) then it would be
fair to categorise any resulting inflation as 'cost push'. Of course, in both types of case it
would be necessary to have clear evidence that subsequent inflation was indeed caused
by these events and not by other factors.
The problem is that in most cases cost-push and demand-pull factors interact. A rise in
consumer demand (a seemingly demand-pull factor) might have been the result, at least
in part, of pay increases secrured by trade unions. Those pay rises (a seemingly cost-push
factor) might, in turn, have been demanded because unions saw their position being
strengthened by the fall in unemployment, itself caused by higher demand. That rise in
demand might have been caused, in part, by previous pay increases, and so on.
6 What is socially desirable for the individual is not necessarily desirable for the group
as a whole, therefore the above quotation is wrong and is an example of the paradox of
thrift. While it may be desirable for one individual household to attempt to increase
savings in such a situation, if all households attempt this course of action the recession
will dramatically worsen. Savings represent a leakage from the circular flow of income.
Thus, as savings increase, consumption will fall, aggregate demand and production will
fall, unemployment will increase and the recession will deepen.

7 Definition of aggregate demand and foreign exchange.

The foreign exchange rate affects aggregate demand because it affects the prices
foreigners have to pay for Australian-produced goods and services and the prices we
have to pay for foreign-produced goods and services. All other things being equal, a rise
in the foreign exchange rate will decrease aggregate demand because foreigners and
Australians will buy relatively less Australian-produced goods and services and
relatively more foreign-produced goods and services.

8 Definition of investment, interest rate and GDP.

The main influences on investment decisions are real interest rates, profit expectations,
and the stock of existing capital. Real GDP is not a significant influence. This means that
investment is independent of real GDP and therefore is an autonomous expenditure.

Assessment Items
Item number



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Due date*

Return date**

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item 1
item 2









* due date is the last date for assessment items to be received at the University
** applies only to assessment items submitted by the due date

Assessment item 1

Assessment item 1
Value: 50%
Due date: 17-Dec-2010
Return date: 07-Jan-2011
Length: One page for each answer
Submission method options
EASTS (online)
Task: All eight questions are to be attempted and are of equal worth. Topics covered: 1-7
Use diagrams where applicable.
Please limit answers to the equivalent of one page double spaced text.
Diagrams are additional to the word limit.






What gives a person, a business or a country a comparative advantage? How does

dynamic comparative advantage arise?
Distinguish between explicit and implicit costs, giving examples of each. What are
the explicit and implicit costs of going to university? Why does the economist
classify normal profits as a cost? Are economic profits a cost of production?
Why does a single-monopoly produce a smaller output and charge a higher price
than what would prevail if the industry were perfectly competitive and why is this
inefficient? Explain with the use of a diagram.
How does the law of total and marginal utility relate to your postgraduate study? If
so how and what are some of the gains you expect? Is there a diminishing marginal
utility between the number of hours studied and the results you achieve?
You plan to go sailing this weekend. If you do, you will have to miss your usual
weekend job which pays $100 and you wont be able to study for 8 hours. Your
boat hire will cost $350, transport to the bay $80 and food $50. What is the
opportunity cost of your sailing trip?
Explain clearly the relationship between the marginal cost curve of the perfectly
competitive firm and the industry supply curve.
What is the effect on the price of a DVD and the quantity of DVDs sold if:
a. the price of a DVD player rises?
b. the supply of DVDs increases?
c. consumers incomes increase?
d. the wage rate of workers who produce DVDs increases?
You are the managing director of Best Juices Australia and you are wondering
whether or not to cut the price of your signature product, Orange Juice drink to

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increase your total revenue from Orange Juice drink sales. Explain how knowledge
of the elasticity of demand for Orange Juice drink can help you decide whether or
not to cut your price, using a diagram where appropriate
This assessment item is designed to:

assist you to develop your learning through discussion of the principles covered in
Topics 1-7 of the subject;
allow you to demonstrate your understanding and knowledge of the subject; and
develop your ability to communicate well in writing.

Marking criteria
Marks will be gained for:

the clarity and comprehensiveness with which you answered the question;
the inclusion of essential information in your answer;
your demonstration, in your answer, that you have understood the concepts and/or
terms of the question;
adherence to the page limit;
proper acknowledgement of books or articles which have contributed to the
assignment. The University takes a serious view of plagiarism or misuse of the
work of others; and
inclusion of bibliography of the books and journal articles used in the assignment at
the end of the report.

Presentation guidelines: See 'Preparation and submission of essays' in this Subject
Outline. A synopsis is required only for Part B of Assignment 2 and it is counted for
marking purposes.
You should note that this subject uses a due date system for assignments, i.e. the stated
date is the last date for acceptance for that assignment; it is not the date by which the
assignment must be posted. You must timetable your work schedule so you have plenty
of time to ensure your work arrives on time.
Important note:
For all of the assessment tasks you are required to answer all questions.
Answers to each question should not exceed one page in length (unless otherwise stated).
You must keep to the point. Long rambling answers will be penalised.

Assessment item 2

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Assessment item 2
Value: 50%
Due date: 04-Feb-2011
Return date: 25-Feb-2011
Length: Refer below
Submission method options
EASTS (online)
Part A - All 3 questions must be answered and are of equal worth. Please limit answers
to one page each.
Part B - Given below
Part A: Short Answer Questions (20 marks)


Indicate how each of the following effects aggregate demand and aggregate supply:
a. an increase in interest rates;
b. a fall in the value of the Australian dollar;
c. successful labour market reforms; and
d. an increase in the number of skilled migrants.
Briefly explain the relationship between the Current Account Deficit and the level
of Australias Foreign Debt.
Keynes believed that the classical view of savings and investment was wrong.
What was Keynes own view of savings and investment?

Part B: Essay (30 marks)

Length: 1,500 words (excluding synopsis, which should not exceed 200 words, and
tables, graphs, figures, appendices and bibliography).
Topic: Choose either Question 1 or Question 2
Question 1 What are the costs and benefits of using fiscal policy to manage an
economys short-term and long term growth rates? Discuss.

Question 2 Over recent years, the Reserve Bank of Australia has used interest rates in
order to control inflation. Analyse the effects of this monetary policy in the Australian
Your essay should drawn on your understanding of the relevant policy and provide facts
and figures as evidence. Your conclusion should be made in line with your analysis/
discussion and the points made in the body of your essay. Arguments should be
expressed clearly, concisely and within word limits, clear graphs and tables should be

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provided. All source material should be appropriately referenced in the essay and a list of
all materials must be included in the bibliography at the end of the essay.
Main sources of information include textbooks, print and electronic media
For statistical data you might use the websites of:
Reserve Bank of Australia (
Australian Treasury (
Australian Bureau of Statistics (
For historical data you might use the websites of:
National Archives of Australia (
Parliamentary Library (
General academic sites (
Assessment rationale: This assignment is designed to:

allow you to apply the theoretical knowledge of macroeconomics to analyse

practical events in the Australian economy;

allow you to demonstrate your level of understanding and the level of research
effort within a broad framework;

develop your ability to communicate well in writing;

develop your ability to create a professional presentation.

Assessment criteria: You must use your own words except when employing appropriate
short quotations to illustrate points in your explanation. Markers will be looking for
depth of understanding and the ability not just to present information but to link this
information effectively together to create a reasoned coherent and well structured essay
which flows to a conclusion constant with your essay's contents. Do not forget to provide
a synopsis and a Bibliography/List of references. Adhere generally to the Expectations
and requirements for the presentation of assignments contained in this Subject Outline
(pp. 15-20).
Note: Students should strive to utilise as many sources as possible. All first year
textbooks will provide coverage for the theoretical aspect of this topic. However, your
focus should be on the practical aspect. Media reports and journal articles, reports and
other writings by economists and relevant bodies will be very useful in writing this essay.
This assessment item is designed to:

assist you to develop your learning through discussion of the principles covered in
Topics 8-12 of the subject;
allow you to demonstrate your understanding and knowledge of the subject; and
develop your ability to communicate well in writing.

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Marking criteria
Part A
Marks will be gained for:

the clarity and comprehensiveness with which you answered the question;
the inclusion of essential information in your answer;
your demonstration, in your answer, that you have understood the concepts and/or
terms of the question;
adherence to the page limit;
proper acknowledgement of books or articles which have contributed to the
assignment. The University takes a serious view of plagiarism or misuse of the
work of others; and
inclusion of bibliography of the books and journal articles used in the assignment at
the end of the report.

Support Services

Student Central
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non-teaching services. Student Central liaises closely with Divisions and Schools to
ensure the timely and accurate resolution of student enquiries.
You may direct your enquires in person to Student Central staff situated within the
Learning Commons found on campus at Albury-Wodonga, Bathurst, Dubbo, Orange,
and Wagga Wagga.
You may also contact Student Central through: (
1800 ASK CSU (1800 275 278)
Phone from outside Australia: + 61 2 6933 7507

Information on Your Library Services

Your Library Website ( provides access to
material such as eBooks, reports, journals, articles, dissertations, newspapers and other
reference tools. You will also find guides and assistance to help you to use the Library's
Subject Support Pages (
Use these pages to help you to find resources for your assignments. Choose your subject
area and follow the easy steps.

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Library Skills Tutorials (

InfoSkills@CSU is an online tutorial which will help you to learn the research skills that
you will need to complete your assignments. It consists of modules such as using Library
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Library Survival Toolbox (
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Contact Your Library Services, through:
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Phone from outside Australia: + 61 2 6933 7507

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university studies.
For academic learning assistance, contact:

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Student Central (
1800 ASK CSU (1800 275 278)
Phone from outside Australia: + 61 2 6933 7507

Policy and Procedures

University Policies and Regulations

Academic matters are defined by, and are subject to, Charles Sturt University policies
and regulations. Your Subject Outline should be read in conjunction with all such
academic regulations and policies, as some of these may affect the outcome of your

Variations to Subject Outlines

Should it be necessary to change the content of the Subject Outline during a teaching
session, it will be done in consultation with the Head of School and other support
services of the University. You then will be notified of the changes in writing by the
subject coordinator.

Variations to Assessment
Should it be necessary to vary the assessment in this subject, you will be notified in
writing by the Subject Coordinator, or Subject Convenor where one is appointed. The
variations to assessment include variations to the assessment tasks and/or assessment
procedures for assignments, examinations and any other assessment task published in the
Subject Outline. The variations will be communicated only after the Subject Coordinator
or Subject Convenor has obtained approval from their Head of School. The overriding
principle is that such changes will not disadvantage students and is made in accordance
with the Awards, Courses and Subjects policy (Part L6.3 (
acad_sec/academic-manual/docs/l6-3.rtf), Section 1.4) of the Academic Manual.

Evaluation of Subjects
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form a basis for subject improvement and recognition of excellence in teaching. Every
School provides a report to their Faculty Board and the University Learning and
Teaching Committee on their evaluation data highlighting good practice and
documenting how problems have been addressed. A summary of those reports can be

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found at:
We rely on student feedback to improve our teaching and strongly encourage you to
complete the online evaluations which open three weeks before the end of session. You
are notified by email of the window opening and provided with a link to each subject
Individual subject results are reported to the Subject Coordinator and Heads of Schools
after grades have been submitted for each teaching session (except where subjects have
one student the results are not reported to staff). The aggregated results for subjects are
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Special Consideration
Academic regulations provide for special consideration to be given if you suffer
misadventure or extenuating circumstances during the session (including the
examination period) which prevents you from meeting acceptable standards or deadlines.
Applications for special consideration must be submitted in writing and include
supporting documentary evidence. Such applications should be sent to the Student
Administration Office.
For further information about applying for special consideration please refer to Part C3 Special Consideration Regulations (
docs/c3.rtf) of the Academic Manual.

Assessment Regulations
The assessment practices of all University subjects are conducted in accordance with the
Universitys Assessment regulations (

Academic Conduct
The University expects that you, as a student, will be honest in your studies and research
and that you will not do anything that will interfere with or frustrate the studies and
research of other students. In particular, you are expected to:

acknowledge the work of others in your assignments and other assessable work;
not knowingly allow others to use your work without acknowledgment;
report honestly the findings of your study and research; and
use only permitted materials in examinations.

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Details of expected academic conduct are provided in:

the Student Academic Misconduct Rule (;

the Academic Progress regulations (;

Students are also expected to be responsible in the use of University facilities and
resources and to abide by University rules concerning the Library and electronic

the Rule of the Library (

htm); and
the Code of Conduct for Users of Electronic Facilities (

Copies of the Rule of the Library and Code of Conduct for Users of Electronic Facilities
can also be obtained from the Library or the Division of Information Technology (DIT)
Service Desk.
Penalties for breaching the above Rules and Code include suspension or exclusion from
the University.
Students also have expectations of the University and of other students in the
cooperative endeavour of studying. Details of these expectations are provided in the
Student Charter (

Subject Outline as a Reference Document

This Subject Outline is an accurate and historical record of the curriculum and scope of
your subject. University policies (L6.3 1.3.8(f) (
academic-manual/docs/l6-3.rtf)) require that you retain a copy of the Subject Outline for
future use such as for accreditation purposes.

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