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Why is the price of apples lower in the high season for apples, and why is the price of beachfront cottages higher in the high season for beachfront cottages?; if a museum seeks to increase its revenue, should it increase or decrease its price?; should the poor be helped by means of cash grants, or by means of food packages?
The subfield of economic science that can answer these questions is microeconomic theory. It lies at the core of modern economics, and most of the courses in the curriculum of U.S.E. apply microeconomics in one or another form. The course makes use of concepts taught in the Mathematics (ECB1WIS) course. Microeconomics, Institutions and Welfare pays additional attention to institutional aspects of microeconomics, as institutions are one of the highlights in the U.S.E. curriculum.
The (neoclassical) microeconomic part of this course starts with supply-and-demand analysis. Next, in the following topics, the course gives a theoretical underpinning of supply and demand:
- Consumer theory: starts from rational consumers, and is used to derive demand.
- Theory of the firm: starts from profit-maximizing firms, and is used to derive supply.
- Perfect competition: the interaction of supply and demand causes goods to be produced efficiently, and to be allocated to consumers in an efficient manner.
To show the limits of this analysis, we also treat imperfect competition (monopoly, monopolistic competition) and introduce you to the tool-box for analysing strategic interactions: game theory.
The institutional part of the course pays attention to the following questions:
- What are institutions and how do they impact the behaviour of economic actors? Why do institutions not always serve efficiency but - sometimes - serve the particular interests of minority groups?
- In what ways can institutions combat opportunistic behaviour and market failures, in particular negative side-effects of production, such as pollution?
Learning objectives
At the end of the course the student is able to:
- Apply the basic principles of neoclassical microeconomics (economic agents respond to incentives, think in terms of opportunity costs, ignore sunk costs,…) and see how these principles lie at the basis of microeconomic theory;
- Apply neoclassical microeconomics to explain a host of real-world questions;
- Treat institutional aspects of microeconomics. E.g., understand how effective institutions can stimulate the functioning of markets and can decrease market failures such as market power, imperfect information, externalities and pure public goods.
Academic skills
This course focuses on the following academic skills:
- Analytical skills:
- Problem solving (identifying the problem, devising a path towards the solution, following this path, verifying the outcome) for specific questions.
- Academic reasoning
- Thinking conceptually, thinking in terms of theory.
- Analysing questions from different perspectives.
- Identifying links between problems.
Format
Lectures, tutorials, electronic learning environment.
Repeaters: lectures, opportunity to ask questions.
Assessment method
- Course week 4 and course week 7: mid-term examinations (100% multiple choice) (15% each, thus 30% of the final grade);
- Course week 9: end-term examination (100% open questions) on the course material of weeks 1 through 8 (70% of the final grade);
The examinations are closed-book examinations consisting of open questions and multiple choice questions, respectively. The academic skills (academic reasoning and working and problem solving) are tested in all examinations.
In order to prepare well for the mid-term examinations a valid code for the Electronic Learning Environment (MyLabsPlus) is required. This code is included in the prescribed course material.
Effort requirements
Sufficient preparation and active participation in tutorials; you are allowed to miss four tutorials at most.
Passing at least 5 out of 8 effort requirement tests in the electronic learning environment (MyLabsPlus) with a minimum score of 50% per test by answering a series of questions and solving problems. To do these test a valid code for the electronic learning environment (MyLabsPlus) is required.
If you have met the effort requirement you are entitled to join the retake arrangement.
For this course the student is expected to spend the recommended 20 weekly hours, 4 hours weekly tutorials (complemented by the lecture) and the remaining hours practicing the assignments on MyLabsPlus to attain optimal performance and the highest return on this course.
Course repeaters
Students who signed up for the course in (one or more of the) previous years, and did not drop the course in time, and failed the course, may participate in the course repeaters programme. Repeaters are not entitled to follow the regular tutorials.
With respect to the teaching format, this implies that course repeaters:
- Have each week one (regular) lecture;
- Have one Q&A session (before the end-term);
- Have two mid-terms (30%) and one end-term (70%);
- Do not have to fulfill the effort requirements.
Language of instruction
English
Students are expected to have knowledge of:
Courses that build on Microeconomics, Institutions and Welfare
- Intermediate Microeconomics, Games and Behaviour (ECB2VMI)
- Advanced Mathematics (ECB2VWIS)
- Contemporary Economics in Historical Perspective (ECB2GED)
- International Economics (ECB2INTE)
- Economics of the Public Sector (ECB2EPS)
- Game Theory (ECB3GT)
- Microeconomics of Financial Markets and Behavioural Finance (ECB3ME)
- Industrial Organisation and Competition Policy (ECB3IO)
- Politics, Philosophy and Economics (ECB3CMEPC)
- Corporate Finance and Behaviour (ECB2FIN
- Labour Economics (ECB3ARBE)
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