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 microeconomics and principles of fairness 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.
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Required. Cannot be combined with EC1PME and EC2MIP.
Why are several consumers willing to queue for hours to get the latest update of a popular computer game, and being prepared to pay a high price, whereas in cases of other products such as the provision of reliable dikes consumers try to evade paying anything?; 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 parallel 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 studies the behaviour of individuals (consumers, workers), households, firms (producers) and governments in all kinds of markets, such as labour markets, markets for agricultural products but also for high-tech devices. It analyses and evaluates the outcomes of these markets as a result of social interactions (among which considerations of fairness), forces of supply and demand and as a result of market power and political power. Among other things, 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-maximising 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 (in markets with differentiated products, such as 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?
• In what ways can institutions combat opportunistic behaviour and market failures, in particular negative side-effects of production, such as pollution?
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.
Assessment method
• About halfway the course: mid-term examination (100% multiple choice) (25% of the final grade);
• Course week 9: end-term examination (100% open questions) on the course material of weeks 1 through 8 (75% 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.
Effort requirements
Sufficient preparation and active participation in tutorials; you are allowed to miss four tutorials at most.
Passing at least 4 out of 7 effort requirement tests in the electronic learning environment with a minimum score of 60% per test by answering a series of questions and solving problems.
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 in the Electronic Learning Environment 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, will participate in the repeaters programme: they may visit all lectures but should study the weekly materials by themselves. Course repeaters do not need to meet the effort requirements but only a full 4 (overall) in order to be eligible for the retake. Participating in the weekly digital tests is optional but highly recommended.
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 one mid-term (25%) and one end-term exam (75%)
In case online access is required for this course and you are not in the position to buy the access code, you are advised to contact the course coordinator for an alternative solution. Please note that access codes are not re-usable meaning that codes from second hand books do not work, as well as access codes from books with a different ISBN number. Separate or spare codes are usually not available.
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