Saint-Louis University - Bruxelles
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ECGE1217 - Microeconomics



Credits : 6

Lecturer :
Teaching assistant :
Mode of delivery :
Face-to-face , first term, 45 hours of theory and 15 hours of exercises.

Timetable :
First term
Tuesday from 13:00 to 15:00 at 119 Marais 3100
Wednesday from 10:45 to 12:45 at 119 Marais 1100
Wednesday from 16:45 to 18:45 at Préfecture P60

Language of instruction :
English

Learning outcomes :
Define the main microeconomic concepts and specify their scope. To develop the student's ability to carry out a formalized economic analysis by systematic mathematical modeling of individual behavior and their impact on the allocation of economic resources in markets. Use this formalization to analyze the mechanisms underlying the economic facts observed. Demonstrate the main results necessary for the construction and characterization of market equilibrium, in perfect and imperfect competition.

Specific objectives: At the end of the course (and TA sessions) the student will be able to:
- Propose a stylized but coherent analysis of simple economic phenomena based on the individual behavior of the agents concerned.
- Use mathematical language to formalize simple economic problems.
- Discuss the role of the assumptions used to establish the main results of the course. Discuss the relevance of these findings to the analysis of real economic situations.
- Apply theoretical models to solve exercises.
- Define the main microeconomic concepts and specify their scope.


Prerequisites :
Co-requisites :
None

Course contents :
The course covers the central areas of analysis of individual economic behavior (microeconomics) and their relation to the market, so as to propose a first formalization of economic exchanges, resulting in the allocation of scarce resources based on the decentralization of decisions via market prices.

In the first part, we analyze, on the one hand, consumer behavior and, on the other, the behavior of the firm in perfect competition based on the analysis of production technologies. The characterization and main properties of short and long term competitive equilibrium are studied in a partial equilibrium context.

In a second part the competitive equilibrium model is introduced using the construction of demand functions for goods and services from the mathematical formalization of consumer behavior. The analytical framework of an exchange economy is formalized. The problem of general equilibrium and efficiency in the allocation of resources is addressed in this context.

In a third part we study one of the main sources of market failure: information asymmetry. If time permits, the other main source of market failure will be addressed: imperfect competition (monopoly, oligopolies).

More precisely, the course is developed in the following way:

Part I: Introduction

I.1. General Framework (Varian, Chapter 1)

Part II: Consumer Theory:

II.1. Budget constraints, preferences, utility (Varian, ch 2, 3, 4 and 5)
II.2. Choice and Marshalian Demand functions (Varian, ch 5, 6 and 8)
II.3. Duality, Hicksian demand, and the Slutsky equation (Varian, Ch. 8 and 10)
II.4. Consumer Surplus and Market Demand (Varian, Ch. 14-15)
II.5. Decision under uncertainty (Varian, Ch. 12)

Part III: The behavior of the competitive firm

III.1. Technology, cost minimization and cost curves (Varian, 19, 21 & 22)
III.2. Maximizing profits in perfect competition (Varian, ch 20)
III.3. Firm supply and industry equilibrium (Varian, ch. 23, 24)

Part IV: General Equilibrium and Social Choice

IV.1. An exchange economy (Varian, Chapter 32)
IV.2. Production (Varian, Chapter 33)
IV.3. General equilibrium and welfare (Varian, 34)
IV.4. Externalities and public goods (Varian, 35 & 37)

Part V: Asymmetric information and auctions

V.1. Adverse Selection (Varian, Chapter 38)
V.2. Moral hazard (Varian, ch. 38)
V.3. Auctions (Varian, Chapter 18)

Part VI. Market power (time allowing)

VI.1. Monopoly (Varian, 25, 26)
VI.2. Oligopoly (Varian, ch. 28, 29, 30)
VI.3. Information Technology (Varian, Ch. 36)


Planned learning activities and teaching methods :
The course covers the central areas of analysis of individual economic behavior (microeconomics) and their relation to the market, so as to propose a first formalization of economic exchanges, resulting in the allocation of scarce resources based on the decentralization of decisions via market prices.

In the first part, we analyze, on the one hand, consumer behavior and, on the other, the behavior of the firm in perfect competition based on the analysis of production technologies. The characterization and main properties of short and long term competitive equilibrium are studied in a partial equilibrium context.

In a second part the competitive equilibrium model is introduced using the construction of demand functions for goods and services from the mathematical formalization of consumer behavior. The analytical framework of an exchange economy is formalized. The problem of general equilibrium and efficiency in the allocation of resources is addressed in this context.

In a third part we study one of the main sources of market failure: information asymmetry. If time permits, the other main source of market failure will be addressed: imperfect competition (monopoly, oligopolies).

More precisely, the course is developed in the following way:

Part I: Introduction

I.1. General Framework (Varian, Chapter 1)

Part II: Consumer Theory:

II.1. Budget constraints, preferences, utility (Varian, ch 2, 3, 4 and 5)
II.2. Choice and Marshalian Demand functions (Varian, ch 5, 6 and 8)
II.3. Duality, Hicksian demand, and the Slutsky equation (Varian, Ch. 8 and 10)
II.4. Consumer Surplus and Market Demand (Varian, Ch. 14-15)
II.5. Decision under uncertainty (Varian, Ch. 12)

Part III: The behavior of the competitive firm

III.1. Technology, cost minimization and cost curves (Varian, 19, 21 & 22)
III.2. Maximizing profits in perfect competition (Varian, ch 20)
III.3. Firm supply and industry equilibrium (Varian, ch. 23, 24)

Part IV: General Equilibrium and Social Choice

IV.1. An exchange economy (Varian, Chapter 32)
IV.2. Production (Varian, Chapter 33)
IV.3. General equilibrium and welfare (Varian, 34)
IV.4. Externalities and public goods (Varian, 35 & 37)

Part V: Asymmetric information and auctions

V.1. Adverse Selection (Varian, Chapter 38)
V.2. Moral hazard (Varian, ch. 38)
V.3. Auctions (Varian, Chapter 18)

Part VI. Market power (time allowing)

VI.1. Monopoly (Varian, 25, 26)
VI.2. Oligopoly (Varian, ch. 28, 29, 30)
VI.3. Information Technology (Varian, Ch. 36)


Assessment methods and criteria :
Certifying evaluation: Written examination in sessions of examinations covering both theoretical questions, exercise resolutions and simple applications of theory to problems inspired by economic reality.

Formative evaluation: the questions asked during the lectures allow students to situate their level of understanding of the class material taught in previous lectures. Furthermore, the availability of a portfolio of solved exercises allow students to verify their understanding of the course and exercise sessions during the year.


Recommended or required reading :
"Intermediate Microeconomics: A Modern Approach.", Hal R. Varian, 9th ed. New York, NY: W.W. Norton, 2014. ISBN-13: 978-0393123975.

Other information :
Didactic materials offered to students:
- copy of the slides used during the course and taking notes during the course
- mandatory handbook: "Intermediate Microeconomics: A Modern Approach.", Hal R. Varian, 9th ed. New York, NY: W.W. Norton, 2014
- portfolio of exercises with partial solutions.