Microeconomics

Course goals

After this course, the student will be able to
-           Analyze economically the problems of allocation, income and substitution effects, and market imperfections, including situations where interacting actors and imperfect information play a role, in terms of preferences and incentives, prices and opportunity costs, and demand and supply;
-           Identify the ‘moral limits of the market,’ that is, to identify where economic decisions impinge moral judgments; here we can form a nice bridge between insights from an economics perspective and from an ethical perspective (interdisciplinary skills).
-           Analyze micro-economically institutional aspects, that is to say, how the design of institutions is related to the functioning of markets, externalities, and public goods;
-           Apply theoretical micro-economical insights to actual problems by analyzing a real-life case, formulating a research question, and writing an essay. This will be done in a small group, thus training your professional skills 'cooperation' (and giving peer feedback) and 'writing'. 
-           Practice stronger collobaration skills (professional skills)
-           Strengthen their disciplinary grounding in economics (interdisciplinary skills)
 

Content

This course studies real-life situations and problems from a microeconomic perspective and comes up with several institutional devices to solve these problems.

The 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, 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 the functioning of markets and firms:
-           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.

While addressing these topics, we will make use of graphical and algebraic methods.
To show the limits of this analysis, we also treat imperfect competition (firms with price-setting power, such as monopolies) and introduce you to the toolbox 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?