This second course on microeconomics first demonstrates how useful market price mechanisms can be and then examines situations that may limit the effectiveness of such markets. The topics covered in this course include general equilibrium analysis, exchange economies, Pareto efficiency, competitive market equilibria, externality problems, Pigouvian tax, Coase theorem, the tragedy of the commons, the free rider problem in public goods provision, the voluntary contribution mechanism, and demand revelation mechanisms.
Following Microeconomics I, the course aims to enable students to understand basic ideas in microeconomics and acquire the fundamentals of microeconomic analytical tools widely applicable to various economic and management situations. Analytical tools taught in this course are not only useful in studying market mechanisms, but also are applicable to various other types of economic systems, and are useful in other courses on economics and industrial engineering.
At the end of this course, students will be able to:
1) Analyze competitive market equilibria in exchange economies.
2) Explain the fundamental theorems of welfare economics.
3) Analyze the core and equitable allocations in exchange economies.
4) Explain externalities problems, Pigouvian taxes, the Coase theorem, and the tragedy of the commons.
5) Analyze the free-rider problem and the voluntary contribution mechanism.
6) Explain Lindahl equilibrium and demand revelation mechanisms.
General equilibrium analysis, exchange economies, Pareto efficiency, competitive market equilibria, externalities, Pigouvian tax, Coase theorem, the tragedy of the commons, and public goods provision
Intercultural skills | Communication skills | Specialist skills | Critical thinking skills | Practical and/or problem-solving skills |
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- | - | ✔ | - | ✔ |
At the beginning of each class, solutions to exercise problems that were assigned during the previous class are reviewed. Towards the end of class, students are given exercise problems related to the lecture given that day to solve. To prepare for class, students should read the course schedule section and check what topics will be covered. Required learning should be completed outside of the classroom for preparation and review purposes.
Course schedule | Required learning | |
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Class 1 | Analytical methods in Microeconomics - Partial equilibrium and general equilibrium analyses | Explain partial equilibrium and general equilibrium analyses. |
Class 2 | Exchange economies A. Edgeworth box | Explain exchange economies by using an Edgeworth box. |
Class 3 | Exchange economies B. Individually rational allocations and C. Pareto efficient allocations | Explain individually rational and Pareto efficient allocations. |
Class 4 | Exchange economies D. Competitive Market Equilibrium | Conduct a graphical analysis of competitive equilibria in exchange economies. |
Class 5 | Exchange economies E. The fundamental theorems of welfare economics | Explain the fundamental theorems of welfare economics. |
Class 6 | Exchange economies F. Fair allocations | Conduct a graphical analysis of fair allocations in exchange economies. |
Class 7 | Externalities A. Externalities problems and B. Pigouvian taxes | Explain externalities problems and derive Pigouvian taxes. |
Class 8 | Review of the first half of the course (classes 1–7) and midterm exam. | Review what was taught during classes 1-7 to prepare for the exam. |
Class 9 | Externalities C. The Coase theorem and transaction costs | Explain the Coase theorem and transaction costs. |
Class 10 | Externalities D. The tragedy of the commons | Explain the tragedy of the commons. |
Class 11 | Public goods A. Public goods provision experiments | Draw up a report on public goods provision experiments. |
Class 12 | Public goods B. The definition of a public good and the optimal provision of the public good | Explain the definitions of private and public good. Derive the conditions for the optimal provision of the public good. |
Class 13 | Public goods C. The free-rider problem and the volutantary contribution mechanism | Analyze the free-rider problem and the volutantary contribution mechanism |
Class 14 | Public goods D. Pareto effiiciency and Lindahl equlibirium | Explain Pareto effiiciency and Lindahl equlibirium. |
Class 15 | Public goods E. Demand revelation mechanisms | Analyze demand revelation mechanisms. |
No textbook is set. Download course materials from Tokyo Tech OCW-i.
Nishimura, Kazuo, "Introduction to Microeconmics," Iwanami Syoten, 1995. (Japanese)
Ishii, Saijo, and Shiozawa, "Introduction to Microeconmics," Yuhikaku, 1995. (Japanese)
Students' knowledge of exchange economies, competitive market equilibria, externality problems, and the provision of public goods and their ability to apply them to problems will be assessed. Midterm and final exams 70%, exercise problems 30%.
Students must have successfully completed Microeconomics I or have equivalent knowledge.