2025 (Current Year) Faculty Courses School of Engineering Undergraduate major in Industrial Engineering and Economics
Microeconomics II
- Academic unit or major
- Undergraduate major in Industrial Engineering and Economics
- Instructor(s)
- Takehiko Yamato
- Class Format
- Lecture
- Media-enhanced courses
- -
- Day of week/Period
(Classrooms) - Class
- -
- Course Code
- IEE.B202
- Number of credits
- 200
- Course offered
- 2025
- Offered quarter
- 4Q
- Syllabus updated
- Mar 19, 2025
- Language
- Japanese
Syllabus
Course overview and goals
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.
We also lecture on experimental methods of testing economic theoretical predictions. We begin with an experiment on microeconomics followed by an explanation of the economic theoretical predictions in the experiment. Finally, we compare the theoretical predictions with our experimental results.
In economics, in order to analyze several economic phenomena, a human being is assumed to be a "homo economicus" that is rational and selfish. However, human beings in reality may not be so rational or selfish as is typically assumed. For example, some people may envy the wealthy, while some may feel sympathy towards those not as fortunate. On the other hand, a "homo economicus" is free of such feelings and cares only about his/her own interest.
Such difference between a "homo economicus" and a human being in reality may cause a big gap between theoretical predictions and economic phenomena in reality. Conducting economic experiments is crucial in grasping the extent of this gap. One of the purposes of this class is for students to develop the viewpoint of comparing the economic theory and reality through economic experiments.
Course description and aims
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.
Keywords
General equilibrium analysis, exchange economies, Pareto efficiency, competitive market equilibria, externalities, Pigouvian tax, Coase theorem, the tragedy of the commons, public goods provision, and experimental economics.
Competencies
- Specialist skills
- Intercultural skills
- Communication skills
- Critical thinking skills
- Practical and/or problem-solving skills
Class flow
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/Objectives
| Course schedule | Objectives | |
|---|---|---|
| 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 | Externalities C. The Coase theorem and transaction costs | Explain the Coase theorem and transaction costs. |
| Class 9 | Externalities D. The tragedy of the commons | Explain the tragedy of the commons. |
| Class 10 | Public goods A. Public goods provision experiments | Draw up a report on public goods provision experiments. |
| Class 11 | 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 12 | Public goods C. The free-rider problem and the volutantary contribution mechanism | Analyze the free-rider problem and the volutantary contribution mechanism |
| Class 13 | Public goods D. Pareto effiiciency and Lindahl equlibirium | Explain Pareto efficiency and Lindahl equilibrium. |
| Class 14 | Public goods E. Demand revelation mechanisms | Analyze demand revelation mechanisms. |
Study advice (preparation and review)
To enhance effective learning, students are encouraged to spend approximately 100 minutes preparing for class and another 100 minutes reviewing class content afterwards (including assignments) for each class.
They should do so by referring to textbooks and other course material.
Textbook(s)
No textbook is set. Download course materials from T2SCHOLA.
Reference books, course materials, etc.
Nishimura, Kazuo, "Introduction to Microeconmics," Iwanami Syoten, 1995. (Japanese)
Ishii, Saijo, and Shiozawa, "Introduction to Microeconmics," Yuhikaku, 1995. (Japanese)
Evaluation methods and criteria
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 by homework, reports, and exams.
Related courses
- IEE.B204 ： Macroeconomics II
- IEE.B206 ： Experimental Economics
- IEE.B331 ： Applied Microeconomics
- IEE.B337 ： Mathematical Economics
- IEE.B302 ： Cooperative Game Theory
Prerequisites
It is desirable to have successfully completed Microeconomics I and Non-cooperative Game Theory or have equivalent knowledge.