Contents Describe budget constraint –Algebra –Graph Describe changes in budget constraint Government programs and budget constraints Non-linear budget lines

Structure Endowments Budget constraints with endowments Net demands Labor supply

Contents Describe preferences Indifference curves Well-behaved preferences Marginal rate of substitution

Contents Instructor and TAs Requirements Course outline An example: market for apartments

Revealed Preference Analysis Suppose we observe the demands (consumption choices) that a consumer makes for different budgets. This reveals information about the consumer’s preferences. We can use this information to

Information in Competitive Markets In purely competitive markets all agents are fully informed about traded commodities and other aspects of the market. What about markets for medical services, or insurance, or used cars?

Structure Definition When to provide a public good – Efficient provision – Private provision: free-riding Variable quantities of public good – Efficient amount – Free-riding problem How to provide public goods? Demand revelation

Structure Definition Consumption externality Production externality The tragedy of commons

Now Add Production ... Add input markets, output markets, describe firms’ technologies, the distributions of firms’ outputs and profits … That’s not easy!

Contents The Edgeworth (艾奇沃斯) Box Pareto improving trade Pareto Efficient Allocation The Core (核心) Trade in a competitive market Walras’ Law of general equilibrium (一般均衡)