Micro II Winter 2024
ECON 701

Two Nobel prizes have been awarded in general equilibrium: Kenneth Arrow in 1972 and Gerard Debreu in 1983. It began as a key pillar of microeconomics, and now manifests itself in almost all of theoretical macroeconomics. Its earlier focus was on commodity markets, and has more recently shifted to financial markets. What makes the equilibrium “general” is the simultaneous consideration of two or more markets; for example, peanut butter and jelly or a bond and a stock. We will consider perfectly competitive markets; prices will be set in such a way to ensure market clearing. Common questions we will answer in these settings concern the existence and Pareto efficiency of equilibria.

There are two things you need to do to be successful in this course: come to lecture and do your homework (well, these are necessary but not sufficient conditions). Unlike other courses you may be used to, there will be very little reading. Why? I will cover some advanced topics directly from a combination of books and papers, which I list below but do not expect you to read. Lecture notes should be sufficient for full understanding of the course material. Try to expose yourself to the course material in as many ways as you can; this includes asking questions in lecture, emailing questions, coming to office hours, and forming study groups.

I have picked out what I think are the “main pillars” of general equilibrium and listed them in the course outline below. There will be a lot of problem solving, as these are theoretical/ mathematical models. I will be using calculus and linear algebra without review; expect a rigorous treatment of these topics below.

Positive theory (finish this before Midterm 1)

• Edgeworth box
• Walras’ Law
• Fixed points
• Existence
• Anything goes

Normative theory (finish this before Midterm 2)

• First fundamental welfare theorem
• The core
• Externalities
• Production and the second fundamental welfare theorem

Incomplete markets

• Arrow securities
• Fundamental theorem of asset pricing
• Existence
• First fundamental welfare theorem

Presentations

• Rational expectations
• Default
• Production with incomplete markets

Lecture notes will be posted several days after each class. The following readings are optional.

• Homework will be graded on effort only (work in groups OK, submit a copy for each individual).
• Receive full credit for in-class polls with 80%+ answered (effort only).
• Polls consist of 1-2 survey links given in class, and aggregated responses displayed/discussed.
• Presentations in the last two weeks of the course will be led by students.
• Presentations should be 60-80 minutes, with prepared slides.

Intellectual Property

Students should be aware that this course contains the intellectual property of their instructor, TA, and/or the University of Waterloo. 

Intellectual property includes items such as:

• Lecture content, spoken and written (and any audio/video recording thereof);
• Lecture handouts, presentations, and other materials prepared for the course (e.g., PowerPoint slides);
• Questions or solution sets from various types of assessments (e.g., assignments, quizzes, tests, final exams); and
• Work protected by copyright (e.g., any work authored by the instructor or TA or used by the instructor or TA with permission of the copyright owner).

Course materials and the intellectual property contained therein, are used to enhance a student’s educational experience. However, sharing this intellectual property without the intellectual property owner’s permission is a violation of intellectual property rights.  For this reason, it is necessary to ask the instructor, TA and/or the University of Waterloo for permission before uploading and sharing the intellectual property of others online (e.g., to an online repository).

Permission from an instructor, TA or the University is also necessary before sharing the intellectual property of others from completed courses with students taking the same/similar courses in subsequent terms/years.  In many cases, instructors might be happy to allow distribution of certain materials. However, doing so without expressed permission is considered a violation of intellectual property rights.

Please alert the instructor if you become aware of intellectual property belonging to others (past or present) circulating, either through the student body or online. The intellectual property rights owner deserves to know (and may have already given their consent).

Economics Department Deferred Final Exam Policy

All deferred Final Exam requests for economics courses are administered by the Economics Undergraduate Office. Please consult the Deferred Exam Policy at 

https://uwaterloo.ca/economics/undergraduate/resources-and-policies/deferred-final-exam-policy.

Academic integrity: In order to maintain a culture of academic integrity, members of the University of Waterloo community are expected to promote honesty, trust, fairness, respect and responsibility. [Check the Office of Academic Integrity for more information.]

Grievance: A student who believes that a decision affecting some aspect of their university life has been unfair or unreasonable may have grounds for initiating a grievance. Read Policy 70, Student Petitions and Grievances, Section 4. When in doubt, please be certain to contact the department’s administrative assistant who will provide further assistance.

Discipline: A student is expected to know what constitutes academic integrity to avoid committing an academic offence, and to take responsibility for their actions. [Check the Office of Academic Integrity for more information.] A student who is unsure whether an action constitutes an offence, or who needs help in learning how to avoid offences (e.g., plagiarism, cheating) or about “rules” for group work/collaboration should seek guidance from the course instructor, academic advisor, or the undergraduate associate dean. For information on categories of offences and types of penalties, students should refer to Policy 71, Student Discipline. For typical penalties, check Guidelines for the Assessment of Penalties.

Appeals: A decision made or penalty imposed under Policy 70, Student Petitions and Grievances (other than a petition) or Policy 71, Student Discipline may be appealed if there is a ground. A student who believes they have a ground for an appeal should refer to Policy 72, Student Appeals.

Note for students with disabilities: AccessAbility Services, located in Needles Hall, Room 1401, collaborates with all academic departments to arrange appropriate accommodations for students with disabilities without compromising the academic integrity of the curriculum. If you require academic accommodations to lessen the impact of your disability, please register with AccessAbility Services at the beginning of each academic term.

Turnitin.com: Text matching software (Turnitin®) may be used to screen assignments in this course. Turnitin® is used to verify that all materials and sources in assignments are documented. Students' submissions are stored on a U.S. server, therefore students must be given an alternative (e.g., scaffolded assignment or annotated bibliography), if they are concerned about their privacy and/or security. Students will be given due notice, in the first week of the term and/or at the time assignment details are provided, about arrangements and alternatives for the use of Turnitin in this course.

It is the responsibility of the student to notify the instructor if they, in the first week of term or at the time assignment details are provided, wish to submit alternate assignment.