General Equilibrium Models: Improving the Microeconomics Classroom

Abstract

General equilibrium models now play important roles in many fields of economics including tax policy, environmental regulation, international trade, and economic development. The intermediate microeconomics classroom has not kept pace with these trends, however. Microeconomics textbooks primarily focus on the insights that can be drawn from the Edgeworth box diagram for exchange. This treatment leaves students unprepared for understanding much of the policy-related literature they encounter. The lack of attention can be explained: The technical analytics required to mathematically analyze general equilibrium models overwhelm all but a handful of undergraduates. We offer an alternative approach that overcomes this obstacle by providing Web-based general equilibrium simulations. The simulation approach circumvents the complex mathematics so that undergraduates can master the most important lessons of general equilibrium models.

Keywords:

• general equilibrium
• policy issues
• simulations