Microeconomics 2
John Hey
Lecture 1: plan for today
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Tutorials and teaching fellows.
This lecture is about organisation and motivation.
Who is John Hey?
Web site. (TFs and reps.) VLE.
Introduction to module.
What it is trying to achieve.
Lectures.
Assessment.
Advised study method.
First a word about the module as a whole
• Autumn Term – taught by me – lectures 1 to 19
excluding lecture 17 – built on my text and my
website.
• Spring Term – taught by Alan Krause.
• Examination will have two parts corresponding to
the two terms. The exam on my part will be like
the exam I have set in the past. All information is
on the site.
Teaching Fellows/Tutors are Daniel Howdon, James Lomas,
and Dominic Spengler.
Teaching fellows and tutorials
• TFs will have office hours each week – between them one
hour a day each week.
• Tutorials are in Weeks 4, 6, 8 and 10 of term 1.
• Some of them may be before the relevant lectures; and this
will help you to anticipate some of the lectures.
• Tutorials are a mixture of things; they are not mathematical
exercises.
• Prepare for them in advance (as it tells you).
• Actively participate in the tutorials – don’t be a free-rider.
• After the tutorial do what it tells you to do, and hand in to
your tutor if asked.
Tutorials Autumn Term
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Autumn Term Week 4: Tutorial 1: An allocation problem.
Autumn Term Week 6: Tutorial 2: Demand.
Autumn Term Week 8: Tutorial 3: Exchange.
Autumn Term Week 10: Tutorial 5: Production possibility frontiers.
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(Tutorial 4, which you can find on this site, will not be covered this year.)
General comments about the module
• Read the introduction section on the VLE.
• It is to get you thinking like economists...
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We understand indifference (human beings don’t)
We know that “Everything in life is a trade off.”
Do not try and memorise things.
Try to understand concepts and ways of
thinking. Develop economic intuition.
• Not mathematics (though it is there if you want/like it).
• Not memorisation.
What do (micro) economists do?
• They want to explain and predict economic
behaviour; but crucially predict.
• To predict we first need to explain.
• To explain we need models to give structure.
• Why? Because we explain using past data.
There is a lot of such data; we need to decide
which to use. That is the role of theory.
• Theory assumes that people are rational.
What does that mean?
Web site
• Everything that you need (and more) is
there (including me and the module representatives).
• Powerpoint presentations (constantly
revised). One for each chapter/lecture.
• Lectures in html format. One for each chapter/lecture.
• Lectures in Maple format (only for the afficionados).
• Tutorials. (Later ‘answers’.)
• But what about VLE?
Lectures
• They are on the site – both powerpoint
overviews and the detailed html files.
• Smell both before the lecture.
• Come to the lecture and participate.
• Read both immediately after the lecture.
• Read the corresponding chapter in the
module text: Intermediate Microeconomics:
People are Different. This is obtainable in the
Campus bookshop, £25.
The book: a bit of history
• I have taught Micro 2 for a long time –
both in the UK and in Italy.
• I used to use Varian – he has an artist.
• I evolved my own course. I wrote the book.
• I (well Maple actually) drew the pictures…
• … they are accurate and are based on
particular preferences/technology.
• Why the subtitle “People are Different”?
Part 1: Economies without production
• 1: Introduction
• 2: Gains from Trade
• 3: Discrete Goods: Reservation Prices, Demand,Supply, and
Surpluses
• 4: Continuous Goods: Reservation Prices, Demand and
Supply, and Surpluses
• 5: Preferences
• 7: Demand with Money Income
• 6: Demand and Supply with Income in the Form of
Endowments
• 8: Exchange
• 9: Welfare
Part 2: Economies with production
• 10: Firms and Technology
• 11: Cost Minimisation and the Demand for
Factors of Production
• 12: Cost Curves
• 13: Firm Supply and the Surplus of the
Firm
• 14: Production Possibility Frontiers
• 15: Production and Exchange
Interlude
• 16: Empirical Analysis of Demand, Supply
and Surpluses
Part 3: Applications and implications of the basic tools
not taught by me this year except for chapters 18 and 19
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17: Aggregation
18: Revealed Preference and Revealed Technology
19: Compensating and Equivalent Variations
20: Intertemporal Choice
21: The Discounted Utility Model
22: Exchange in Capital Markets
23: Choice under Risk
24: Expected Utility Model
25: Exchange in Capital Markets
26: The Labour Market
Part 4: Market inefficiencies of various types
not taught by me this year
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27: Taxation
28: Monopoly and Monopsony
29: Natural Monopoly and Discrimination
30: Game Theory
31: Duopoly
32: Externalities
33: Public Goods
34: Asymmetric Information
Office hours and the Discussion Board within VLE
• Office hours will be on the Module
website.
• However we feel that use should be made
of the Discussion Board within VLE.
• In principle it is more efficient...
• ... and we, as economists, are interested
in efficiency.
Assessment of the Autumn Term material
• The examination will be different from those before
2011-2012.
• The examination will be set and marked by the
computer.
• The examination has been strengthened relative to
2011-2012
• There will almost certainly be a question on each
lecture/chapter covered by me. So study them all!
• You will be penalised for wrong answers.
• There are two specimen papers on the site. We will go
through them in two lectures later in the year.
Advised study method
• (See also what I have said about lectures.)
• You learn economics by doing economics.
• So the tutorials are crucial, though they are
(obviously) not a direct preparation for the
examination. We will do that later.
• There are also Review Questions in the book.
• Form study groups of you and your friends and work
through things together.
• Use your tutor, the student reps and me to resolve
any issues.
Preparation for Lecture 2
• Review definition of a Reservation Price for a
buyer and for a seller.
• To keep it simple, suppose the good is
discrete and the buyer/seller wants to buy/sell
at most one unit.
• Reservation price is maximum/minimum that
the buyer/seller would pay/accept.
• Profit/Surplus if buyer/seller buys/sells at
price below/above reservation price?
Conclusions
• Come to all the lectures.
• Smell the lectures before the lecture and
read them again afterwards.
• Prepare for the tutorials, participate in
them actively, and review them afterwards.
• Form study groups; learn together.
• Study constantly throughout the year.
• Study, learn and enjoy.