Microeconomics 2 John Hey

Lecture 1: plan for today Tutorials and teaching fellows. This lecture is about organisation and motivation. Who is John Hey?John Hey Web site. (TFs and reps.) VLE.Web siteVLE 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 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. (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... 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.Powerpoint presentations Lectures in html format. One for each chapter/lecture.html format Lectures in Maple format (only for the afficionados).Maple format Tutorials. (Later ‘answers’.)Tutorials 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 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 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 The examination will be set and marked by the computer. The examination has been strengthened relative to 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.