Microeconomics 2
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Microeconomics 2. John Hey. Lecture 1: plan for today. 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.

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Microeconomics 2

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Microeconomics 2

Microeconomics 2

John Hey

Lecture 1 plan for today

Lecture 1: plan for today

  • 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

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.

Microeconomics 2

Teaching Fellows/Tutors are Daniel Howdon, James Lomas, and Dominic Spengler.

Teaching fellows and tutorials

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

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

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

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

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?



  • 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

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

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

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



  • 16: Empirical Analysis of Demand, Supply and Surpluses

Microeconomics 2

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

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 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

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

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

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?



  • 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.

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