WELCOME TO MICROECONOMICS 2 - THE CORE COURSE
Welcome to the Course in October 2003.
Several students have asked me to post the answers to last year's examination paper. I do so with a health warning. Reading the answers without having attempted the paper is a complete waste. You will only benefit from having the answers if you have tried to do the paper yourself. You should use the answers as a check on what you have done. Remember, this year's paper will be different.
Juan Yang and others have noticed that there is a typo in Tutorial 6. Part (10) should read: "We note something interesting: for each measure of the loss in welfare - the compensating variation, the change in surplus, and the equivalent variation - the measure is always greater for Individual A than for Individual B. Why?" I am sorry about this. Note that this is not a general result.
There are typos on page 74, in the fourth paragraph (that starting "It will be useful..."). The sentence starting "If we look at any curve in Fig 5.1..." should continue "...it is apparent that the sum of q1 plus q2 is constant along any one of these curves: along the top one the sum is 180; along the next to the top the sum is 160;...; along the bottom curve the sum is 20."
KiDae Kim has noticed a mistake on page 58 of the course text. In the sixth line of the first paragraph m - r1 should read M - r1, and in the ninth line of the first paragraph (Q+1, Q-p) should read (Q+1, M-p).
Lu Zhang has noticed a mistake on page 100 of the course text. In the eighth line from the
bottom, where the slope of the indifference curves is written, it should be
Abi Marshall has noticed a mistake on page 101. The final complete sentence on that page should read:
"So the budget constraint goes from (m/p1,0) to (0, m/p2)."
There is some misleading English on page 122, where the impression is given that money exists in this simple economy. That, of course, is not the case.
Jinkwon Lee has noticed that there are mistakes on pages 157 and 172.
On page 157, in equation 11.5 the bottom line should read:
q1=0 and q2=a y1/s
On page 172 in discussing Type 1 Technology (Perfect Substitutes 1 to a) the production function is incorrectly stated two times. It should be
y = (q1 + q2/a)s.
Lynn Willis has notice a typo in line 11 of page 187. This should read
"a=0.49 and b=0.21 for firm 1 and a=0.42 and b=0.28 for firm 2 (notice that the ratio of"
There is a typo on page 190. In line 22, it says that there are 100 units of both inputs available. It should say that there are 12 units of both inputs available.
There is a typo in the line immediately below fig 14.14. "(0,6)" should read "(6,0)".
Alex Sykes has noticed that there is a typo on page 195. In line 5 of section 15.4 it should read "Table 15.1."
Yaxin Duan has noticed two typos on page 299. The first when talking about someone
whose relative risk aversion is constant and therefore has a utility function
u(c) = c1-r
If r is negative, we have someone who is risk-loving. If r is 1 we have someone risk-neutral. If r is between 0 and 1 we have someone risk-averse and it should read:
"Furthermore the closer is r to 1 the more concave is the function and the more risk-averse is the individual. "
Also, when defing the risk premium for a risk-lover I should have written:
"is the maximum amount that he or she would pay to keep the risky prospect rather than have it replaced by the certainty of its expected value."
My thanks to all of these people for noticing these mistakes and my apologies to all of you for the existence of these mistakes. Please keep sending me news about any further mistakes.
The chapters are as follows:
Chapter 2: Gains from Exchange lecture, handout
Chapter 3: Discrete Goods: Demand and Supply and Surpluses lecture, handout
Chapter 4: Continuous Goods: Demand and Supply and Surpluses lecture, handout
Chapter 5: Preferences lecture, handout
Chapter 6: Demand and Supply with income in the form of endowments lecture, handout
Chapter 7: Demand and Supply with income in the form of money lecture, handout
Chapter 8: Exchange lecture, handout
Chapter 9: Welfare lecture, handout
Chapter 10: Firms lecture, handout
Chapter 11: Cost Minimisation and the Demand for Factors lecture, handout
Chapter 12: Cost Curves lecture, handout
Chapter 13: Firm Supply and Producer Surplus lecture, handout
Chapter 14: Production Possibilities lecture, handout
Chapter 15: Production and Exchange lecture, handout
Chapter 16: Empirical Evidence of Demand, Supply and Surpluses lecture, handout
Chapter 17: Aggregation lecture, handout
Chapter 18: Revealed Preference and Revealed Profitability lecture, handout
Chapter 19: Compensating and Equivalent Variations lecture, handout
Chapter 20: Intertemporal Choice lecture, handout
Chapter 21: The Discounted Utility Model lecture, handout
Chapter 22: Asset Markets lecture, handout
Chapter 23: Risky Choice lecture, handout
Chapter 24: Expected Utility Model lecture, handout
Chapter 25: Insurance Markets lecture>, handout>
Chapter 26: Labour Markets lecture, handout
Chapter 27: Taxation lecture, handout
Chapter 28: Monopoly and Monopsony lecture, handout
Chapter 29: Natural Monopoly and Discrimination (note: not part of the syllabus in 2003-4) lecture, handout
Chapter 30: Game Theory lecture, handout
Chapter 31: Duopoly lecture, handout
Chapter 32: Externalities lecture, handout
Chapter 33: Public Goods lecture, handout
Chapter 34: Asymmetric Information lecture, handout
This is the setup. After unzipping you will get a directory c:\new micro in which there will be sub-directories:
The basic maple files are the ones in c:\new micro\english and are called exy.mws where xy is the lecture number. These files read two other files: exy.txt which is in c:\new micro\english\text files and pxy.txt which is in c:\new micro\programs. If you set things up in this way then you should be able to simply go to exy.mws and open it using Maple. You will see that the output has been removed before doing the zipping - because otherwise the files are too big. To get the output you should go into Maple, open the file, and then click on Edit, then click on Execute and then click on Worksheet. Some of these files take quite a while to execute - the time of course depending on how fast your computer is. (If you want a different file structure you will have to make certain changes to the programs - so you are advised against that.)
Hope this is all clear.
You should note that all this material is copyright - we presume you understand what that means and what the implications are if you violate the copyright. (Basically John Hey will do nasty things to you.)
Let me know if you have any problems.
with EXEC, the Centre for Experimental Economics, by clicking
EXEC carries out economics experiments and participants in these experiments have the possibility of earning considerable amounts of cash.
We hope you enjoy the course. If you spot any mistakes or have any comments please get in touch with John Hey.
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