Microeconomics 1

Main course materials

The main reference for my half of the course is my lecture notes. Please regularly check that you have the latest version. I last updated the notes at 12:00AM, Tuesday 21 of March. You can see what changed using Adobe Acrobat Pro on the uCreate computers. Choose Tools -> Compare Documents, and select the PDFs containing the old and new versions of the notes. You can download the Latex source if you want to annotate or contribute improvements to the notes.

You can read the Assessment guide with practice exam questions and sample solutions with commentary.

You can browse last year's course materials.

News

• 1st of June, 2021: Sample solutions with commentary are now available for the May exam.
• 15th of January, 2021: Sample solutions with commentary are now available for the December exam.
• November 21:
  • In our on-going experiment on help desks and Piazza, we are now trying out a new arrangement: in-person help desks on Tuesdays at 4pm in the Adam House basement, and Piazza. This means that tutors will be a bit slower to help with Piazza questions, so please do try to help each other too.
  • You might find this Model formulation video helpful.
• Week 5
  • Watch The first welfare theorem (5.5).
  • Watch Week 5 AM (2018) from 1:06 to 2:26 about existence of equilibrium (5.6). You can read the whiteboard.
  • Watch Week 5 PM (2018) from 0:14:30 to 0:59:00 about the second welfare theorem (5.7), and from 1:16:15 about the exam. Note: I moved the bonus maths questions to the Mathematical Microeconomics 1 exam. You can read the whiteboard.
  • Reminder: we are trying out Piazza instead of help desks.
  • You can watch the Q&A session and read the whiteboard.
  • Homework: 5.2, practice questions 4, 6, and 33.
• Week 4
  • The Q&A session will run as normal this week (Monday 2pm-3pm).
  • Watch Week 3 PM (2018) from 0:02, about utility functions (3.1), time preference (4.1), finite horizon dynamic programming (4.2), utility maximisation (3.2), and starting consumer's value functions (3.3). You can read the whiteboard.
  • Watch Week 4 AM (2018) from 1:08:25, finishing consumer's value (3.3), expenditure functions (3.4), and the Slutsky decomposition (3.5). You can read the whiteboard.
  • Watch Week 4 PM (2018) from 1:03 to 1:40:40, about Walras law (5.4). You can read the whiteboard.
  • Homework: 3.1, 3.6, 3.7, practice question 13 parts (i) to (v).
  • Please ask questions on Piazza. Students can answer each other's questions, and the tutors will also answer questions. This is an experiment. It might replace help desks. Please give us feedback.
  • You can watch the Q&A session and read the whiteboard.
  • Starting next week, we will use Piazza instead of Microeconomics help desks. Students can answer each other's questions, and the tutors will also answer questions. This is an experiment. Please give us feedback.
• Week 3
  • I am sick, so we will use videos from last year.
  • Please watch Week 1 PM from 0:20 to 1:07, about isoquants (finishing 2.1) and quasiconcavity (finishing D). You can read the whiteboard.
  • Please watch Week 3 AM from 0:42 to 1:30, about convexity of upper envelopes, and increasing marginal cost (finishing 2.5). You can read the whiteboard.
  • Please watch Week 4 AM from 1:05 to the end, about economies (5.1), efficient allocations (5.2) and equilibrium (5.3). You can read the whiteboard.
  • Homework: 2.16 and part (i) of practice questions 1, 2, and 3.
• Week 2
  • Watch Comparative statics (finishing 2.3). You can read the whiteboard.
  • Watch Dynamic programming (2.4). You can read the whiteboard.
  • Watch Constrained envelope theorem (starting 2.5). You can read the whiteboard.
  • You can watch the Q&A session.
  • Homework: 2.10, 2.11, 2.12, 2.5.
• Week 1
  • Watch Welcome to Microeconomics 1.
  • Optional: watch Naive Set Theory (B1, B2, B3) and Naive Set Theory (B4, B5, B6), which will help you understand the notation in the course. Note: these videos were primarily designed for other courses about proofs (including Mathematical Microeconomics 1), but I think many students will find these videos helpful. You can read the first and second whiteboard.
  • Watch Production functions 1 (2.1). You can read the whiteboard.
  • Watch Concave production functions (D and 2.1). You can read the whiteboard.
  • Watch The firm's problem (2.2). You can read the whiteboard. Note: this lecture includes lots of non-examinable material about the chain rule and the implicit function theorem.
  • Watch The envelope theorem (2.3). You can read the whiteboard.
  • There are no more videos for this week! The next video is ready, but it can wait. I thought I was behind schedule, but actually I usually cover that topic in week 2.
  • Homework: 2.1, 2.2, 2.6, 2.7, 2.8, 2.9.
  • Note: I reorganised the sections, so last year's materials are very confusing! A rough plan for the rest of Part A:
    • Week 2: finish 2.3, 2.4
    • Week 3: 2.5, 3.1, 4.1, 4.2, 3.2, 3.3
    • Week 4: 3.4, 3.5, 5.1, 5.2, 5.3, 5.5
    • Week 5: 5.4, 5.6, 5.7
  • Errata:
    • In the last step of the chain rule proof of the envelope theorem (minute 26), the partial derivative should be with respect to a, not b.
    • In the lazy decision maker proof of the envelope theorem, I sometimes confused Rupert Murdoch's sons, Lachlan and James. Only James is relevant to the proof.
• If you want to learn more mathematics, you can take Mathematical Microeconomics 1 instead.

Assessment

Details on the assessment (including the marking criteria) are included in the practice question file. Two students kindly donated their marked exam scripts in 2017-8. Note that the December and May exams are marked on the same scale.

Extra Reference

Some students like an extra reference, although it is unnecessary. I will only test knowledge from my notes. The references below are also available as a clickable reference list via the library.

Material marked with a star in the notes will only be tested in bonus questions; it is possible to get a distinction in the class without learning the starred material. My notes are closer to Varian and Kreps than MWG, but quite different from all of them. Ambitious students who would like a strong background in mathematics might want to read Maxwell Rosenlicht's (1968) "Introduction to Analysis" or Luenberger's (1969) "Optimization by Vector Space Methods". Angel de la Fuente's (2000) "Mathematical Methods and Models for Economists" is also helpful.

MWG means Mas-Colell, Whinston and Green's (1995) "Microeconomic Theory". V means Varian's (1992) "Microeconomic Analysis". K means Kreps' (1990) "A Course in Microeconomic Theory". KK means Kreps' (2013) "Microeconomic Foundations 1: Choice and Competitive Markets". SL means Stokey and Lucas (1989), "Recursive Methods in Economic Dynamics". Debreu (1960) is Topological methods in cardinal utility theory.

1. Introduction
2. Production
   1. Production Functions   See: V1, MWG5, K7.1
   2. Profit Maximization   See: V2, MWG5, K7.2
   3. Upper Envelopes and Value Functions   See: V3, SL4, MWG5, K7.2
   4. Cost Functions and Dynamic Programming   See: V4, SL4, MWG5, K7.3, K.A.2
   5. Upper Envelopes with Constraints   See: V5, SL4, MWG5, K7.3
3. Consumption
   1. Utility Functions   See: V7, MWG3, K2.1
   2. Utility Maximization   See: V7, MWG3, K2.2
   3. Consumer’s Value and Policy Functions   See: V7, MWG3, K2.2, K2.3
   4. Expenditure Function and Policy Functions   See: V7, MWG3, K2.2, K2.3
   5. Slutsky Decomposition   See: V8, MWG3, K2.3
4. Time
   1. Time Preference   See: Debreu (1960), V19, SL4, SL5, MWG20, KK2.5
5. Equilibrium
   1. Economies   See V17, V18, V19, MWG16, K6.1, K6.2
   2. Efficient Allocations   See V17, V18, V19, MWG16, MWG22, K5.2
   3. Equilibrium   See V17, V18, V19, MWG16, K6.1
   4. Characterising Equilibria   See V17, MWG15, MWG16, MWG20, K2.2
   5. Efficiency of Equilibria   See V17, MWG16, K6.3
   6. *Existence of Equilibria   See V17, MWG17, K6.4
   7. Implementation of Efficient Allocations   See V17, MWG16, K6.3