INTRODUCTION TO MICROECONOMICS
CHRIS WALLACE
Michaelmas Term 2003
1,Course Objective
This course is intended for those taking Prelims in Philosophy,Politics and Economics,Mods
in Modern History and Economics,Prelims in Economics and Management and Part Is in
Engineering,Economics and Management or Materials,Economics and Management,The
course is directed at students with and without A-Level Economics,The course will make use
of elementary mathematics — most of the material will be presented graphically,Some basic
algebra will be required.
The relevant part of the rubric for Introductory Economics in the Preliminary Examinations is:
Elementary economics,including demand theory,production theory,perfect
competition,monopoly,monopolistic competition,oligopoly,factor markets,
general equilibrium and welfare,the theory of international trade.
2,Teaching
There will be sixteen one-hour lectures during Michaelmas Term on Mondays and Tuesdays at
11.00am in the Examination Schools,All the lectures will be given by Chris Wallace (Trinity
College),Classes and/or tutorials will be organised on a college basis,Students should also
attend the complementary mathematics and statistics lectures provided by the University.
3,The Exam
The examination at the end of the first year is called,Introductory Economics”,It includes
questions from both the Micro and Macroeconomics courses,E&M,any 4 questions from a
selection of essays must be answered in 3 hours,PPE and MHE,4 questions must be answered
including one compulsory maths question and 3 others,at least two of which must be essays.
4,Contact
I can be reached at Trinity College,My email is christopher.wallace@economics.ox.ac.uk.
Further copies of this handout and other resources can be found at my website:
http://malroy.econ.ox.ac.uk/ccw/.
1
MICRO 2
5,Reading List
Course Texts,Students should use (and buy if possible) one of the following two texts:
Varian,H,R,(2002),Intermediate Microeconomics,A Modern Approach 6th Edition,Norton.
Katz,M,L,and Rosen,H,S,(1998),Microeconomics 3rd Edition,McGraw-Hill.
Both are excellent,In the Course Outline below,chapters from Varian (2002) are referred to
by V-numbers and chapters from Katz and Rosen (1998) by K-numbers.
For International Trade,the text (chapters are referred to by KO-numbers) is:
Krugman,P,and Obstfeld,M,(2003),International Economics 6th Edition,Addison Wesley.
Background Reading,For those with no economics background,two popular texts are:
Begg,D.,Fischer,S,and Dornbusch,R,(2002),Economics 7th Edition,McGraw-Hill.
Lipsey,R,G,and Chrystal,K,A,(1999),Principles of Economics 9th Edition,OUP.
These books are only suitable as an introduction — both Varian (2002) and Katz and Rosen
(1998) meet the appropriate standard,Nevertheless,chapters from Begg et,al,(2002) are
referred to in the Course Outline by B-numbers,and Lipsey and Chrystal (1999) by L-numbers,
for introductory reading (if required).
There are some very good,popular” introductions to economics,Three such are:
Dixit,A,K,and Nalebuff,B,L,(1993),Thinking Strategically,Norton.
Krugman,P,(1999),The Accidental Theorist,Penguin.
Landsburg,S,E,(1995),The Armchair Economist,Free Press.
The first of these is useful for an introduction to games,the second for an introduction to
“current” economic issues (including trade) and the third to microeconomics in general,All
are,believe it or not,entertaining reading.
6,Course Outline
There are sixteen lectures,A guide follows,with contents and suggested reading.
Consumption,Lectures 1 to 6 are devoted to consumer theory.
(1) What is Microeconomics? Economics — positive and normative,the nature of modelling in
microeconomics,markets,V1,K1,B1?B3,L1?L3.
(2) Preferences,Representation,utility and indifference curves,well-behaved preferences,marginal
rates of substitution,V3?V4,K2,B5,L6?L7.
(3) Budgets,Prices,endowments and budget lines,changing the budget line,Choice,consumer
demand and the MRS condition,V2,V5?V6,K2,B5,L6?L7.
(4) Comparative Statics,The price effect decomposition — substitution,income and endowment
effects,Normal and inferior goods,V8?V9,K3?K4,B5,L6?L7.
MICRO 3
(5) Applications,Slutsky vs Hicks decomposition,Labour supply and intertemporal choice,Other
applications,V8?V10,K4?K5,B5,L6?L7,L13.
(6) Demand and Supply,Price elasticity of demand and supply,Taxes and consumer surplus.
Producer surplus,V14?V16,K11,B4,L4?L5.
Production,Lectures 7 to 11 are devoted to the theory of the firm.
(7) Firms,Technology,marginal product and returns to scale,Profit maximisation and cost
minimisation,Cost curves,V18?V21,K7?K9,B6?B7,L8.
(8) Perfect Competition,Price taking firms in the short and long run,Industry supply in the
short and long run,V22?V23,K10,B8,L9.
(9) Monopoly,Monopoly behaviour,dead-weight loss and price-discrimination,Monopsony and
factor markets,V24?V26,K13?K14,B8,B10?B12,L10,L14?L17.
(10) Games,Monopolistic competition,Games and players,Best responses and reaction curves —
Nash equilibrium,V25,V28?V29,K14,K16,B9,L11.
(11) Oligopoly,Competition in quantities (Cournot) and prices (Bertrand),Price and quantity
leadership games,V27,K15,B9,L11.
Market,Lectures 12 to 15 are devoted to markets and equilibrium.
(12) General Equilibrium,Pareto efficiency,competitive general equilibrium,MRS and MRT
conditions,Edgeworth boxes,V30?V31,K12,B15,L18.
(13) Welfare,The welfare theorems,Social welfare and the aggregation of preferences,Fairness
and impossibilities,V30?V32,K12,B15,L18.
(14) Market Failure,Externalities and public goods,Tragedy of the commons,Free riding and
public good provision,V33?V35,K18,B16?B18,L18?L19.
(15) What Next? An introduction to uncertainty,asymmetric information and games — where
microeconomics goes next,V12,V17,V36,K6,K17,B13,L12.
International Trade,Lecture 16 is devoted to international trade.
(16) Trade,Comparative advantage and Ricardo,The Heckscher-Ohlin model and the distributive
effects of trade,KO2?KO5,KO8,B33,L34.
CHRIS WALLACE
Michaelmas Term 2003
1,Course Objective
This course is intended for those taking Prelims in Philosophy,Politics and Economics,Mods
in Modern History and Economics,Prelims in Economics and Management and Part Is in
Engineering,Economics and Management or Materials,Economics and Management,The
course is directed at students with and without A-Level Economics,The course will make use
of elementary mathematics — most of the material will be presented graphically,Some basic
algebra will be required.
The relevant part of the rubric for Introductory Economics in the Preliminary Examinations is:
Elementary economics,including demand theory,production theory,perfect
competition,monopoly,monopolistic competition,oligopoly,factor markets,
general equilibrium and welfare,the theory of international trade.
2,Teaching
There will be sixteen one-hour lectures during Michaelmas Term on Mondays and Tuesdays at
11.00am in the Examination Schools,All the lectures will be given by Chris Wallace (Trinity
College),Classes and/or tutorials will be organised on a college basis,Students should also
attend the complementary mathematics and statistics lectures provided by the University.
3,The Exam
The examination at the end of the first year is called,Introductory Economics”,It includes
questions from both the Micro and Macroeconomics courses,E&M,any 4 questions from a
selection of essays must be answered in 3 hours,PPE and MHE,4 questions must be answered
including one compulsory maths question and 3 others,at least two of which must be essays.
4,Contact
I can be reached at Trinity College,My email is christopher.wallace@economics.ox.ac.uk.
Further copies of this handout and other resources can be found at my website:
http://malroy.econ.ox.ac.uk/ccw/.
1
MICRO 2
5,Reading List
Course Texts,Students should use (and buy if possible) one of the following two texts:
Varian,H,R,(2002),Intermediate Microeconomics,A Modern Approach 6th Edition,Norton.
Katz,M,L,and Rosen,H,S,(1998),Microeconomics 3rd Edition,McGraw-Hill.
Both are excellent,In the Course Outline below,chapters from Varian (2002) are referred to
by V-numbers and chapters from Katz and Rosen (1998) by K-numbers.
For International Trade,the text (chapters are referred to by KO-numbers) is:
Krugman,P,and Obstfeld,M,(2003),International Economics 6th Edition,Addison Wesley.
Background Reading,For those with no economics background,two popular texts are:
Begg,D.,Fischer,S,and Dornbusch,R,(2002),Economics 7th Edition,McGraw-Hill.
Lipsey,R,G,and Chrystal,K,A,(1999),Principles of Economics 9th Edition,OUP.
These books are only suitable as an introduction — both Varian (2002) and Katz and Rosen
(1998) meet the appropriate standard,Nevertheless,chapters from Begg et,al,(2002) are
referred to in the Course Outline by B-numbers,and Lipsey and Chrystal (1999) by L-numbers,
for introductory reading (if required).
There are some very good,popular” introductions to economics,Three such are:
Dixit,A,K,and Nalebuff,B,L,(1993),Thinking Strategically,Norton.
Krugman,P,(1999),The Accidental Theorist,Penguin.
Landsburg,S,E,(1995),The Armchair Economist,Free Press.
The first of these is useful for an introduction to games,the second for an introduction to
“current” economic issues (including trade) and the third to microeconomics in general,All
are,believe it or not,entertaining reading.
6,Course Outline
There are sixteen lectures,A guide follows,with contents and suggested reading.
Consumption,Lectures 1 to 6 are devoted to consumer theory.
(1) What is Microeconomics? Economics — positive and normative,the nature of modelling in
microeconomics,markets,V1,K1,B1?B3,L1?L3.
(2) Preferences,Representation,utility and indifference curves,well-behaved preferences,marginal
rates of substitution,V3?V4,K2,B5,L6?L7.
(3) Budgets,Prices,endowments and budget lines,changing the budget line,Choice,consumer
demand and the MRS condition,V2,V5?V6,K2,B5,L6?L7.
(4) Comparative Statics,The price effect decomposition — substitution,income and endowment
effects,Normal and inferior goods,V8?V9,K3?K4,B5,L6?L7.
MICRO 3
(5) Applications,Slutsky vs Hicks decomposition,Labour supply and intertemporal choice,Other
applications,V8?V10,K4?K5,B5,L6?L7,L13.
(6) Demand and Supply,Price elasticity of demand and supply,Taxes and consumer surplus.
Producer surplus,V14?V16,K11,B4,L4?L5.
Production,Lectures 7 to 11 are devoted to the theory of the firm.
(7) Firms,Technology,marginal product and returns to scale,Profit maximisation and cost
minimisation,Cost curves,V18?V21,K7?K9,B6?B7,L8.
(8) Perfect Competition,Price taking firms in the short and long run,Industry supply in the
short and long run,V22?V23,K10,B8,L9.
(9) Monopoly,Monopoly behaviour,dead-weight loss and price-discrimination,Monopsony and
factor markets,V24?V26,K13?K14,B8,B10?B12,L10,L14?L17.
(10) Games,Monopolistic competition,Games and players,Best responses and reaction curves —
Nash equilibrium,V25,V28?V29,K14,K16,B9,L11.
(11) Oligopoly,Competition in quantities (Cournot) and prices (Bertrand),Price and quantity
leadership games,V27,K15,B9,L11.
Market,Lectures 12 to 15 are devoted to markets and equilibrium.
(12) General Equilibrium,Pareto efficiency,competitive general equilibrium,MRS and MRT
conditions,Edgeworth boxes,V30?V31,K12,B15,L18.
(13) Welfare,The welfare theorems,Social welfare and the aggregation of preferences,Fairness
and impossibilities,V30?V32,K12,B15,L18.
(14) Market Failure,Externalities and public goods,Tragedy of the commons,Free riding and
public good provision,V33?V35,K18,B16?B18,L18?L19.
(15) What Next? An introduction to uncertainty,asymmetric information and games — where
microeconomics goes next,V12,V17,V36,K6,K17,B13,L12.
International Trade,Lecture 16 is devoted to international trade.
(16) Trade,Comparative advantage and Ricardo,The Heckscher-Ohlin model and the distributive
effects of trade,KO2?KO5,KO8,B33,L34.
