Economics

4007: Honours Microeconomics (2012) Part A: Microeconomic Theory Justine Burns (Room 5.03; Justine.Burns@uct.ac.za) Welcome to this first module in Honours Micro which covers core Micro theory. In this part of the course, we revisit traditional producer and consumer theory in more formal detail. While most students find theory dry and boring, I encourage you to hang in there and work through it with me. There really is no other way to get through theory other than to just do it (and keep a copy of Chiang close by!). Hopefully, some of the additional readings on the course outline will help spark your interest, and allow you to see how some of this theoretical framework has been applied in understanding important empirical questions. Reading The prescribed text for this first module is Hal Varians text Microeconomic Analysis (3rd edition). This is a standard text used to teach graduate Micro the world over, and its worth the investment, especially if you plan to carry on to Masters. To get the most out of lecture, come to class having read ahead. I will also put the lecture slides up on Vula ahead of time. Please download them and bring them with you, as this will save considerable time. In addition, there are a few additional readings (to rescue us from theory). You will find these on Vula in the Resources tab. These are required reading. 1. Arthur, B. (1990) Positive feedbacks in the Economy, Scientific American, 262, February, pps 92-99 2. Gebreselasie, T. (2008) Sectoral elasticity of substitution and returns to scale in South Africa, South African Journal of Economics, Vol 76:S2, August. 3. Frey, B.S. and Stutzer, A. (2002) What can economists learn from Happiness Research?, Journal of Economic Literature, Vol XL (June), pps 402-435. 4. Harbaugh, W.T.; Krause, K. and Berry, T.R. (2001) GARP for Kids: On the Development of Rational Choice Behaviour, American Economic Review, December, pps 1539-1545 5. Andreoni, J. and Miller, J. (2002) Giving according to GARP: An experimental test of the consistency of preferences for altruism, Econometrica, Vol 70(20) March, pps 737-753.

 Tuts There is a tut session every Tuesday afternoon. Tuts are voluntary, but highly recommended. We will work through selected questions each week. Again, to get the most out of the tuts, please attempt the questions ahead of time. Occasionally, I may use a tut slot as a lecture slot, but I will advise you of this ahead of time. Evaluation This part of Honours Micro will be evaluated as follows: Test 1: 25% (date tbc) Test 2: 25% (This test will happen on 20 March, during class time) Final exam: 50% Note that in terms of your overall Micro mark, this module will count 50% of your final mark. Schedule Below is a proposed work schedule that I will revisit as the course progresses. How far we get depends on how much progress we make during our lecture sessions and tuts. We will certainly cover the Varian material in class. Some of the reading material may be covered in class or as part of your tutorial. In either case, the material is examinable. Date 14 Feb 21 Feb 28 Feb 6 March 13 March 20 March 27 March Reading Varian Chs 1 & 2; Arthur; Gebreselasie Varian ch 3 Varian 4 Varian Ch 5, 6 &12; Varian Ch 7, Frey & Stutzer In Class Test Varian Ch 8; Harbaugh et al; Andreoni and Miller.