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Econ 1: Spring 2012: U.C. Berkeley: Wheeler Auditorium "Office Hours" for the Rest of the Semester...

Dear Sophonts taking Econ 1--

Only 6 of the 700 of you showed up for my three hours of Wednesday office hours last week...

So I will be in Wheeler Auditorium to talk about all topics related to the course at the following times:

Friday March 16, 2012: 11-11:45 AM

Sunday April 1, 2012: 7-8 PM

Friday April 6, 2012: 11-11:45 AM

Friday April 20, 2012: 11-11:45 AM

Friday April 27, 2012: 11-11:45 AM

Yours,

Brad DeLong

March 13, 2012 at 12:08 in #economics, Econ 1 | | Comments (0)

Econ 1: Spring 2012: UC Berkeley: Extra "Office Hours" 11-11:45 Friday in Wheeler Auditorium

Sophonts taking Econ 1--

Only 6 of the 700 of you showed up for my three hours of Wednesday office hours this week...

So I will be in Wheeler from 11-11:45 on Friday to talk about quotas, taxes, subsidies, price ceilings, price floors, perfect competition, and monopolistic competition

We will stop at 11:45 to leave Bob Reich's class lots of time to flood in...

Brad DeLong

March 08, 2012 at 11:15 in #economics, Econ 1 | | Comments (2)

Economics 1: Spring 2012: U.C. Berkeley: Problem Set 5

Economics 1: Spring 2012: Problem Set 5:

J. Bradford DeLong: U.C. Berkeley: Due at first section after March 12, 2012 lecture

http://delong.typepad.com/20120305-econ-1-problem-set-5-1.pdf

Headnote: Remember that the utility—that is, the happiness—of the consumer is higher when the function:

U = (x1)θ(x2)(1-θ)

is higher. For this function the marginal rate of substitution is—that is, the utility stays the same as you move from (x1, x2) to (x1+Δx1, x2-Δx1) for small changes Δx1 and Δx2 if:

Δx1 = ((1-θ)/θ)(x1/x2)Δx2

  1. Suppose we have students going to Railroad Monopoly University who spend their money on only two things all semester: vacations in Cabo San Lucas (V) and renting BMWs for the weekend (R). And suppose that their utility function is the Cobb-Douglas function with θ=1/3, and suppose that a student named Jonah takes vacations in Cabo on three weekends and rents a BMW for the other 15 weekends of the semester. What, for that consumption pattern, is Jonah’s marginal rate of substitution between Cabo vacations and renting BMWs?That is, if he takes an additional vacation, by how many BMW rentals could he cut back his BMW-renting and still be as happy, still be on the same indifference curve?

  2. Suppose that Channing is also a student at Railroad Monopoly University, with the same utility function as Jonah. But suppose that Channing takes vacations in Cabo on six weekends and rents a BMW for six weekends of the semester. What, for that consumption pattern, is Channing’s marginal rate of substitution between Cabo vacations and renting BMWs—that is, if he takes an additional vacation, by how many BMW rentals per average semester could he cut back his BMW-renting and still be as happy, still be on the same indifference curve?

  3. Suppose that renting a BMW costs $50 a weekend and taking a vacation in Cabo costs $500, and that Jonah has $2250 to spend and Channing $3300. Is either Channing or Jonah making a mistake in choosing their consumption pattern? If only one is, which one is making a mistake? Why are they making a mistake?

  4. Explain to either Channing or Jonah—whichever one you think is making a mistake, or both—how they could make themselves happier (or at least more dissipated) if they changed their consumption pattern. In what direction do you think they should change their consumption pattern(s)? How far do you think they should change their consumption pattern(s)? (Or, if you think neither is making a mistake, explain why you think both are doing what they ought to do.)

  5. Brie, with only $1100 per semester to spend, has different tastes and preferences. Her utility function has θ=5/6. If Cabo vacations cost $500 and BMW rentals cost $50, is she happiest buying 0, 1, or 2 vacations and spending the rest of her money on BMW rentals? Explain why her optimal ratio of vacations to rentals is different than the optimal ratio for Channing and Jonah.

  6. Suppose that there is a BMW shortage. BMWs now rent for not $50 a weekend but $500 a weekend. And suppose that Jonah, Channing, and Brie have $2500, $3500, and $1000 to spend, respectively. How should each of the three spend his or her money? Explain your reasoning.

  7. Suppose Phil and Chris notice that neither Channing nor Jonah actually likes riding around in BMWs. What they like, instead, is impressing each other by renting more BMWs than their co-star—and they feel unhappy when their co-star rents more BMWs than they do. That is, the utility function for Jonah is actually: Uj = (Vj)θ(Rj/Rc)(1-θ), where “j” as a subscript means that this applies to Jonah, and “c” as a subscript means this applies to Channing. And Uc = (Vcc)θ(Rc/Rj)(1-θ). Phil and Chris calculate how many vacations and BMW rentals, if BMW rentals cost $50 and Cabo vacations cost $500, Channing and Jonah should spend their money on to collectively make them the happiest. What do they conclude? Explain your reasoning. (Hint: suppose Phil and Chris decide to calculate the geometric mean of Channing’s and Jonah’s utility, and then to try to make that product as large as possible...)

  8. Suppose that Phil and Chris are right, that you are in charge of Railroad Monopoly PDC, and that you try to make both Channing and Jonah happier by imposing a tax on BMW rentals. How high a tax do you think you should impose? Explain your reasoning.

March 06, 2012 at 06:08 in #economics, Econ 1 | | Comments (5)

Econ 1: Spring 2012: U.C. Berkeley: Review "Office Hours" in Wheeler Fridays 11-12

From: Brad DeLong
To: Econ 1 Students
Subject: Review "Office Hours" in Wheeler on Fridays...

The 200 people who came to the pre-midterm Friday "office hour" in Wheeler 11-12 believed that it was useful...

So given that attendance at my W2-5 office hours up in Evans Hall has been low--a total of only 27 people in the 5 weeks the term has been running--I am going to repeat Wheeler Friday "Office Hours"...

However:

  1. They will run from 11-11:50, so that we can be out of Wheeler before Robert Reich's class starts to funnel in...

  2. March 2 I have to be in New York for my niece's Bat Mitzvah, March 23 I have to be in Washington for a Brookings Institute Conference, April 13 I have to be in New York for a Russell Sage Conference, and April 27 I have to be in Los Angeles...

  3. That leaves us with March 9, March 16, April 6, April 20, and May 4...

February 17, 2012 at 12:26 in #economics, Econ 1 | | Comments (0)

Econ 1: Spring 2012: U.C. Berkeley: Midterm Information

  1. The exam will take place on Wednesday, February 22 from 11:10 AM - 12:00 PM. We will need to start handing out exams a few minutes before the official start, so please arrive promptly and get seated quickly so we can be ready to start right at 11:10.

  2. No blue books are necessary; you will write directly on the exam. No calculators, cell phones, or electronic devices are allowed in the exam. Time will be announced periodically during the exam. If you are worried about keeping track of time, please wear a wristwatch that day.

  3. To give you ample space during the exam, we have divided the students, based on GSI, into different rooms for the exam. Students (except DSP) should report to classrooms on Feb. 22 at 11:10 AM as follows:

Wheeler Aud: Ashley Clark, Haozhe Wang, Eric Huff, Natarajan Chakrapani, Jason Barbose, Sean LaGuardia

106 Stanley: Sarah Thomason

1 Pimentel: Katherine Murtha, David Puzey, Frankie Le, Fahd Majeed

105 North Gate: Gaurav Shetti

GSI names and emails are in "GSI-section info" under the Resources tab on bspace. Please go to your assigned room. It is not good if exams go to the wrong GSIs.

February 14, 2012 at 20:19 in #economics, Econ 1 | | Comments (1)

Econ 1: Spring 2012: UC Berkeley: Announcements for January 30, 2012

Number of open seats > # people on the waitlist. People can get in, as long as they switch into a section that has open seats (using Telebears): 22 people on the waitlist and 26 available seats

Any more manual processing of the waitlist should be done by the middle of this week

Any questions about enrollment can be directed to Lanwei Yang... She has year last set of office hours Monday 1-5 PM, 534 Evans

January 30, 2012 at 05:20 in #economics, Econ 1 | | Comments (0)

ECON 1: SPRING 2012: U.C. BERKELEY: FROM THE (WORLD READABLE) CHATROOM: JANUARY 26, 2012-JANUARY 28, 2012

RUCHIKA GUPTA (Jan 26, 2012 9:24 PM PST) When drawing the supply curve in our homework why do we make steps (a horizontal line and a vertical line) to connect the points as opposed to connecting them by straight lines like in a PPF?

J. Bradford DELONG (Jan 27, 2012 5:58 AM PST) It is because of the way we set up the problem: the supply curve is flat because each producer has a constant opportunity cost of teaching yoga lessons. If they got bored as they taught more lessons--and so needed more money to teach the fifth lesson than the first to make it worth their while--we would have a supply curve without steps.

J. Bradford DELONG (Jan 27, 2012 12:42 PM PST) Re: "how do you calculate opportunity cost if a worker can produce n of one good and 0 of the other. The opportunity cost of the other would be n/0 which is undefined" Would you be happier at saying that the limit of the opportunity cost is infinity as productivity at making the good approaches zero?

THERESA FRUZSINA ANDRASFAY (Jan 27, 2012 7:11 PM PST) I'm noticing this problem set is not only long but the problems each are pretty time intensive. I'm just wondering if the exams are going to be a similar difficulty level.

J. Bradford DELONG (Jan 27, 2012 7:13 PM PST) As I said, the first problem set was double length in an attempt to clear the waitlist. It seems to have worked: at the moment we have 26 available seats and a waitlist of 27...

JOSEPH JAE MIN AHN (Jan 27, 2012 11:31 PM PST) Can anyone tell me where I can find out how to find expected values?

TAI CAO TRAN (Jan 28, 2012 12:17 AM PST) Based on our section, (taken from a worksheet) Expected Value = [probability that the person will be making x item] x [amount of item the person can make]. For example: Greg can make 10 lattes and Dharma can make 2 lattes. The probability that either Greg or Dharma will be making latte is 50% (say they flip a coin to determine who will make latte). So Greg making lattes EV would be 5 (1/2 * 10) vs Dharma making lattes EV would be 2 (1/2 * 1). FYI, I'm still trying to incorporate that to #3 of the problem set.

J. Bradford DELONG (Jan 28, 2012 8:56 AM PST) Remember: expected values are easy because they add: E(a + b) = E(a) + E(b). Expected values are easy because they are just probabilities times outcomes: E(a) = P(a=A) x A, where P() means "probability" and E() means "expected value"

January 28, 2012 at 08:59 in #economics, Econ 1 | | Comments (1)

Econ 1: Spring 2012: U.C. Berkeley: Problem Set 2

Due at the start of section following the Monday, February 6 lecture:

Problem Set 2

Problem Set 2: Demand and Supply; Market Equilibrium

J. Bradford DeLong/Lanwei Yang/etc.

Econ 1: Spring 2012: U.C. Berkeley

Due at first section after Monday, February 6 lecture

  1. Suppose that there are four people in the economy who demand yoga lessons: Kautilya (a government economist) with an income of $1000/week, Thasuka Witko (a herder and politician) with an income of $500/week, Buffy Summers (a student at U.C. Sunnydale) with an income of $300/week, and Sappho (a poet) with an income of $600/week. Kautilya spends 1/5 of his income on yoga lessons, Thasunka Witko spends 1/10 of his income on yoga lessons, Sappho spends 1/4 of her income on yoga lessons, and Buffy Summers spends half of her income on yoga lessons. Draw the demand curve for yoga lessons in this economy. What is demand for yoga lessons if the price of yoga lessons is $10/hour? $20/hour? $30/hour? $40/hour? $50/hour?

  2. Consider the same situation as in question (1) but with one difference. Changes in Buffy Summers's life circumstances--the opening of the Mouth of Hell on the U.C. Sunnydale campus--lead her to have no demand for yoga lessons at all as she has to spend all of her income buying sharp wooden stakes. Learning about Buffy's predicament leads Kautilya to boost his yoga expenditures to 1/4 of his income, leads Thasuka Witko to drop yoga entirely and join Buffy in her family business, while Sappho continues to spend 1/4 of her income on yoga lessons. Draw the demand curve for yoga lessons in this economy. What is demand for yoga lessons if the price of yoga lessons is $10/hour? $20/hour? $30/hour? $40/hour? $50/hour?

  3. This new situation sees the rapid growth of a wooden stake-making industry to deal with the influx of vampires onto the U.C. Sunnydale campus. Buffy can make 20 stakes a shift and has an alternative occupation she enjoys as much as stake-making that pays her $60 a shift. Kautilya can make 10 stakes a shift and has an alternative occupation he enjoys as much as stake-making that pays him $200 a shift. Sappho has an alternative occupation she enjoys as much as stake-making that pays her $120 a shift and can make 30 stakes a shift. Thasuka Witko has an alternative occupation he enjoys as much as stake-making that pays him $100 a shift and can make 8 stakes a shift. Draw the supply curve for stakes on the U.C. Sunnydale campus. How many stakes are supplied if the price of each stake is $1? $2? $4? $8? $15? $30? $50?

  4. In this new situation, Buffy realizes that she can order wooden stakes over the internet in unlimited quantities for a price including next-day FedEx shipping of $10/stake. Draw the new supply curve for stakes.

  5. In the same situation as problem (4), suppose that there is a demand for 10 stakes a shift. Who makes stakes? What is the market price of stakes? How about if there is a demand for 50 stakes a shift? 100 stakes a shift? 200 stakes a shift?

  6. Suppose that, on and near the U.C. Sunnydale campus, the weekly supply curve for lattes is given by the equation Q = max(1000 P - 2000, 0) : nobody makes any lattes unless the price is above $2/latte, and for each $1 the price is above $2 an extra 1000 lattes are made. Suppose that customers have $10,000/week to spend on lattes. Draw the supply curve and the demand curve. What is the equilibrium price of lattes? What is the equilibrium quantity of lattes?

  7. Suppose, in the same situation as (6), that the arrival of new, charismatic yoga teachers reduces the amount of money customers have to spend on lattes to $6,000/week. Draw the supply curve. Draw the old and the new demand curves. What is the new equilibrium price of lattes? What is the new equilibrium quantity of lattes?

  8. Suppose that, in the same situation as (6), scary newspaper stories about the health dangers of yoga lead customers to cut back on their purchases of yoga lessons and increases the amount of money they have to spend on lattes to $14,000 a week. Draw the supply curve. Draw the old and the new demand curves. What is the new equilibrium price of lattes? What is the new equilibrium quantity of lattes?

  9. Suppose that, on and near the U.C. Sunnydale Campus, the supply curve for yoga lessons is Q = 100 P. Suppose that customers have $10,000/week to spend on yoga lessons. Draw the supply and demand curves. What is the equilibrium price of yoga lessons? What is the equilibrium quantity? Suppose that the amount of money customers have to spend on yoga lessons rises to $14,000/week? Suppose it falls to $6,000/week?

  10. In the same situation as (9), suppose that the professors at Crony Capitalism Corrupt Rail Baron University 50 miles to the south become lazier, decide they want to teach less, and offer full course credit toward their degree to students who are willing to offer yoga lessons at U.C. Sunnydale. Suppose that enough students to teach 500 places in yoga classes a week drive up to U.C. Sunnydale to add to those offering yoga classes. Draw the new supply curve. Draw the demand curve if people have $10,000/week to spend on yoga lessons. What is the equilibrium price of yoga lessons? What is the equilibrium quantity? Suppose that the amount of money customers have to spend on yoga lessons rises to $14,000/week? Suppose it falls to $6,000/week?

January 27, 2012 at 18:05 in #economics, Econ 1 | | Comments (3)

Econ 1: Spring 2012: U.C. Berkeley: From the (World Readable) Chatroom: January 13, 2012-January 26, 2012

J. Bradford DELONG (Jan 13, 2012 8:46 AM PST) Welcome to Econ 1, Spring 2012...

J. Bradford DELONG (Jan 13, 2012 2:04 PM PST) Yes, there are sections on Tuesday, January 17. Moreover, if you do not attend your sections the first week, even if they happen before the first lecture, THE ECONOMICS DEPARTMENT AUTOMATICALLY DROPS YOU FROM THE COURSE. YOU MUST THEN RE-ENROLL. AND YOUR RE-ENROLLMENT PRIORITY PUTS YOU BEHIND ALL CURRENT MEMBERS OF THE WAITLIST. So, yes, go to section on January 17...

J. Bradford DELONG (Jan 13, 2012 4:23 PM PST) The first assignment will be going out by email in less than 24 hours. It will be to read the "Preface", "Prologue", and "Macroeconomic History" sections of Dasgupta's "Economics: A Very Short Introduction" before your first section...

J. Bradford DELONG (Jan 13, 2012 5:42 PM PST) There are at least 30 available seats in the lecture--and at least 5 sections with open seats in them. Why are you on the waitlist rather than in the class?

J. Bradford DELONG (Jan 14, 2012 9:34 AM PST) The first assignment is to read the "Preface", "Prologue", and "Macroeconomic History" sections of Dasgupta's book, "Economics: A Very Short Introduction", before your first section...

J. Bradford DELONG (Jan 14, 2012 12:41 PM PST) I'm looking for four students who would like to join me for lunch (my treat) at A Musical Offering after lecture on January 23. First come, first served...

YIJIA MAO (Jan 16, 2012 4:33 PM PST) Professor, I bought the textbook "Principles of Microeconomics" at cal bookstore, but you are not one of the author. The authors are Janet Gerson, Paula Malone and Chris Proulx. Is it the correct textbook? By the way, do we have to buy this textbook? Or can we just buy the other three books? From course website, I cannot find what chapters we need to read in "Principles of Microeconomics".

J. Bradford DELONG (Jan 16, 2012 4:53 PM PST) Yes. Gerson, Malone, and Proulx just taught from this version last semester at Michigan...

J. Bradford DELONG (Jan 23, 2012 10:48 AM PST) First Essay “Intro to GSI” due at start of next section... One more week to do problem set 1... iClicker points will start for real next Monday... Econ 1 §106 REASSIGNED TO 156 DWINELLE...

J. Bradford DELONG (Jan 25, 2012 5:36 AM PST) what's the textbook situation, anyway? Any sign that the next tranche of the order has arrived at the bookstore?

J. Bradford DELONG (Jan 25, 2012 3:49 PM PST) 34 students on the wait list, 26 places in the class. If 8 more drop, the wait list is going to clear...

J. Bradford DELONG (Jan 26, 2012 9:14 AM PST) We are now down to a waitlist of 32 with 28 seats available. This waitlist is going to clear...

J. Bradford DELONG (Jan 26, 2012 9:14 AM PST) And I guess I did not have to make the first problem set a double-length one after all...

RUCHIKA GUPTA (Jan 26, 2012 10:44 AM PST) how do you calculate opportunity cost if a worker can produce n of one good and 0 of the other. The opportunity cost of the other would be n/0 which is undefined

J. Bradford DELONG (Jan 26, 2012 11:00 AM PST) Don't say "undefined"! Say "larger than any real number"! There is a symbol for a quantity larger than any real number: "∞".

DEBORAH MARI FRIAS (Jan 26, 2012 8:25 AM PST) Professor Delong, for some reason when I click on the lecture audio, it doesn't work. And I asked the staff if your lecture will be podcasted and they said no.

J. Bradford DELONG (Jan 26, 2012 11:02 AM PST) Are you sure? It looks like there is a podcast of the lectures here: http://itunes.apple.com/itunes-u/economics-1-001-spring-2012/id496401496

January 26, 2012 at 11:08 in #economics, Econ 1 | | Comments (3)

A Note on Office Hours

A Note on Office Hours

OK. It is now clear the way office hours are going to work. They are going to start in either Evans 597 or Evans 601 at 2 PM on Wednesdays (depending on where I am at that moment), and then I will gradually drift upward to Evans 601--with occasional runs into Evans 611 to grab cookies and coffee.

January 25, 2012 at 14:55 in #economics, Econ 1, Econ 210a | | Comments (1)

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