Econ 101

Econ 101 - Econ 101 2009-01-14 Scarcityskills not adequate...

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Econ 101 13:59 Scarcity skills not adequate to produce things  we want Limited resources and unlimited wants lead to scarcity Choices Prices Macro looks at economy from huge perspective Micro why people do the things they do Normative economics not sufficiently tested Positive economics testable Model abstract representation  (1)Logically consistent and (2)explain the world judged by how useful they are and what they predict Economic efficiency No one can be made “better off” unless someone  becomes “worse off.” Allocative efficiency producing goods that people want Q=f(k, L, N,…) Inefficiency produce the wrong set of goods Productive efficiency (1) maximize output for a certain amount of resources  and a certain amount of costs or (2) minimize cost or resources to produce a  certain amount of output Distributive efficiency trading so that someone gains and no one loses Anytime we have inefficiency, we can make things better for someone Division of labor split tasks (egalitarian) and reduce costs Q= f (K, L, N)  fixed resources          1000, 1000, 1000  /2
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 G      1000     500                          500                C + I    1040s               α                β                                         δ
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                                           HB  We produces more HBs, the  cost is 1040s we don’t produce   C + I                           1941                 1937                       Λ G                         G
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January 23, 2009 Q D  = f (P, P ref ,   P og ,    Y, N, T, E) o Quantity demanded is a function of price, preferences, price of goods,  income, number of people, taxes and regulations, and expectation  constant o Consumes sold together compliments If a price of one goes up the demand for the other goes down Inferior goods as income goes up, purchases goes down The Higher the price the lower will be the quantity demanded, vice-versa P L of D P      Q P     Q P 0 P=g(Q c ) P 1 D 1 D 0             Q 0     Q 1                      Q
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The lower your consumption more you’re willing to pay Change in quantity demand-change in price doesn’t change demand
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Econ 101 - Econ 101 2009-01-14 Scarcityskills not adequate...

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