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Pam 200 slides 1

Pam 200 slides 1 - PAM 2000 Intermediate Microeconomics A...

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PAM 2000 Intermediate Microeconomics A. Sinan Ünür Introduction and Review Introduction and Review Chapters 1 and 2
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Chapters 1 and 2 PAM 2000 – A. Sinan Ünür What do markets do? TRUE OR FALSE? Suppose there is a good or service. You want this good or service, and you can afford it. You will most likely be able to buy it.
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Chapters 1 and 2 PAM 2000 – A. Sinan Ünür What do markets do? There are virtually no instances in our lives where can’t buy something we want and we can afford. The market price of a good reflects its relative scarcity. We are basing our decision of whether we can afford that good on that price. We are assured of being able to buy it. This is decidedly not the case everywhere in the world or throughout history.
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Chapters 1 and 2 PAM 2000 – A. Sinan Ünür Economics: Science of constrained choice Economic actors have preferences. Economic actors face constraints. Economic actors want to choose a most preferred alternative subject to these constraints. That is, economic actors are rational .
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Chapters 1 and 2 PAM 2000 – A. Sinan Ünür Rationality and Self Interest Self Interest Standard of Rationality : Consider only costs and benefits that accrue directly to themselves Present Aim Standard of Rationality : Rational people act efficiently in pursuit of whatever objectives they hold at the moment of choice
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Chapters 1 and 2 PAM 2000 – A. Sinan Ünür Economic Analysis: Abstraction You are going to drive from New York City to Ithaca. What kind of map do you need? The most accurate map? Or, the most useful map? Hmmmmmm?
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Chapters 1 and 2 PAM 2000 – A. Sinan Ünür Economic Analysis: Abstraction Models are just like maps: The most accurate ones are usually not the most useful. How useful would 1:1 scale map be during your trip from New York City to Ithaca ?
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