2-20-09 - Microeconomics Class Notes 2/20/09 Textbook...

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Microeconomics – Class Notes – 2/20/09 Textbook Problems: Chapter #4 : #1-3, 7, 9, 12, 14, 15, 17, 19, 21-24, 26 You cannot have both goods be inferior or both be luxury . Starting Chapter 5 – Social Policy The measure of how well off (welfare) people are from consuming a good: Utility – but it is often hard to measure utility directly by looking at the demand curve o What areas on this function do we use to measure utility or welfare Consumer surplus For quasilinear functions Consumer surplus is exactly equal to the net utility from consuming the good.
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Net utility = total utility – opportunity cost of consuming the good Compensating variation – if there is a change in price, how much do I have to give you in order to maintain your original level of utility Equivalent variation – the change in price Take price changes and convert them to how much stuff can you buy after the price change Consumer surplus – a number in between the compensating and equivalent variations
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This note was uploaded on 06/03/2009 for the course ECON 200 taught by Professor Nonnenmacher during the Spring '09 term at Allegheny.

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2-20-09 - Microeconomics Class Notes 2/20/09 Textbook...

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