EconLecture

EconLecture - the consumption bundle. 1/16/08-Basic...

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Economics Lecture Notes 1/14/08 - Brown Family o 6 shots of vodka o Bloody Mary = shot + tomato juice o Screwdriver= shot + orange juice o Opportunity Cost- BM=SD o Brown Family specializes in Screwdriver. - Smith Family o 10 shots of vodka o Bloody Mary= shot + tomato juice o Screwdriver= 2 shots +Orange Juice o Opportunity Cost – SD= 2BM o Smith Family specializes in Bloody Mary. - Terms of trading are determined by the opportunity cost of each party, so that both parties benefit. - Terms of trade (TOT)- 1 SD: 1.5 BM - 2 goods: TVs and Drugs - 2 Countries: US + Japan - Labor is the main input and it is homogeneous. - Technology is constant return to scales(constant opportunity cost) - US- 2 TVs per day Japan- 1 TVs per day - US-10 Drugs per day Japan- 3 Drugs per day
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- US has 200 million workers - Japan has 90 million workers. - 45TV: 180D - Find consumption with trade and how many workers it would take to produce
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Unformatted text preview: the consumption bundle. 1/16/08-Basic assumptions of the supply and demand model o Competitive market Many buyers Many sellers o Product is homogeneous-Demand side of the market-Objective of the consumers: maximize utility-Consumers buy if marginal utility if it is greater than the price. Buyer value > Price.-Things that can shift demand curve o Preferences o Income o Prices of related goods Substitutes Complements o Number of consumers and their demographics o Expected future prices.-Supply Side o Objective of producers o Maximize profit = Total Revenue- Total Costs-Producers Determinants o Input prices o Technology o Prices of substitution in production o Number of firms in the market o Expected future price-...
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This note was uploaded on 04/02/2008 for the course ECON 101 taught by Professor Balaban during the Spring '07 term at UNC.

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EconLecture - the consumption bundle. 1/16/08-Basic...

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