Chapter16 - 1 Title: Glamorous Artist: Fergie Economic...

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Unformatted text preview: 1 Title: Glamorous Artist: Fergie Economic concept: income-consumption path; Engel curve Representative lyrics: To support your shoe fetish Lifestyles so rich and famous Robin Leach will get jealous Half a million for the stones Taking trips from here to Rome So if you ain't got no money take yo broke ass home Cost Effective Campaigning Cost Effectiveness Analysis is the branch of economics devoted to determining the most efficient way of achieving a given objective determining the most efficient way of achieving a given objective What is the bang for the buck? Yale political scientists Donald Green and Alan Gerber have conducted randomized controlled trials in actual local political campaigns to measure the cost of increasing voting through each possible campaign method Arent able to study who the new voters vote for Findings: Robo-calls, direct mail, mass email: no detectable effect Live phone banking: $38 per new voter Door-to-door canvassing: $29 per new voter (the most consistently effective and efficient method of voter mobilization) Text messaging: $1.50 per new voter Overall lesson: personalized methods and messages work better 2 PAM 2000: Intermediate Microeconomics Prof. John Cawley Chapter 16: I t t R t I t t Interest Rates, Investments, and Capital Markets Where We Are Consumer Theory Individual Demand Theory of Production Costs of Production Factor Individual Demand Market Demand Perfect Competition Imperfect Competition: Monopoly Monopolistic Competition Prices Markets Oligopoly General Equilibrium Market Imperfections Strategy Game Theory 3 Outline Comparing mone at different points in time Comparing money at different points in time Interest rates and discount rates Present value of money invested in the past Present value of money to be received in the future Future value of money invested today Choices over time; investment decision Choices over time; investment decisions Net present value Internal rate of return How Should You Invest? Burton Malkiels The Random Walk Guide to Investing Dont hire a financial advisor Dont day trade Put your money in mix of index mutual funds (domestic stock, international stock, bonds) and leave it there Gradually increase share of your portfolio in bonds as approach retirement 4 Interest Rate Interest rate: how the market values money today versus money tomorrow; if interest rate is i , For each $1 you borrow today you will owe $1*(1+ i ) next period For each $1 you lend today you will be owed $1*(1+ i ) next period $1 (1+ i ) next period Each $1 that youll receive next period is worth today 1 $1* (1 ) i g12 Discount Rate Discount rate : how a person values money today versus money tomorrow $1 tomorrow is worth today Myopic : high discount rate Person on death row has high discount rate; assigns little value to future events 1 $1* (1 ) d g12...
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Chapter16 - 1 Title: Glamorous Artist: Fergie Economic...

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