Lecture 3 _Jan 26_ - Economics 100A Lecture #3: Tuesday,...

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Economics 100A Lecture #3: Tuesday, Jan. 26 Consumers’ Preferences and Utility To text/email question during lecture, send to: 5104183484@txt.att.net
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Micro approach to the consumer Perfectly rational consumers pursue their self interest: What a consumer wants ( preferences ) + What a consumer can afford ( budget ) ? What a consumer consumes ( choice ) (This is constrained optimization!)
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Who are the consumers? n Population Clock (1/25/10 @ 19:22 GMT) ¤ U.S. = 308,554,086 ¤ World = 6,798,663,817 n U.S. households & families in 2006 ¤ Households = 114,384 (2.57 persons on avg) ¤ Families = 77,402 (3.13 persons on avg) ¤ Pets: 77.5 M dogs, 93.6 M cats
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U.S. Households & Families 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 2006 2002 1998 1994 1991 1987 1983 1979 1975 1971 1967 1963 1959 1955 1951 1947 Year Population Units (millions) 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 HOUSEHOLDS FAMILIES Population per household Population per family
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What are the goods? n Something that can be produced and consumed ¤ Known as a “good” or a “product,” “service,” “commodity” ¤ Can be measured in physica units (e.g., pounds, hours, Mbits) ¤ There are also “bads” (e.g., pollution, traffic, SPAM) n Wide range of interpretations ¤ Physical products: food, clothing, cars, gasoline ¤ Services: hair cut, air travel, housing, education ¤ Less typical: insurance, stock ownership ¤ Artificial: copyright, carbon emission rights ¤ What about friendship? self esteem? influence?
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Goods (cont’d) n Other distinctions ¤ Durable or perishable ¤ Intermediate (e.g., input) or final n Countless number of “versions” ¤ More than 18 million books have been printed ¤ About 10.4 million commercial flights in U.S. per year
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Baskets of goods n A “basket” is an array of quantities of different goods ¤ So much food (F), so much clothing (C), etc. ¤ Basket A = (F A , C A ), basket B = (F B , C B ) ¤ Gets interesting when: F A < F B but C A > C B ¤ That is when “tradeoffs” must be made
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Baskets F B F A Food (# pounds) C B C A Clothing (# shirts) Basket A Basket B ?
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This note was uploaded on 03/18/2010 for the course ECON 100A taught by Professor Woroch during the Spring '08 term at University of California, Berkeley.

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Lecture 3 _Jan 26_ - Economics 100A Lecture #3: Tuesday,...

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