10.14.10 Notes

10.14.10 Notes - personal debts, including the mortgage,...

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10/14/2010 Search Cost – The cost of learning what’s out there in the market In economics there is an optimal time spent searching for the right product. (shopping) Transactions Costs = Cost of making the deal after what good or service is optimal to buy We will spend hundreds of thousands of dollars on search costs (steaks are high to buy the optimal house). Spend thousands of dollars for transactions cost (realtor, advisor, title search) Unemployment is considered to be a public policy problem (one way to reduce this problem is to reduce the search cost) Search Theory = Some people have applied it to the marriage market (to find the optimal spouse). What kind of theories would reduce the search cost for finding the optimal spouse Residual income payment = The amount of income that an individual has after all
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Unformatted text preview: personal debts, including the mortgage, have been paid Residual income payment would rather have more money than less. Firm wants to be very efficient – wants to optimize production and minimize costs Long Run Cost Curve – follows economies of scale as the cost goes lower But follows diseconomies of scale as cost gets higher as quantity increases Economists try to do positive analysis Pareto Optimal – The gold standard of economics, the utopian policy lever. Pareto Optimality means at least one person is made better off and no one is made worse off. That’s a Pareto Optimal move. Envy and jealousy has to be put to the side Theory that relates to Pareto Optimality...
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This note was uploaded on 02/24/2011 for the course ECON ECON 201 taught by Professor Elzinga during the Spring '09 term at UVA.

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