econ101w0715 - Introductory Economics Economics 101-300...

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(c) Sherrie A. Kossoudji Introductory Economics Economics 101--300 Lecture # 15 Sherrie A. Kossoudji If you print the preliminary version of these slides before class, please be aware that they are likely to change right up to class time.
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(c) Sherrie A. Kossoudji Please remember that reading these slides does not substitute for attending class. These slides are merely outline guides for what is discussed during the lecture.
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(c) Sherrie A. Kossoudji Schedule: Week 10 WEEK 10: WEEK OF MARCH 5 TH Lecture #: 14-15 Discussion #: 7 Anderson: Chapter 15 Subjects/Concepts: Factors of production, theories of income distribution Uncertainty, risk, adverse selection, moral hazard Readings: This week: Next week: KW Chapter 12, KW Chapter 18 KW Chapter 14, KW Chapter 15 Homework: Graded: Ungraded: None Chapter 12, problem set I; Chapter 18, problem set I Section Quizzes: None Exams: None Other Important Information: None
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(c) Sherrie A. Kossoudji Midterm Results Perfect score—25/50 : 1 student Modal score—20/40: 33 students Mean score—17/34 Median score—18/36 Score distribution: 21/42—25/50: 41 students 16/32—20/40: 138 students 11/22—15/30: 79 students 0/0—10/20: 11 students There are about 10 students whose scores are not accounted for in this list.
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(c) Sherrie A. Kossoudji Economics in the news Minimum wage  article
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(c) Sherrie A. Kossoudji Time The past The present The future 1 minute from now Tomorrow Next year Five years from now Twenty years from now One hundred years from now Risk Perfect certainty Almost no risk Low-risk Medium risk High risk We have to consider the value of money at different points in time and under different risk possibilities. When we think about any economic decision, we need to consider the time over which the market takes place and the uncertainty of some markets. Why are time and risk important?
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(c) Sherrie A. Kossoudji Behavior when there is risk The future is uncertain Outcomes generated in the future are uncertain. There is some probability (or a whole distribution of probabilities) that any outcome (or different outcomes) will occur. The expected return of a purchased asset (or gamble) is calculated by weighting the potential gains and losses by the probability that they will occur. An expected return of zero is called a “fair gamble”. The expected return is NOT what you expect to get in the general sense, but the mathematical expectation. People have different attitudes toward risk in the future: Risk aversion means that people prefer less risk to more risk. They will choose the less risky choice out of two choices. Risk neutrality means that people have no preferences over risk. Risk loving means that people actually prefer risky over non-risky outcomes (or more risky over less risky).,
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(c) Sherrie A. Kossoudji Distributions of Outcomes and Risk Sometimes there are only two possible outcomes (you win or you lose).
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