N16-cost curves jpw - End of Consumer Theory and onto....

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http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ End of Consumer Theory and onto. . Lecture 16 Dr. Jennifer P. Wissink ©2011 John M. Abowd and Jennifer P. Wissink, all rights reserved. October 25,2011
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http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ Announcements: Micro F2011 MEL REMINDER I have posted Quiz#08 and ToCatchUpQuiz#02 – see the MEL site for due dates which are early NEXT week, before the prelim. Prelim 2 It’s just around the corner! Yikes!! Thursday Nov 3 (5:15pm or 7:30pm) Friday Nov 5, AFTERNOON this time PELASE SEE THE SYLLABUS ON THE WEB PAGE FOR WHAT TO DO IF YOU HAVE CONFLICTS. DON’T FORGET TO USE THE ABOWD MULTIPLE CHOICE QUESTIONS, MY SAMPLE PRELIMS, AND MY OLD PROBLEM SETS! Get to them via the link below. http://www.arts.cornell.edu/econ/wissink/econ1110jpw/pset.htm
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http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ The Odd Case of Labor/Leisure and “Money-Left- Over” and Why Firms Offer Overtime Wages Z=leisur e $mlo IC-old BL-old BL-higher wage for all hours BL-OT Z*o A D C B 24 hours Consider Abe. Consider one day in Abe’s life. He has 24 hours of time. He can consume his time as leisure (Z) or sell it to the market at the market wage (w) as Labor (L). L + Z = 24 Along any budget line, $mlo=$wL Abe gets utility from only 2 things: leisure (Z) and $money-left- over. $24w
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http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ You feel RICHER–your endowment of time is more valuable “Z” normal Z is relatively more expensive Suppose your wage increases Quantity of Z demanded increases Quantity of Z demanded decreases Quantity of Z demanded decreases “Z” inferior Reacting to a Wage Change: The Odd Case of INCOME EFFECT SUBSTITUTION EFFECT NOTE: This case is DIFFERENT, since when the price of leisure increased, you felt RICHER. Beware! This situation can lead to a “backward bending demand for leisure” which generates a “backward bending supply of labor”!
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http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ Problem Solving Example Suppose X and Y are BOTH normal goods. Suppose Px increases. What happens to the amount of X and Y in the optimal bundle?
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http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ Shifting Gears to Theory of the Firm
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http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ What Is A Firm? Broadly: A firm is an organization producing goods or services, also called a business. Examples of common businesses: Grisamore
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This note was uploaded on 11/11/2011 for the course ECON 1110 at Cornell University (Engineering School).

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N16-cost curves jpw - End of Consumer Theory and onto....

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