101-2011-L6 - Econ101 Lecture6 Decisions n NoclassonMonday...

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Econ 101 Lecture 6 Consumption and Leisure  Decisions
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n No class on Monday
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What to read n Williamson, chapter 4, pp. 102-116  (today) n Williamson, chapter 4, pp. 116-123 (next  Wednesday)
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Consumption
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From measuring to modelling n It’s time to construct models of the  economy and use them as  laboratories   to understand and predict  macroeconomic events n e.g. what happens if n Government implements a stimulus package n Government changes taxes n Productivity changes
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Where are we? n Measurement of Economic Activities n A static model of the economy n Economic Growth n A dynamic model of the economy n Business Cycles
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Consumption, work and  leisure n Why is this important? n Need to work if you want to buy consumption  goods n Would rather not work and enjoy leisure n We call this a  trade-off : while people desire  both consumption and leisure, they cannot  have plenty of both, on average. n Preferences and Constraints n Preferences define what one would like to do n Constraints define what one can and cannot do
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Introducing your new best friend § A useful principle in macroeconomics: under  certain  conditions  the average behavior of all consumers is exactly 
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