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Unformatted text preview: Problem solving U Max: I Expected Utility U Max II Choice Under Uncertainty (Chapter 12) January 6, 2011 Problem solving U Max: I Expected Utility U Max II Teaching Assistants Updated: Name Email OH Greg Leo gleo[at]umail TR 23, PHELP 1420 Dan Saunders saunders[at]econ R 911, HSSB 1237 Rish Singhania hs[at]econ F 57, PHELP 1448 Anand Shukla ajshukla[at]umail F 12:302:30, TDW 2600 Rebecca Toseland toseland[at]econ M 46, HSSB 2251 Kevin Welding welding[at]econ M 911, 434 0121 Problem solving U Max: I Expected Utility U Max II Table of Contents Problem solving & exam questions Constrained Utility Maximization: Part I Budget Constraint Preferences Expected Utility of a Risky Prospect Lotteries Risk Attitudes Constrained Utility Maximization: Part II Problem solving U Max: I Expected Utility U Max II Typical 100B problem Breaking it down • You’re asked to analyze economic behavior/outcomes/policy • Individual choice • Market behavior and welfare • Effectiveness/consequences of policy • You need to break it down into smaller pieces • Apply specific skills/tools to deal with each part • Put parts together to solve overall problem • zoom back out, refocus on big picture • Not just solving math problem • What insight do we gain from this? Problem solving U Max: I Expected Utility U Max II Typical 100B problem Example: uncertainty • Given setup • Separately derive budget constraint, indifference curves (find MRS) • Solve U max problem, optimal bundle • Learn something about demand for insurance Problem solving U Max: I Expected Utility U Max II Typical 100B problem Example: market demand, equilibrium • Given individual demands, info about supply • Derive total demand, supply • Solve for equilibrium p , q • Learn something about behavior in the market Problem solving U Max: I Expected Utility U Max II Typical 100B problem Example: Changes to equilibrium (comparative statics) • Given info about demand, supply • Find equilibrium p , q • Introduce demand/supply shift, tax, price floor, ceiling, quota, etc., calculate new p,q • Observe something about effect on behavior, welfare Problem solving U Max: I Expected Utility U Max II Typical 100B problem Example: Comparison of market structures • Given market demand, costs/supply • Find eq. p , q for various market structures • Compare behavior and welfare Problem solving...
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This note was uploaded on 12/26/2011 for the course ECON 100B taught by Professor Kilenthong during the Fall '08 term at UCSB.
 Fall '08
 KILENTHONG
 Utility

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