REVIEW SHEET (exam #1)

REVIEW SHEET (exam #1) - Review Sheet-203 Midterm I....

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Review Sheet-203 Midterm I. Introduction A. What is economics and the fundamental concept? Economics- study of how individuals make choices when faced with scarce resources. Fundamental Concepts- Resources are unlimited relative to limited wants B. Define opportunity cost- measured by what we give up when one makes a choices II. Individual choice (How do individuals make decisions according to our model?) A. With just one good and assuming no scarcity- consume up to the point before total utility falls (beyond this point will take away from total utility) 1. Choose to consume to bliss/ satiation point where marginal utility (MU) = 0 – Decision rule 2. Know how to calculate marginal utility and total utility B. With several goods and scarcity -- Choose to consume where marginal utilities are equal across all options (MU 1 = MU 2 = ………….=MU n ) C. With several options for using productive resources (such as labor) and scarcity -- Value of the Marginal Products are equal across all options (V 1 = V 2 = ……=V n ) D. How does adding in the future and risk affect our decisions? (PV) (EPV)
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This note was uploaded on 01/11/2012 for the course ECN 203 taught by Professor Evensky during the Spring '07 term at Syracuse.

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REVIEW SHEET (exam #1) - Review Sheet-203 Midterm I....

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