introduction - Introduction: Microeconomics and Models...

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Introduction: Microeconomics and Models
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Outline Microeconomics A tale on modelling: "The accidental theorist" (by P. Krugman) Models The use of microeconomic models
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Microeconomics ) Studies agent decisions and their coordination - Individuals and firms allocate their resources to make themselves as well off as possible - Economic outcomes result from the interaction of these decisions: Which goods and services are produced How they are produced Who gets the goods ) Particular attention to: - How this happens in the markets and the role of prices - The role and effects of Government intervention
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A tale on modelling: "The accidental teorist" (by P. Krugman) ) An economy produces two goods: hot-dogs (H) and buns (B) ) Consumers insist that every hot-dog come with a bun and viceversa ) Employment: 120 million workers, L ± 120 ) Technology: 2 person-days produce either a hot-dog or a bun That is, sector production functions are H ± 0.5 L H B ± 0.5 L B
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) Initial equilibrium: 60 million workers in each sector producing
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introduction - Introduction: Microeconomics and Models...

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