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lecture01_slides - Econ 121. Intermediate Microeconomics....

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Unformatted text preview: Econ 121. Intermediate Microeconomics. Eduardo Faingold Yale University Lecture 1 Introduction eduardo.faingold@yale.edu http://www.econ.yale.edu/ef253/ Office hours: Mondays, 2:30-3:30pm, 30 HH Rm. 27 Textbook: Hal Varians Intermediate Microeconomics , 7th or 8th Editions 1 Outline of the course I. Introduction II. Individual choice III. Competitive markets IV. Market failure 2 Outline of the course I. Introduction a. Procedural stuff: requirements, homeworks, discussion sections, etc. b. Example: a simple model of a market for rental apartments. II. Individual choice III. Competitive markets IV. Market failure 3 A simple model of a market for rental apartments Assumptions: A simple model of a market for rental apartments Questions: Optimization and Equilibrium The optimization principle: People try to choose the best patterns of consumption that they can afford. The equilibrium principle: Prices adjust until the amount that people demand of something is equal to the amount that is supplied. The first one is almost a tautology. The second one is more problematic: It may be that at some point in time, demand and supply are not compatible, in which case something must be changing. These changes may, in turn, induce other changes that might destabilize the whole system. Nevertheless, such off-equilibrium situations are uncommon. For instance, in the apartment rental market, the prices are fairly stable. It is this equilibrium prices that we are interested in. Let us apply these principles to our rental apartments market model. Caveat: The notion of equilibrium may be different in different models. In general, equilibrium entails some form of consistency among the actions of economic agents. 6 Demand Curve Consider all renters and ask them how much they are willing to pay , i.e. their reservation price . Someone is willing to pay the highest price. Perhaps this person is the wealthiest, or maybe he is the laziest and does not like walking to the university. We do not care about the reason why he values the apartment more than the others; it is a matter of personal preference, hence it is...
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This note was uploaded on 03/01/2012 for the course ECON 121 taught by Professor Samuelson during the Spring '09 term at Yale.

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lecture01_slides - Econ 121. Intermediate Microeconomics....

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