February-29 - ECON203Notes 23:59 iPods...

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ECON 203 Notes  23:59 Applications and Extensions  Introduction of new products  iPods  Higher relative MU/Price Shift in consumption pattern  New products succeed by enchaining total utility  Diamond-Water Paradox  Why do “essential” goods have much lower prices than relatively “unimportant” goods? P_W < P_D Water in great supply. Diamonds rare.  MU of last unit of water in low, TU water is high. MU of last unit of diamonds high, TU Diamonds is low.  Water has much more TU than Diamonds is low.  Water has much more TU than Diamonds even through the P_W < P_D MU of water (low)  P of water (low)  Opportunity Cost and Time Cost of the next best alternative forgone  Consumption and production take time  Labor/leisure trade-off Cost of search  Opportunity cot of forgone income Hourly wage 
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Baseball game. Movie, golf, travel, vacation What is the true economic cost? Other Applications 
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February-29 - ECON203Notes 23:59 iPods...

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