Econ 4011: Notes 3
(Ch. 35 in Varian, also Undercover Economist Ch. 4)
Basic Market Equilibrium
The equilibrium is efficient because all efficient trades (those
(Ch. 16 in Varian)
A market is in equilibrium when total quantity
demanded by buyers equals total quantity
supplied by sellers.
Remember, standard sup
Notes 6 - Choice
also Ch. 5 in Varian
What's possible, and what
There are two ingredients to any choice problem:
options and preferences.
The set of all available options is called the choice
set. The boundary of the cho
Economics 4011: Notes on utility
(see also Varian Ch. 4)
Saying a utility function u(x) represents a
means that higher utility is
u(x) > u(x)
u(x) < u(x)
u(x) = u(x).
(also Ch. 6 in Varian)
We have covered how to model choices by a
How does this relate to demand, which is the
total demand of many consumers?
A common assumption is that there is a
representative consumer, meaning that
Week 1: Introduction
Prof. Jonathan Weinstein
Washington University in St. Louis
Economics: A social science concerned chiefly
with description and analysis of the production,
distribution, and consum
You have $20 to spend on apples ($1) and
This tells us your choice set
To model choice, we need to know something
about individual preferences
Suppose your preference is to maximize x1x2,
Notes 14, Econ 4011
(also Varian Ch. 24)
A monopolized market has a single seller.
The monopolist has the power to alter the market price by
adjusting its output level.
What causes monopolies?
a legal fiat; e.g. US P