I am going to jump ahead to page 152 to cover the Hicks Income and substitution effects. What
we are doing here is decomposing the effect of a price change into two partsthe income effect
and the substitution effect. The general idea is that when a good g
Econ 301
Ch 24
Monopoly
The monopolist tries to pick output, y, so as to maximize profits, B.
B = TR - TC or, in the notation of your book, B = r(y) - c(y)
Because both r and c are functions of y, the max B is found where
TR = r = P y, so in general, dTR
Econ301. Chapter 22, Firm Supply
we suppose that all firms try to pick output, y, so as to maximize profits, B.
B = TR - c
Because both TR and c are functions of y, the max B is found where
TR = P y, so in general, dTR = P dy + y dP or
In a competitive ma
Econ 301, chapter 33, welfare
There are lots of different Pareto points. At some points I am king and at some you are. If you
want to find a global optimum (whatever that might mean) you need some way to add up the U
functions for all traders.
aggregation
Econ 301, chapter 32, Production and exchange
Robinson Crusoe Economy
The picture above implies that the MRS = MP at the Robinson Crusoe point of optimum.
Now we introduce the firm which maximizes profit (B = pC - wL) when MP = w/p
note dC/dL = f= MPL = w
Econ 301, chapter 9, exchange
Net and Gross Demands
trader enters the market with endowment (T1,T2). He wants to go home with, i.e., he has a
gross demand for (x1,x2). He has a net demand or excess demand of (x1- T1, x2- T2).
Budget constraint
value of wh
Econ 301, chapter 6, Demand
The demand function looks like this: x1(p1, p2, m). How does x1 vary with changes in p1, p2,
and m?
Changes in m
dx1/dm could be positive, negative, zero-even with well behaved preferences
if positive, normal good
if negative,
Econ 301, chapter 18, Technology
note the unhelpful change in notation.inputs are now x1, x2, etc, and output is y
production functions
diminishing returns
cobb-douglas
iso-quants. perfect input substitutes and complements, like goods
we usually assume mo
Econ 301, Chapter 3
First lets define what we mean by a bundle. We often talk about a bundle of commodities,
like 1 bottle of wine, 2 oz. of cheese, and 4 crackers. This would be the bundle (1, 2, 4) where
the first entry is quantity of wine, second is ch
Econ 301, Chapter 5, Choice
Starting the theory of household behavior prior to D has costs and benefits:
costs-extra work and assumptions
benefits-illuminates trade, welfare, optimality, disequilibrium
our economic man maximizes his U s.t. his BC
this vie
Econ 301, Chapter 3
First lets define what we mean by a bundle. We often talk about a bundle of commodities,
like 1 bottle of wine, 2 oz. of cheese, and 4 crackers. This would be the bundle (1, 2, 4) where
the first entry is quantity of wine, second is ch
Econ 301, chapter 6, Demand
The demand function looks like this: x1(p1, p2, m). How does x1 vary with changes in p1, p2,
and m?
Changes in m
dx1/dm could be positive, negative, zero-even with well behaved preferences
if positive, normal good
if negative,
Econ 301 Chap 2
In Econ 103, we say traders usually have down-sloping demand curves.
In 301 we start prior to D, asking question like Where does this come from? Why do they
usually act like that? When dont they?
We model the households behavior in 301 and
Econ 301, Chapter 4, Utility
Utility is a way, an old-fashioned way, of describing preferences.but it has its uses.
We think of a U(.) function that maps (x1,x2,.xn) to R. That is, it assigns a number to every
bundle. The bigger the number, the higher the
Econ 301
Chapter 25
Monopoly Behavior
Skip second degree price discrimination in section 25.3.
The Temptation to Price Discriminate
Consider the monopolist shown below. If the same price must be charged to all buyers, then P0 is the best price.
But the te
Econ 301, chapter 6, Demand
The demand function looks like this: x1(p1, p2, m). How does x1 vary with changes in p1, p2,
and m?
Changes in m
dx1/dm could be positive, negative, zero-even with well behaved preferences
if positive, normal good
if negative,
Econ 301 guidance for 2nd midterm
General:
Know the lecture notes and associated pdf. Let the book help topic by topic. Dont
worry about math, concepts, or graphics in the book that we did not cover.
Detail:
Start in Ch 31 at p. 598 and go to 606. You are
Econ 101, ch 31, Exchange
Ill start by drawing the Edgeworth box for two traders (A and B) by superimposing two sets of
indifference curves, one of which is inverted via a 180 rotation. This is easily done in the
classroom with 2 transparencies.
There are