Economics 2150A/B Lecture Notes - Inverse Demand Function, Exogeny, Demand Curve

• School: Western University
• Department: Economics
• Course: Economics 2150A/B
• Professor: Prof

Document Summary

Study of how we allocate scarce resources among competing groups with unlimited wants. Offers insights into real world situations that affect us every day. Ex: cap and trade = lowest cost solution. Three types of models: constrained optimization, equilibrium analysis, comparative statics. Df try to max or min an objective function subject to a constraint. Ex: suppose you wish to fence your yard. Want to maximize area s. t. the constraint that you have a limited amount of fencing (100m) Objective function that you are trying to maximize = area = l x w s. t. perimeter = 2l+ 2w 100m. Ex: choose l and w to max area. Chooses f and c to max utility (satisfaction) s. t. income constraint. Production function turn k,l into output qo. Given that we want to produce a certain amount of output, how do we maximize. We choose an input level that minimizes out costs of production. Minimizes costs = wl +rk s. t. an output constraint.