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Lecture

Substitution.docx

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Department
Economics
Course
ECON 2210
Professor
M.Yu
Semester
Fall

Description
Substitution - Substitution: everyone is willing to trade some amount of one good for some amount of another 1. It is an act of the will - One is willing to substitute one good for another 2. Everyone is willing to substitute one good for another, but it doesn’t say how much 3. Relationship between what someone is willing to pay and what he is able to pay - You have enough resources (income) to make the payment - Willing to pay for something and must be able to pay for it Trade-offs are everywhere - Trade-offs are made everywhere so that nothing is sacred, we are willing to sacrifice everything The fallacy of priority in consumption - When an individual “needs” something, there is a priority in consumption, they will not live if the need is not met yet - To have a priority in consumption implies that individuals first satisfy their most important need, then satisfy their second, e
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