Class Notes (838,058)
Canada (510,633)
Economics (490)
ECON 103 (154)
Lecture 7

Econ 103 Lecture 7 Jan 28th.doc

3 Pages
50 Views
Unlock Document

Department
Economics
Course
ECON 103
Professor
Iryna Dudnyk
Semester
Winter

Description
Econ 103, Lecture 7 January 28th Chap. 6, Exchange without Production (fixed amount of good available) Ex: -Darlene: MV(D) = 12-0.4 Q(D) -Nelson: MV(N) = 25 - Q(N) -Darlene has a chicken that lays 20 eggs/day Should they trade? Find MV's: -If Darlene eats her 20 eggs: MV(D) = 12 - 0.4 x 20 = 4₵ MV(N) = 25 - 0 = 25₵ ******Check notebook for graph****** ( 1 ) In Equilibrium: -MV(N) = MV(D) => no more gains from trade are possible. -Q(N) + Q(D) = 20 (Eggs available) ^- Total eggs "eaten" -25 - Q(N) = 12 - 0.4Q(D) - Q(N) = 20 - Q(D) -25 - 20 + Q(D) = 12 - 0.4Q(D) -1.4Q(D) = 7 -Q(D) = 5 inefficient (unexploited gains from trade) - Can they gain from trading 16th egg: - for Q(D) = 4 ; MV(D) = 12 - 0.4 x 4 = 10.4 -Q(N) = 16 = 25 - 16 = 9 -If they trade more, => they will lose CS and SS => Equilibrium in this market is efficient. - total gains = CS + SS are maximized. *** skip the box where MV's are put together ***
More Less

Related notes for ECON 103

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit