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Lecture 2

ECON 104 Lecture Notes - Lecture 2: Demand Curve, Microeconomics, Economic Equilibrium


Department
Economics
Course Code
ECON 104
Professor
Vasyl Golovetskyy
Lecture
2

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Jan 18, 2016
Econ 104
Chapter 2: Economics, A Special Way of Thinking
Positive - what is?
Normative - what ought to be?
someone’s opinion
make normative as close to positive
Economics = study of behavior
= study of choice
= study of allocating scarce resources to achieve some goals
= what economist do
= an art of taking common sense and making it incomprehensible
= a special way of thinking about behavior
owe all speak English which is the common language, but special ways is the way
we speak English (i.e. accents)
Neoclassical Economics
1. People are maximizers
2. Principle of diminishing marginal values
3. The idea of equilibrium
4. Paying special attention to opportunity cost
5. Thinking “on margin”
Science = 1) Testable hypothesis (and want to know if it’s correct)
2) Empirical evidence
3) Common procedures
Experiments (economics doesn’t have much as it’s hard/can’t do this)
Model (VERY) simplified “copy” of a real thing
help make you be able to study things (ie without killing)
Homo Economics: - model of a person
a maximizer (get most of something by determining what it is therefore impossible to)->
o-> desire to get the most ->
-> max value
- Maximizer is about what we try to do
Value: what you are willing to give up
-Value is different than price
-I.e. pen is $3, so you are willing to give up $3 for a pen, so that’s giving up buying 2
water bottles
“On margin”: for 1 additional unit
-i.e. given how many you have, so thinking of taking 6 courses then the 6th course is on
margin
Diminishing marginal value: the more you have of something the less valuable an additional unit
is
-i.e. the more money you have the less valuable it is for you
Equilibrium: state of rest (a balance of 2 system)
-i.e. ball no move as it’s at rest so therefore it’s at equilibrium
-don’t want to change what you’re doing
-choice you make will be equilibrium
ochoosing to do things you won’t want to do different in the same circumstances
Opportunity Cost: what you have to give up
-i.e. being a full time student going to SFU, cost is that you can’t work
-not willing to but have to give up as that’s the cost!
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