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EC120 Lecture Notes - Lecture 18: Vise, Inferior Good, Budget Constraint

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cyanfish941
4 Apr 2016
School
WLU
Department
Economics
Course
EC120
Professor
Amjad Rabi

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EC120 Full Course Notes
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EC120 Full Course Notes
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Document Summary

Recall: people face tradeofs (ten principles in chapter 1) Buying more of one good leaves less income to buy other goods. Chapter 21 explains how consumers choose what to buy. Theory examines tradeofs people experience as consumers. Theory of consumer choice (tcc): economists assume the consumers choose the best bundle of goods they can aford. The limit on consumpion bundles that a consumer can aford. Links income to prices and spending: income = p1q1 + p2q2. This formula shows the tradeof a consumer faces between two goods (q1 and q2) Is the relaive price of two goods. Describes the rate at which the consumer can trade one good for another. Spends enire income on pepsi and pizza. Start at point c consumer wants to increase her consumpion of pizza by 10 units. Recall: the price of good a compared to good b slope = .

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Related Questions

Can I get answers about these questions??

These questions are about Chapter 16-22 in Principles of Microecnomics sixth editon.


Monopolistic competition

· What makes a market monopolistically competitive?

· How do monopolistically competitive firms decide how much to produce and what price to set?

· How to monopolistically competitive firms make short-run and long-run choices?

· What is the role of advertising?

Oligopoly and Game Theory

· What is the prisoner’s dilemma and what are some applications?

· What is collusion and why is it difficult? What are some things that can make it harder or easier to collude?

· What is a dominant strategy?

· How can you find a Nash equilibrium in a game where a player has a dominant strategy?

Markets for Factors of Production

· How do profit maximizing firms decide how much of a factor of production (such as labor) to use? In other words what is the demand for factors of production?

· What changes the demand for factors of production?

· What determines the supply for labor? Supply for other factors of production?

· How are the rental prices and wages determined in a competitive market for factors of production?

Earnings and Discrimination

· What are some reasons why different people have different labor earnings?

· What are some difficulties in measuring discrimination?

· Why might firms that discriminate have difficulty competing?

· Why might a firm find it profitable to discriminate?

Income Inequality and Poverty

· What are some political philosophies regarding what the government should do to decrease poverty or income inequality?

· What are some policies that can reduce poverty? What are the strengths and weaknesses of these policies?

Consumer Choice

· What is the consumers budget constraint?

· How does a consumer choose how much of different goods to consume?

· What are the income and substitution effects?

· How does the demand curve relate to the consumer choice problem?

· How does the consumer choice problem relate to labor supply and borrowing/lending behavior?

Asymmetric Information and Healthcare

· What is moral hazard?

· What is adverse selection?

· How do these two concepts relate to the market for insurance and healthcare?

· How do insurance companies try to deal with adverse selection and moral hazard?