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Economics (213)
ECON-UA 1 (101)
Lecture

Day03
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Department
Economics
Course
ECON-UA 1
Professor
Marc Lieberman
Semester
Fall

Description
Day 3 242014Model Abstract representation of realityA model does not necessarily cover every aspect of realityex road map doesnt have treesAssumptions made by models1Simplifying assumptions made to keep model simple ex Map assumes there are no trees2Critical assumption that effects the conclusionex Map assumes all roads are open for travelSupplyDemand model that helps us see how prices are determined inmany different marketsPrices are market signals2 types of variables1Flows process that occurs over period of time ex Rate at which water flows into tub2Stock quantity that exists at a moment in timeex amount of water in the tub at a given timeMarket for Gasoline in the USQthe number of gallons of gas buyers would like to buy in the US each month given their DconstraintsConstraints buyers face1Income2Must pay a price Expected Q Dprice per gallon income wealthP P PtastesD SubstituteComplement Gas depends on stuff in Temporarily hold everything except price per gallon constantLaw of demand when price of something goes up demand for it generally goes downCeteres Paribus Latin for all else the sameNormal good people buy more as income risesInferior good people buy less as income risesIf price of good changes move along demand curve if anything else changes demand curve shifts
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