ECON 102 Lecture Notes - Lecture 3: Economic Equilibrium, Inferior Good, Normal Good
1
ECON 102 Full Course Notes
Verified Note
1 document
Document Summary
Models and tools: supply and demand, endogenous and exogenous variables, demand functions and supply functions. Solve the complexity problem (where do ham sandwiches come from?) Use prices to transmit information and create incentives. Create incentives that maximize private and social benefits. Exogenous variables: the value is determined outside the model, exogenous = external c. Income, preferences, taxes, weather: one whose value is wholly causally independent from other values in the system. Demand function: qx = quantity of good x, px = price of good x c. I = income: w = weather, e = exogenous. All exogenous variables are folded into the b parameter. Number of epi - pens sold depends on: price, number of patients, substitutes, health insurance, availability (easy or hard to get, an allergy. An inferior good is a type of good for which demand declines as the level of income or real gdp in the economy increases.