01:220:102 Lecture Notes - Lecture 3: Marginalism, Statics

• School: Rutgers University
• Department: Economic
• Course: 01:220:102
• Professor: Daijiro Okada

Document Summary

Chapter 3: optimization - doing the best you can: two kind of optimization: a matter of focus, optimization techniques that emphasize net benefit (benefit minus cost) i. ii. Optimization in levels - calculates the total net benefit of different alternatives and chooses the best alternative. Calculate the total net benefit of each alternative. Pick the alternative with the highest net benefit: comparative statics - comparison of economic outcomes before and after some economic variable is changed i. If wealth increases, some people will buy more expensive cars: optimization in differences: marginal analysis, optimization in differences focuses on the way that alternatives differ i. Translate all costs and benefits into common units, like dollars per month. Calculate the marginal consequences of moving between alternatives.