ECO 101 Lecture Notes - Lecture 3: Marginal Cost, Marginalism, Comparative Statics
Document Summary
Optimization- people will make the best choice given available info. People do not always optimize, but behavior approximates optimization. Calculate: net benefits (nb)= total benefits (tb)- total cost (tc: optimization in levels. Find nb of each option and pick highest nb: optimization in differences. Calculate just the change in nb from moving from one option to another. Behavioral economics- why people optimize in some situations and fail to optimize in others. Costs in ticket/gas, food and time all other costs are 0. Using wages to determine $ cost of time. Use the totals to find net benefit the concept of optimization in two ways: to describe the behavior of knowledgeable decision makers and to identify and improve suboptimal decisions. Go through each column and subtract the late number by the previous (positive or negative). Once you do that for each column add up the differences within the row.
