ECON 103 Study Guide - Midterm Guide: Demand Curve, Economic Surplus, Real Income
7 Mar 2017
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Principle 3: diminishing mv, the most of one thing you have, the less you value it on the margin. Principle 4: opportunity cost, value of highest forsaken alternative. Principle 5: diminishing mp, increases in 1 input leads to increases in output at a diminishing rate. Maximization, scarcity, equilibrium, the margin, indifference, use econ to save the world. Panglossian dilemma: pangloss thought everything in the world was good (optimal), people maximize so as to obtain all benefits, and if they haven"t been attained then u haven"t maximized. Substitution, trade-offs (everywhere), fallacy of priority of consumption, mv, exchange, Diminishing mv: the most someone is willing to sacrifice at the margin for a good, per unit, declines the more someone has of that good (the more of something someone has, the less they value, mv falls). Everyone has fixed incomes and can only purchase 2 goods (g1 and g2) Real income: how many of a certain good can be purchased.
