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Study Guide

[ECON 103] - Final Exam Guide - Comprehensive Notes fot the exam (48 pages long!)


Department
Economics
Course Code
ECON 103
Professor
Ryan Allen
Study Guide
Final

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SFU
ECON 103
FINAL EXAM
STUDY GUIDE

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

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Econ 103 Lecture 1 (week 2)
Maximization: inclusion of this principle is what makes an argument economic
- Maximization has to do with motivation, it is the sole motivator of humans (greed)
- All behaviour is interpreted using Economic Principle #1
- Maximization is universal across time, all genders/religions/ages, etc. Everyone is greedy.
Principle #1 = maximization: all people motivated by greed
But then you ask, what about different people, insane people, criminals, etc. YES they too are also
greedy. Even someone who appears to be acting altruistically, an economist can always come up with
some sort of explanation using the principle of maximization.
Riddle: Legolas only has 10 arrows, and 40 orcs are chasing him, in order to use maximization to help
him get away what should he do?
Always shoot the leader, so eventually after a few are shot the orcs will understand every time
someone steps up to be a leader, they die. Therefore, they will decide to not have a leader and then will
stop chasing him.
Maximization does not imply
- People are always correct (even though you made a wrong decision, you are still greedy)
- People are always cold and calculating (economic models that will be observed will have some
math/calulations in them. But humans are not always cold and calculating robots in this sense,
like he u et to eat eakfast u did’t pode ho a aloies ad egg ith kethup
would supply you with vs your cereal or a piece of toast)
Maximization does imply (3 things)
- Nonsatiation: nonsatiation of something, humans are never satisfied, we may be full of
heeseake i a gie oet ut o’t tu do a up of oage juie, thee is alas oe
we want of.
o This implies MORE is better than LESS
o Greedy person always wants more
o Role of money: it represents something that can get us anything, but it literally is
useless, a sall lue piee of pape that a $5 ill is, does’t eall hae uh of a
purpose
Money=represents all goods
- Scarcity: greed + fixed endowment = never enough
o Choice and cost is the result of scarcity (must give up something for something else to
be obtained)
Sfu discriminates students by letting in certain kids into school and others not
o Scarcity = there will always be people who are winners from it and losers from it
This is because there is competition for things
o “ait does ot eual ait (to e sae, oe people tha it’s aailale aout
should want it)
Small pox is rare, no one wants it tho
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- Equilibrium: all gains from a trade are exploited in equilibrium
o Equilibrium is an idea that exists as result of motivation and maximization
o This happes afte thee is o oe left o the tale, all gais hae ee eploited
and there is no desire to change behaviour in a situation.
Even though equilibrium is reached, we are still maximizers but in situation we
have no opportunities to maximize further ($5 bil on ground was already picked
up by someone)
o Intra-marginal people are people who benefit from maximizing before equilibrium is
reached
Euiliiu iplies…
- No economic profit
o Profit: benefits costs = 0
o Profit drives people to change behaviour, therefore a context is not in equilibrium until
all profit opportunities are exhausted.
o Maiizatio ad euiliiu suggests that if people tell u stuff fo fee, the it is’t
worth anything (cheating 101 book, or they offer to tell u seemingly very useful info for
a small price, like if it rlly was that important they would keep it to themselves and
profit)
o Stock market policies must be random (cuz there are no patterns in it), and if u are
searching to have abnormal rates of return from your investments, u gotta have inside
edge
- No economic policy
o Policy presumably tells where the social profits are lying around
Eooi theo does’t tell us hat to do o ho to sae old
Our fundamental idea is that everyone already did the best they can through
maximization
Economics is a TOOL not a SOLUTION
- (tool used to understand human behaviour, and is not a solution to understanding the stock
market next week in order to make big money from it)
We hae ofidee i aiizatio eause it oes fo a siila iologial oept, atual
seletio. If ou do ot aiize, those ho ae ill i oe u.
We ofte aiize ithout thikig (e did’t hoose to drink gasoline for breakfast, nice!)
Ca people fail ee if the thik soethig though,… ufotuatel, es.
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