ECON 103 Study Guide - Midterm Guide: Arc Elasticity, Pareto Efficiency, Economic Surplus
26 Sep 2017
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Economics is a way of thinking about behaviour. For targeted ads + bring people back to the store. Characteristics of economics: formality can be helpful by providing explicit assumptions, a testable model is a useful model, simple models > complex models, people are fundamentally the same in motivation and nature. (just behave differently in different situations) Note: dmv = mv as q (cid:449)he(cid:396)e q = a(cid:373)ou(cid:374)t (cid:455)ou ha(cid:448)e (quantity: opportunity cost = cost of highest alternative, diminishing marginal product = increase in input increases output at decreasing rate. Note: dmp = mp as q : rate of time preference = all things equal, people prefer goods now, optimal organization = designed to maximize gains from trade. Assume everyone maximizes. (try our best to make ourselves the best off) Maximization implies (1) security, (2) exchange, (3) equilibrium, (n) optimal. Scarcity: (1) a good = scarce if people want at price . (2) if price > 0, a good is scarce.
