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[ECON BC 2075y] - Final Exam Guide - Ultimate 35 pages long Study Guide!


Department
Economics
Course Code
ECON BC 2075y
Professor
Belinda Archibong
Study Guide
Final

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NYU
ECON BC 2075y
FINAL EXAM
STUDY GUIDE

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Rationality, Utility Theory and Expected Utility Theory in Positive and Normative
Economics
All economics is normative economics (she believes this and will defend it)
Hw 1 is posted, due Sept 20 on Courseworks
All extra credit on tests come from readings, so keep up w/ them
Positive economics is actually a subset of normative economics
Prove this by utility theory
Showed vid from Bloomberg Politics- How the Dems & Repub Races are shaping up in
Iowa
Trump v clinton v sanders (strange match up)
○ Non-linear
Utility Theory we have preferences & unlimited wants, but there's something that outs a limit
on our action of unlimited wants (budget constraint ex)
Consumer choice theory
Theory of revealed preferences→ people have particular set of preferences based on their
actions/choice
All else remaining equal assumption working in the background (ceteris paribus)
How do you measure the satisfaction of drinking coke?
Comparing to the satisfaction of drinking something else similar?
When 2 ppl are being compared there is no scale
Matchup where marginal utility is equal
Marginal utility per dollar
Rationality & Choice
Rational choices should further your goals
2 requirements for choice to be rational
Transitive-linearity
x,y,z→ x≥y≥z
X>y, y>z, z> x
Never ending loop-> makes her a sucker
Complete- all the choices are available
X,y (self- interest)
X≥y (x,y) ← z> x
Y≥x
Invisible hand
Individuals act in their best self-interest so it leads to equilibrium
But not self-interest in transitive and completeness
Ordinal utility-only the ranking or order of preferences mater, values don't matter
Cardinal utility-numbers matter, magnitude matters
If not acting based on facts, rationally…. Is it a positive thing?
Rationality → certainty will save
Not rational
find more resources at oneclass.com
find more resources at oneclass.com
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What is probability function:
P P’ P’’
P> P’ P+ (1-x) P’’
← [0,1] > P+ (1-x) P’’∝ ∝
Independence assumption: Ask someone do u prefer coke and apple and pepsi
and apple, should be independent of--apple is irrelevant
This is what rationality looks like when you have uncertainty
find more resources at oneclass.com
find more resources at oneclass.com
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