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Final

An Economics Perspective Review Notes for Final Exam - 4.0ed the exam!

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Department
Economics
Course Code
ECON 150C1
Professor
All

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Summary  from  the  review  section  Econ  150  C1:  12/11/12     • Allocation  vs.  Distribution:     -­‐ Allocation  in  Economics:  allocating  scarce resources. -­‐ Distribution: distributing stuffs (real actions) -­‐ Market prices can achieve efficient allocations (how are scarce resources used, given preferences and wealth?), but they do not take care of the distribution (who should have more wealth?). • What prices do: Prices convey information about value, without needing to have any one person actually do the calculations. Market works well when price convey the right information, fail when not. • Supply and Demand: -­‐ Supply makes stuff, demand buys stuff -­‐ A supply curve tells us how much producers make at each price. -­‐ Supply shifters: input prices… -­‐ Demand curve tells us how much people will buy at each price. -­‐ Demand shifters: supplement and complement goods -­‐ Equilibrium, Excess Supply, Excess Demand -­‐ Draw graphs by yourselves. • Price taker: Perfect competition:” Producers and consumers are price-takers.        When  price-­‐takers  adjust  how  much  they  make  or  buy,  they  do  not  affect  the  price.   • The  price  at  which  supply  equals  demand  is  the  equilibrium  price  or  the  market-­‐ clearing  price. • Opportunity cost is the cost of forgoing the next-best option • The three things that make electricity special: no storage, fixed retail pricing, and expensive plants use cheap fuel • How the type and cost of electricity generation vary throughout the year and day: highest in the summer -­‐ Coal  is  expensive  to  build  but  the  fuel  has  historically  been  cheap.   -­‐ Nuclear  is  extremely  expensive  to  build  but  the  fuel  (uranium)  has  historically   been  extremely  cheap.   -­‐ Natural  gas  has  been  cheap  to  build  but  the  fuel  has  historically  been   expensive. -­‐ Not  true  now  with  shale  gas... * What are our electricity sources during a day? Nuclear, coal, renewable (solar, biomass, hydro), wind, gas • • Private goods, club goods, open-access and public goods Excludable Non excludable rivalrous Private goods (most Common or open-access goods) goods
(beach, village pasture) Non rivalrous Club goods (satellite Public goods (lighthouse, television) military) • Excludable: It is possible to prevent people from having access to the good. • Rivalrous: When one person uses a good, someone else cannot use it. • Pareto improvement: An action makes somebody better off without making anyone worse off • Pareto optimum: There are no possible Pareto improvements; every possible trade creates at least one loser. • Pareto improvement: An action makes somebody better off without making anyone worse off • Utility: An individual’s well-being • Economists  assume  people  make  decisions  to  maximize  their  utility. • They  also  typically  assume  that  having  more  of  a  good  thing  increases  utility,  but   that  the  first  units  increase  utility  most.  
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