ECO 211 Chapter 3: Chapter 3
6 Sep 2016
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ECO 211 Full Course Notes
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Two kinds of optimization: a matter of focus. Economists believe people"s behavior is approximated by optimization; they aren"t perfect at it though. Both ways should give you same answer, they are just different because of the change in focus (whole vs. part) Optimization in differences usually faster & easier because you focus on the key differences between the options. Behavioral economics--jointly analyzes the economic & psychological factors that explain human behavior. Once you understand the basic ideas, it is easy to add more details (to your model) Total costs include direct & indirect costs (i. e. rent & commute) Optimum--the best feasible choice, aka the optimum is the optimal choice. Optimization in levels has 3 steps: o o o. Translate all costs & benefits into common units (i. e. , dollars per month) Calculate the total net benefit of each alternative. Pick the alternative with the highest net benefit. Comparative statics--the comparison of economic outcomes before & after some economic variable is changed.
