Notes From Class
Notes From Class Econ 200
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This 5 page Bundle was uploaded by Ashley Huffman on Sunday February 1, 2015. The Bundle belongs to Econ 200 at University of Washington taught by Gregory Ellis in Winter2015. Since its upload, it has received 60 views. For similar materials see Introduction to Microeconomics in Economcs at University of Washington.
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Date Created: 02/01/15
Quiz Section 2 2115 1015 PM Opportunity Cost Review Opportunity cost is always the NET VALUE But not always the difference Example 0 MacBook Pro for free 0 You could sell it for 1000 at store foregone value 0 Instead you purchase a new hard drive for 500 foregone value added 0 Opportunity cost of keeping the computer and buying a new hard drive for it 1500 I Accumulation of prices Value of Life The value of a good is determined by the willingness of humans to give up other goods in order to obtain that particular good A market premium which humans are willing to give up in order to obtain a good 0 Not an ethical judgment Example 1 o Plumbers 0 TA 0 20 hr for employment everyone picks TA as ore desirable 0 But when plumbers at 30hr and TA at 20hr more people pick plumbers than first scenario I 10 is the market premium Applications 0 Employment amp Wages 0 Public Policy 0 Housing Market Example 2 o 2 identical houses same year same builder same color 0 But one is right next to the train station and the other is in a quiet neighborhood I Quiet neighborhood house sold for 500000 I Train station house sold for 350000 0 150000 for not being inconvenienced by the train Consumption Over Time People smooth their consumption over time Smooth meaning that consumption remains relatively stable Present Consumption The price of present consumption is the amount of future consumption a person has to give up in order to consume a unit of present consumption o What ever you are consuming now is present consumption price 0 present consumption present consumption People are more Willing to trade off consumption today in order to spend combined consumption later in life 0 A more steady consumption Hypothesis s Income Hypothesis Lifetime Earning Hypothesis 0 Even though income is steady over time people s consumption is mostly steady Quiz Section 4 January 30 2015 Gain from Trade People trade when it is mutually beneficial for them to When all units are transacted of a single price then we maximize the gains from exchange Market Equilibrium The quantity of the good demanded is equal to the quantity of the supply How do we obtain a market equilibrium 0 Arbitrage Buying a good and reselling it and making a profit off the temporary price difference Ex 2 bookstores that sell the Econ text book 0 Bob s 150 amp Sam s 300 0 Buy multiple from Bob s and sell them at a higher price for friends in order to make a profit off of it 0 Stores will eventually even out prices once they see the demand for it I Person s arbitrage will go out of business Main Ideas Consumers purchase goods until the marginal value of each good falls to the point where that person has to give up more in terms of the value foregone then he she receives by purchasing that good Consumers who purchase a good have the same marginal value of that good which is the market price Competitive Markets Markets in which many buyers amp sellers transact w each other at unique prices that are beyond the direct control of only one trader The Role of Middlemen Cost from exchange Transaction Costs 0 Transportation Packaging Process of selecting goods Waiting for checkout 0 Transaction costs are the costs associated with determining exactly what is being transacted including the resources used to ensure against bad outcomes Middlemen are people that facilitate trade between the producer of the good and the final consumer of the good 0 Ex Grocery stores or other super markets Discount houses like Costco eBay 0 In most cases they lower transaction costs and often information costs The Use of Money for Exchange Barter Exchange of goods for other goods Money must be 0 Easily recognizable 0 Portable to bring to the store 0 Difficult counterfeit so replicas couldn t be used 0 Staple value constant price not continuously changing Political Exchange Trading political goods i e Votes Common among politicians but a lot harder for regular citizens to partake in political exchanges Chapters 2 amp 3 January 152015 The Law of Demand The quantity demanded of any good or the level of any activity pursued varies inversely with the price of that good or activity holding other things constant Only changing the price of the good in question nverse relationship with price and demand Individual enknd Curve P Total Willingness to Pay CS TE under the curve Marginal Willingness to Pay above curve Q Market De and ve P B s Demand 6 10 A s Demand gt6 Market Demand Q End up with market demand curves that are downward sloping Every point represents some individuals willingness to pay marginal value The area underneath the curve is the total willingness to pay Movement along a demand curve s two points on the line it is not a change in demand just a movement Change in demand is a change in the entire curve The entire curve must shift for this to be a true statement 0 Something held constant in the Law of Demand must have changed Elasticity An attempt to measure the responsiveness of a endogenous variable when another exogenous variable changes
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