×
Log in to StudySoup
Get Full Access to UMD - ECON 306 - Class Notes - Week 3
Join StudySoup
Get Full Access to UMD - ECON 306 - Class Notes - Week 3

Already have an account? Login here
×
Reset your password

UMD / Engineering / ECON 306 / What are net gains?

What are net gains?

What are net gains?

Description

.lst-kix_7x3xwnkm8hnb-3 > li:before{content:"- "}ul.lst-kix_xm34bt3ii4g3-7{list-style-type:none}ul.lst-kix_xm34bt3ii4g3-6{list-style-type:none}ul.lst-kix_xm34bt3ii4g3-5{list-style-type:none}ul.lst-kix_xm34bt3ii4g3-4{list-style-type:none}.lst-kix_7x3xwnkm8hnb-5 > li:before{content:"- "}.lst-kix_7x3xwnkm8hnb-2 > li:before{content:"- "}.lst-kix_7x3xwnkm8hnb-6 > li:before{content:"- "}ul.lst-kix_xm34bt3ii4g3-8{list-style-type:none}.lst-kix_xm34bt3ii4g3-8 > li:before{content:"- "}ul.lst-kix_xm34bt3ii4g3-3{list-style-type:none}ul.lst-kix_xm34bt3ii4g3-2{list-style-type:none}.lst-kix_7x3xwnkm8hnb-4 > li:before{content:"- "}ul.lst-kix_xm34bt3ii4g3-1{list-style-type:none}.lst-kix_xm34bt3ii4g3-7 > li:before{content:"- "}ul.lst-kix_xm34bt3ii4g3-0{list-style-type:none}ul.lst-kix_7x3xwnkm8hnb-4{list-style-type:none}ul.lst-kix_7x3xwnkm8hnb-5{list-style-type:none}ul.lst-kix_7x3xwnkm8hnb-2{list-style-type:none}ul.lst-kix_7x3xwnkm8hnb-3{list-style-type:none}ul.lst-kix_7x3xwnkm8hnb-0{list-style-type:none}ul.lst-kix_7x3xwnkm8hnb-1{list-style-type:none}.lst-kix_7x3xwnkm8hnb-1 > li:before{content:"- "}ul.lst-kix_7x3xwnkm8hnb-8{list-style-type:none}ul.lst-kix_7x3xwnkm8hnb-6{list-style-type:none}.lst-kix_7x3xwnkm8hnb-0 > li:before{content:"- "}ul.lst-kix_7x3xwnkm8hnb-7{list-style-type:none}.lst-kix_xm34bt3ii4g3-0 > li:before{content:"- "}.lst-kix_xm34bt3ii4g3-4 > li:before{content:"- "}.lst-kix_xm34bt3ii4g3-2 > li:before{content:"- "}.lst-kix_xm34bt3ii4g3-6 > li:before{content:"- "}.lst-kix_xm34bt3ii4g3-1 > li:before{content:"- "}.lst-kix_xm34bt3ii4g3-5 > li:before{content:"- "}.lst-kix_7x3xwnkm8hnb-7 > li:before{content:"- "}.lst-kix_7x3xwnkm8hnb-8 > li:before{content:"- "}.lst-kix_xm34bt3ii4g3-3 > li:before{content:"- "}

Tax on consumers

We also discuss several other topics like Describe the earth's composition.

We also discuss several other topics like What is punitive damages?

        If you want to learn more check out What is the difference between calotype and daguerreotype?

                                                Tax on consumers

We also discuss several other topics like Why we do theatre?

                                                                

                                                Don't forget about the age old question of Who was the first pr professional?

                                                

                                                Tax on consumers Don't forget about the age old question of What is probabilistic?

                                                        

 fall due to tax on consumers

Impact of tax ↑  ↓         CS gets smaller ps gets smaller

Tax revenue =                 

Additional region - CS+PS that was lost = deadweight loss

                                                Subsidy on consumers

                                                

                                                                

                                                        ↑

                                                Market price with sub

                                                CS increases PS increases

Add up additional gains = net gains

Government spending =

Net loss =

Consumer Choice Model

                                        1. Preferences                ⎱ determinants

                                        2. Constraints                ⎰

Preferences

Ranking of different quantity bundles of various goods

Bundle - combination of quantity of each of the goods

Simple → 2 goods only - root beer(R) and eggs(E)

                                            Way of comparing bundles to see which we like best

Four Assumptions “axioms”

1. Completeness - preferences are complete. For any 2 bundles A and B, one of the following must be true

        1) A is preferred to B

        2) B is preferred to A

        3) A and B are equally preferred

2. Transitivity - “more is preferred to less”

         R  E        → (4,2)

        (3, 2)

            ↓

        (3, 3)        ?(2, 10)?

                                                 All bundles are preferred

                                                        Indifference curve:

 /eventually will be indifferent                

                                                        IC - bundles that consumer is indifferent to

   Less preferred

                                A is least preferred, C is most

                   Stronger preference for root beer, give up more eggs to get R

Slope = = marginal rate of substitution

        = how many eggs the consumer will give up to have more R

Utility Function

U(R, E) how much utility a person gets from different bundles

U (A) = (B) A is preferred to B

                        A        B        C

U(R,E) = R • E                (2,3)        (3,4)        (1,5)

UA = 6                UB = 12        UC = 5

Assumptions

1. Completeness

2. Transitivity - have to have absolute rankings

3. Monotonicity - more is preferred to less

                                Slope is negative

4. Convexity - diminishing marginal rate of substitution

        ⤷ bowed inwards

Marginal rate of substitution (MRS) -

  • Slope of the indifference curve (absolute value)

                

                     

                                

  • Rate at which you exchange one good for other
  • How much y you would give up for x

                        = amount of beer willing to give up to

                                                have one more pizza

                                

                

The more pizza I have, the less will I give up to get more beer less my minimum

                                        

Page Expired
5off
It looks like your free minutes have expired! Lucky for you we have all the content you need, just sign up here