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DePaul - ECON 106 - Study Guide - Midterm

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DePaul - ECON 106 - Study Guide - Midterm

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background image Microeconomics Study Guide What is economics? Efficiency: best possible use of resources Maximize of well being Rational choices: best possible choice given conditions 1. Information available 
2. Preferences
3. Economy resources available (scarcity)
Ex) Smoker                                                    vs                         non-smoker Has no information regarding                                          has information of health
health effects (rational choice)                                       (rational choice)                       If both have same information of health effects Short term preferences (short life)                                long term preference (long
(rational choice)                                                                 (rational choice)  Limited (real) Economic Resources  Time - 24hr/day Labor – physical abilities Human capital – intellectual abilities Physical Capital – ex) machine, equipment Technology – ex) software of P.C.  Natural resources – ex) land Money   –   not   a   real   economic   resource   as   it   doesn’t   have   intricate   value,
limitation, and same representation 
Microeconomics: study of individual behavior based on the supply and demand
Making Rational Choices can make an individual get Efficiency and Optimality Efficiency: best use of economics resources to maximize well being either by max
output with certain inputs or min input to get certain amount of output
Optimality: maximization of wellbeing of an individual (has subjective valuation) 
background image Pareto   Optimality:   outcome   where   no   one   could   be   made   better   off   without
making someone else worse off
Opportunity Cost: value of the best alternative choice when making a decision Economic Value Economic value (A) = Direct Benefit (A) – Direct Cost (A) Economic value (B) = Direct Benefit (B) – Direct Cost (B)  Optimal Choice is (A) if Economic value (A) > Economic value (B)                                 Or Economic value (A) > Opportunity Cost of (A)  Opportunity Cost of (A) = Economic value of (B) Net EV (A) = EV (A) – EV (B)                      = EV (A) – O.C. of (A)  Economic Models are an analytical tool to simplify complex reality Elements: Assumptions Theories and Concepts  Graphics and Equations Linear PPF has constant opportunity cost while a non-linear PPF has increasing
opportunity cost

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School: DePaul University
Department: Economics
Course: Principals of Microeconomics
Professor: Liliana Fargo
Term: Winter 2018
Name: Micro notes week 1 to week 3
Description: Showing class notes if in need.
Uploaded: 01/15/2018
4 Pages 20 Views 16 Unlocks
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