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ECO211 Week 1 & 2 Notes

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by: May Thu

ECO211 Week 1 & 2 Notes ECON 221

Marketplace > University of Miami > Economcs > ECON 221 > ECO211 Week 1 2 Notes
May Thu
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About this Document

These are the notes from the first two weeks. I also mentioned what the professor said were important points to remember. Graphs are portrayed clearly and there are also important equations in the ...
Economic Principles and Problems 211
David Spigelman
Class Notes
ECO211, Microeconomics




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This 5 page Class Notes was uploaded by May Thu on Saturday January 23, 2016. The Class Notes belongs to ECON 221 at University of Miami taught by David Spigelman in Spring 2016. Since its upload, it has received 102 views. For similar materials see Economic Principles and Problems 211 in Economcs at University of Miami.


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Date Created: 01/23/16
Sunday, May 22, y Week 1 Lecture ECO211 Chapter 1-5 ­ Economics: study of how you allocate resources under conditions of scarcity • Microeconomics: study of how individuals allocate resources under conditions of  scarcity (small scale)  • Positive economics: “as it is”, description and explanation of economic phenomena  (scientific explanation: focuses on facts and cause­effect relationships and testing  of economic theories) • Normative economics: “as it should be”, how to make things better (prospective) ­ 3 Principles (to maximize utility/pleasure) 1. Optimization: process of making the best choice possible with given available  information 2. Equilibrium: when everyone is optimizing, no one would be better off with a  different choice 3. Empiricism: analysis that uses data that is evidence­based to determine what is  causing things to happen in the world ­ Opportunity cost: best alternative use of a resource (going to the watch one  movie instead of the other one)  ­ Scientific Method (2 Steps) • Step One: Developing models that can explain some part of the world • Step Two: Testing those models using data to see how closely the model matches  what we actually observe  ­ model: simplified description of reality (drastic simplification)  ­ Causation VS Correlation • Causation: when one things affect the other  1 Sunday, May 22, y • Correlation: when two things are related  • Correlation doesn’t prove causation (There are omitted variables.) ­ Principle of Optimization at the margin • if the option is the best choice, you’ll be made better off as you move toward it, and  worse off as you move away from it • marginal: incremental (small change) ­ Demand Schedule • Demand curve: Price increases, Quantity decreases • Exogenous: outside the system • Endogenous: inside the system (on the axis, price and quantity) • Quantity demanded: Things along the curve ­ Ceteris Paribus: all else equal ­ Supply Schedule • Price increases, Quantity increases  ­ Things that shift the demand curve • Related goods: changes in prices of a substitute/complimentary good • Taste and preferences  • Consumer income • Expected price of good • Normal VS Inferior goods 2 Sunday, May 22, y ­ Normal: Income increases, consume more (demand increases) ­ Inferior: Income increases, consume less (demand decreases) ­ Things that shift the supply curve • Improvement in technology • Decrease in the cost of input • Expectation of falling prices • Weather  • Exogenous factors cause the curve to shift, endogenous factors are along the line ­ Equilibrium: the point where the demand and supply curves intersect  ­ Budget  Constant 3 Sunday, May 22, y ­ Consumer Surplus Formula ­ (What you’re willing to pay) ­ (what you actually pay)  ­ Elasticities of Demand (IMPORTANT FOR EXAM) ­ Elasticity can go from zero to infinity on the demand curve ­ slope is constant **Elasticity DOES NOT EQUAL slope** ­ Can’t eyeball the number, must calculate except when:  Or  When demand or supply curve is  vertical, it is perfectly inelastic.  When demand or supply curve is  horizontal, it is perfectly elastic.  ­ Estimate of Elasticity formula • If the points are closer together, the more accurate the  estimate will be  • Take the absolute value of the answer so it will never be a negative number  •  Q intercept is perfectly inelastic  4 Sunday, May 22, y 5


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