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ECO 211 Labor/Leisure, Bond Math and Important Terms

by: May Thu

ECO 211 Labor/Leisure, Bond Math and Important Terms ECON 221

Marketplace > University of Miami > Economcs > ECON 221 > ECO 211 Labor Leisure Bond Math and Important Terms
May Thu
GPA 3.8

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About this Document

These notes cover labor leisure problems with graphs, bond math terms and examples, and important terms from chapter 16 mentioned in the lecture.
Economic Principles and Problems 211
David Spigelman
Class Notes
Microeconomics, bonds, Labor/Leisure
25 ?




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This 2 page Class Notes was uploaded by May Thu on Monday April 18, 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 31 views. For similar materials see Economic Principles and Problems 211 in Economcs at University of Miami.


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Date Created: 04/18/16
Sunday, April 17, 2016 ECO 211 Labor/Leisure, Bond Math - 4 things that shift the budget constraint - Shifts up: getting a raise, cutting tax rate - Shifts down: a demotion, raising tax rate - Raise taxes: flattens the slope of budget constraint/ shifts it down (Y t0 Y ) 1 Example Test Question - Under what condition would people work harder after raising taxes? - The income effect needs to be greater than the substitution effect (Needs to be on the left of Point A) - What happens when you win a lottery/ get a inheritance? When would you work harder? - There will be a parallel shift of the budget constraint to the right. You will work harder if leisure was inferior. - Value of a bond - Face value/ Principle: amount you expect to be paid back when bond matures 1 Sunday, April 17, 2016 - Coupon: promise of return (% of the face amount) - C: Value of coupon - P: principle amount - I: interest rate - n: number of years Example Bond Problem - Principle: $1000 - interest rate= 5% - Coupon: 50 (5% of $1000) - What will the present value be after 3 years? Important terms - Moral hazard: incentive to do the wrong thing (contrary to the interest of the firm or society) - Adverse Selection: when people you had selected include people you don’t want (example: Insurance companies: if they accept everyone, people with preexisting conditions will join and it’ll be costly) - Conflict of interest: divided loyalties 2


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