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Econ 110 notes week 4

by: Sydney Clark

Econ 110 notes week 4 Econ 110

Marketplace > Brigham Young University > Econ 110 > Econ 110 notes week 4
Sydney Clark
GPA 4.0

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Slightly late but very detailed. Discussing supply and demand curve
Econ Principles and Problems (ECON 110)
Class Notes
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This 4 page Class Notes was uploaded by Sydney Clark on Tuesday September 27, 2016. The Class Notes belongs to Econ 110 at Brigham Young University taught by Kearl in Winter 2016. Since its upload, it has received 105 views.


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Date Created: 09/27/16
Econ 110 notes week 4  Assume all individuals are  o 1.) Rational o 2.) Optimizers/ Maximizers  Behavior  1.) choose activity level (“Q”) o So MC=MB o So that…. (MBa/MCa)=(MBb/Mcb)=………. A: all  consumed  2.) Ignore sunk costs  Prescriptive  Descriptive  Assume that you WANT to optimize  Assume this and this must be true  If MB> MC means… Q  Must describe situation and outcome  If MB < MC means… Q    Assume you’re optimizing   For any economy you need a PRICE and self interesting o “a Little government.”  Define and enforce property rights  Enforce contracts  Where do the price come from? o 1.) government announce price (AB @ price 41) o 2.) Cultural norms (currency) o 3.) Markets that bring together self­interested people  1.) Have money, want goods, services inputs  “demanders”  2.) Have goods, want money  “suppliers”  Market is a set of related transactions o o QTY/unit of time “Q”  Dollars may not tell us if the relative price changes  Cetaus Parabus: All else= if everything else and we can measure the relative price change   o Quantity demanded exceeds quantity supplied “excess D” o Qp>Qs  exceeds D o Both sides of market would prefer different prices  Buyers would rather buy something than nothing  Predict P* or equilibrium  Demanders: Have $ and want goods o Inverse relationship between price and quantity  Substitution o Demand curve is a picture of an idea  1.) (MBa/  Pa)= (MBb/   Pb) o Point of a demand curve you can always substitute  Prices are determined by the marginal buyer  Demand curve us a picture of diminishing marginal willingness to pay  Consumer surplus o o Markets produce surpluses  Value willing to pay o Price isn’t the only thing that matters  1.) income  2.) price of other goods  3.) transaction costs  4.) expectations   What happens when income increases??   If Pb      QTa     =substitute  If Pb      QTa     =complements  If you follow transaction costs you’d be willing to pay more  If expected price tomorrow goes up the demand curve would shift up  Can everybody expect prices to go up?? o The expected price today has to be the same as tomorrow


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