INTER MICROECON ECO 3314
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This 1 page Class Notes was uploaded by Keyshawn Gutkowski on Wednesday September 23, 2015. The Class Notes belongs to ECO 3314 at Texas State University taught by L. Feng in Fall. Since its upload, it has received 27 views. For similar materials see /class/212869/eco-3314-texas-state-university in Economcs at Texas State University.
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Date Created: 09/23/15
OOOOgt gt gt gtgt gtgt gt OOOOOOOOOOOOOOOOO If F red s marginal utility of pizza is 10 and his marginal utility of salad is 2 he would give up 5 salads to get the next pizza If the utility function between food and clothing is U x the marginal utility of food is lZW If two goods are perfect substitutes the indifference curves for those two goods would be downward sloping and straight If both prices increase by 50 the slope of the budget constraint stays the same If the utility for two goods x and y is measured as U x y then it can be concluded that x and y are perfect substitutes By selecting a bundle where MRS MRT the consumer is reaching the highest possible indifference curve she can afford The demand curve has unitary price elasticity when price is exactly in the middle Price elasticity of demand is 1 when unitary price elasticity is in the middle When given budget line and indifference map the bundle farthest away from origin where the lines intersect will be chosen pTiCe 39 Pr1ce elast1c1ty of supplydemand coeff1c1ent quantity income Income elasticity coefficient quantity Seller receives Pricea max Consumer pays Pricea quot m tax Tax revenue Qa max tax Deadweight loss tax Qb f x Qa maquot elasticity a f supply Percent tax paid by burden elasticity of supply felasti39ci39ty of demand Inferior good if income elasticity is negative Changes in price of substitutes will cause changeshift in demand curve Factors that determine demand price of good taste information price of related goods income govt rules other Factors that determine supply price of good costs government rules and regulations Perfectly competitive markets everyone is a price taker firms sell identical products everyone has full information about the price and quality of goods and costs of trading are low Elasticity of demand will always be negative elastic The more quantity changes the more elastic it is Along a downward sloping linear demand curve elasticity of demand is a more negative number the higher the price is If price elasticity is positive the goods are substitutes If elasticity is negative the goods are compliments Ad valorem tax for every dollar the consumer spends the government keeps a fraction which is the ad valorem tax Unit tax where a specified dollar amount is collected per unit of output Transitivity if a gt b and b gt c then a gt c Indifference curve the set of all bundles of goods that a consumer views as being equally desirable Marginal rate of substitution BS the maximum amount of one good a consumer will sacrifice to obtain one more unit of another good Bundle will be determined by preferences and budget Lshaped curve shows the two goods are perfect compliments then become imperfect substitutes as you move away from origin Utility a set of numeric values that re ect the relative rankings of various bundles of goods Utility function the relationship between utility values and every possible bundle of goods Marginal utility the extra utility that a consumer gets from consuming the last unit of a good Budget line budget constraint the bundles of goods that can be bought if the entire budget is spent on those goods at given prices Opportunity set all the bundles a consumer can buy including all bundles inside and on the budget constraint Behavioral economics by adding insights from psychology and empirical research on human cognition and emotional biases to the rational economic model economists try to better predict economic decision making
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