Econ 102 01 22 2013 DAY 2 The true cost is the opportunity cost Whether you are spending or gaining money you need to consider the ABSOLUTE VALUE to recognize the opportunity cost o Example gaining 30 dollars or spending money to gain something that is valued at 50 dollars Be careful if the question says AVERAGE May lead to answer being depends because of average Rational people make decisions at the margin Incentives matter More girls than guys less quality pickup lines to be effective o Don t necessarily have to be quality because the competition is low Day 3 Efficient Markets move towards equilibrium Shouldn t matter which line you choose when going to a movie theater close or far away Question You drive 7 000 miles on average a year and its 1 00 a gallon Pick a new car with an initial price of 600 and 40 mpg or old car 100 and 20 mpg Yearly cost of the old car o car is given by C O 100 M 20 100 7 000 20 450 o M is number of miles you drive a year New car N C N 600 M 40 300 7 000 40 775 The good of one is the good of many Terms Invisible Hand Invisible Foot Efficient Equitable Selling single game basketball tickets for 40 45 dollars on a first come first serve basis This is equitable efficient or neither When a situation is efficient there is no way to make one person better off without making another person worse off Iphones Angry Birds Apps USA 4hrs 2 hrs CHINA 5 hrs 10 hrs 01 22 2013 01 22 2013