ECON 1100 1nd Edition Lecture 13 Outline of Last Lecture I. Lobster ApplicationII. ElasticityOutline of Current Lecture I.Exam/HWII.RationalityCurrent LectureI. Exam/HWExam Friday, October 18 @ 6:30 pm in same rooms as before25 MC & 2 SAOver Ch 3-6, so next 4 Top 10 listsReview previous, everything is building on top of basics from Exam 1Write experience due 10/10II. RationalityRationality – constrained optimization based on:Goals or objectives (happiness or utility)Constraints (budget)Rule for figuring out what’s best choice (marginal analysis)People make purposeful decisions to make selves happiest w/in availabilityMake choices due to what makes you happy, what you like, subject to constrainsConstraint range: physical (not possible to fly as human), legal, economic (X $ available)These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Way of thinking about whether you’re doing best you could – marginal analysisInvolve decision upon how muchQuestion of balance, how much of X & how much of YEconomists treat people as adults (except for children because they don’t truly know what they want)Constraint:Income: $200/monthP pizza: $2/sliceP sandwich: $5/sandwichIncome/P good = most item you can buy100 slices pizza max40 sandwiches maxEvery point represents possible comboPoints outside triangle, such as A, are not attainable at current incomePoints inside triangle, such as B, are attainable and you save $, but it doesn’t make sensebecause adding other goods for this saved $ will complicate the modelThe line represents the budget line/constraint which depends on the price of goods & income Slope = -5/2
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