ECON 103 Lecture 4: lecture4
30 Jan 2018
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Diminishing marginal value: the third principle in economics is diminishing marginal. Value: it doesn"t matter what the good, the more you have the less you"re willing to pay for more. Why do you save over the life-cycle: some things to note: Principle number 3 refers to a rate of consumption. Even though everyone is assumed to behave according to these principles, there is lots of room for differences. Y = m/py - px/py x: real income: Son worked 30 hours @ /hour. true, the bikes are not the same, but his income looks higher without adjusting for quality: real income. A major reason why nominal incomes don"t measure real utility is due to inflation. Nb: there is no unique measure of real income, it depends on the price level you use: relative prices. Measures prices in terms of the number of other goods one must sacrifice. If py = and px = then:
