MGEA02H3 Lecture Notes - Lecture 2: Opportunity Cost, Mnemonic, Llama

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA02H3
• Professor: John Parkinson

Document Summary

Maximizing a value (or utility) function along ppf. Agenda for this next pair of classes (topic): Overview (build-up) of the competitive market model. Shifts in demand and supply: how they affect equilibrium. A set of institutional arrangements that bring buyers and sellers together to negotiate the terms for exchanging goods or services. We usually assume that, all else the same, our marginal utility declines as we add incremental units of consumption. Suppose we consider the impact of consuming (additional) bowls of rice. Maximum price consumers are willing to pay (per unit) for any particular quantity. The supply curve shows the minimum price suppliers are willing to charge (per unit) for any particular quantity (this min price equals the firms marginal cost of production & increasing marginal cost makes supply upward sloping) Supply in sr = now, with existing firms only, using their existing productive capacity (but varying amounts of labour)