Economics 2150A/B Lecture Notes - Lecture 15: Constrained Optimization, Pistachio, Equation

• School: Western University
• Department: Economics
• Course: Economics 2150A/B
• Professor: Peter Streufert

Document Summary

Economics science that deals with allocation of limited resources to satisfy unlimited wants. Microeconomics studies economic behavior of individual economic decision makers. Macroeconomics analyzes how entire national economy performs. Income, employment, interest rates, prices, inflation, business cycle. Centralized organization government controls allocation of resources (ex. Economics construct and analyze economic models of the problems they are addressing. Exogenous variable one whose value is taken as given in a model. Determined by some process outside the model being examined. Endogenous variable variable whose value is determined within model. Nearly all microeconomic models reply on just three key analytic tools. Used when decision maker wants to make best choice, taking into account any possible limitations/restrictions on choices. Objective function relationship that decision seeks to optimize. Constraints restrictions or limits impose on the decision maker. Choose inputs (choice variable) to min. cost (objective func. ) given output level (constraint)