ECON-UA 1 Lecture Notes - Lecture 2: Substitute Good, Demand Curve, Exogeny
18 Sep 2015
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Document Summary
Econ ua 1 - lecture 2 - supply and demand. A model is an abstract representation (an unrealistic/simplified version) of reality. It takes from the real world certain recognizable things to enrich our understanding of economic concepts. Must be reasonably accurate otherwise conclusions would be invalid. E. g. eliminating trees from maps to focus on main roads. Function - the relationship between two or more variables. E = years of education (positive impact/+) X = years of experience (positive impact/+) A = avg daily consumption of alcohol + weed (negative impact/-) Meaning that a person"s income is determined by education, experience, and consumption of alcohol and weed. Flow variable - process that is measured over a period of time. Stock variable - a quantity that exists at a moment in time. This model explains how prices are determined in many markets through the relationship of demand and supply. Law of demand/ceteris paribus: if price increases, quantity demanded decreases.
