[ECON 101] - Final Exam Guide - Everything you need to know! (24 pages long)
Document Summary
People do the best they can subject to the trade offs they face. People decide what to do by figuring out their objectives and maximizing based on constraints [figuring out benefits and costs, computing net benefit from each contraction (pay-off), pick highest payoff] Pay off of a is greater than pay off of b, people go with pay off of a. Get vaccinated b (personal benefit of vaccine)- c (momentary cost) + opportunity cost of getting vaccinated f (fear of needles) Get vaccinated if and only if b > c+f, (b-c-f>0) Everyone choosing what is optimal for them, leads to an outcome best for the society as a whole. Use policy to change benefits and costs to design entire institutions optimally. Get vaccinated if and only if b-f>0, b>f f
