ECON 100A Study Guide - Midterm Guide: Standard Deviation, Market Failure, Weighted Arithmetic Mean
Document Summary
What is microeconomics: microeconomics studies how households and firms make decisions to allocate limited resources. Assumptions on consumer behaviour: completeness: can rank every possible consumption bundle. Any two goods can be compared: transitivity: if a > b and b > c, then a > c has to be true, non-satiation: more is better. However it does not apply to inferior goods like air pollution: convexity: diminishing marginal substitution. Explained in greater detail in next few lectures. Let"s begin by thinking about how a consumer might compare different groups of items available for purchase with one group of items be preferred to another group or with the consumer be indifferent between the two groups. We use the item market basket to refer to such a group of items. A market is a list with specific quantities of one or more goods for example.
