ECON 1011 Lecture Notes - Lecture 5: Marginal Utility, Perfect Information
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Along all other assumptions of a perfect exchange model, smith and jones are self interested individuals. They care about their own utility, that"s what brought them to the market. They trade in a mutual voluntary way. Trade, in this scenario, is a win win. There are gains on both sides from trade. Smith and jones are a simplification of story. These people can be any two people. Apples and oranges are also a simplification of a story. These goods can be any two goods. Vs. assumptions that are there to just reflect reality. Bilateral trade- only two sides of trade. Necessary and sufficient conditions* not important for quiz. Hidden assumptions related to ethical behavior in mutually voluntary trade. Values are built into the model, because we are assuming that certain things are not allowed to happen. We assume that individuals don"t do the following: Using force to take goods away from the other.
