ECON 100A Chapter Notes - Chapter 1.1-1.5: Reservation Price, Exogeny, Economic Equilibrium
Document Summary
Model simplified representation of reality eliminate irrelevant detail start with simplest model add complicated details. Example: market for apartment, 2 type of apartment: close and far, focus only on close ones, simplified. Determine by factors not discussed in this particular model far apartment. Determine by forces described in the model close apartment. People try to choose the best patterns of consumption that they can afford stem from the fact that people has free choice and people has preference. Price adjust until quantity demanded = quantity supplied. Because of people"s demand not even as people"s supply. Possible renters of the apartment: some people are willing to pay high price, more people willing to pay lower price as it goes down. Person"s maximum willingness to pay for something. Highest price person accept and purchase good. Downward sloping as the price of an item go down, more people would be willing to get the item.
