basic tools of microeconomics

Question 1

primitives/exogenous variables

Answer 1

exist OUTSIDE of our model

Question 2

examples of primitives

Answer 2

• people and preferences
• tech
• endowments
• institutions

Question 3

what is NOT a primitive but is considered + examples

Answer 3

market structure
- systems of auction
- stock exchanges

Question 4

outcomes/endogenous variables

Answer 4

exist INSIDE of our model

Question 5

examples of outcomes

Answer 5

• consumption
• production
• savings
• prices

Question 6

a simple economy or exchange economy

Answer 6

people: we have two agents, A and B

goods: we have two private goods, 1 and 2

Question 7

outcomes of exchange economy

Answer 7

consumption: how much of each good will each of our agents consume?

prices: what rate of exchange would the agents use to trade good 1 for good 2?

Question 8

pareto optimality/pareto efficiency

Answer 8

a state at which resources in a given system are optimized in a way that an individual cannot be better off without making someone worse off

Question 9

methodological individualism

Answer 9

method for explaining social outcome in terms of grouping together and interaction of individual behaviors of goal-oriented, self-interested individuals

Question 10

purpose of societal dimension of politics

Answer 10

regulate interactions between individuals

Question 11

examples of societal dimension of politics

Answer 11

• institutions
• norms
• socialization
• collective rules

Question 12

voluntary contribution mechanism

Answer 12

economic experiment where each group member (i) decides how much to contribute to the public good (ci)

Question 13

i’s profit

Answer 13

πi = ei - ci + ai(sumj of cj)