Dixit. A. Kap 1-5.

Question 1

2.
Substitution?

Answer 1

Consumer respond to a price increase = by less. May replace with something cheaper.
Preference outweigh by cost, May drink less X & more Y. Or switch completely to Y.

Question 2

2. Ability to Substitute?

Answer 2

• time
• habits
• price need to rise a lot, before switch coffee for tea.

Question 3

2. Complements?

Answer 3

Fish & Chips.
If price on F rises, also demand for chips goes down.

Question 4

2. Demand Curve?

Answer 4

Relationship between price & Quantity demand. Shows how price influence the Total demand for X.

Question 5

2. The Babysitter effect?

Answer 5

May shift to higher end products or services.

Question 6

2. Opportunity cost?

Answer 6

Forgone opportunity to do alternative things with money / time / activity.
Is it worth it? = compare to other things you could be doing instead.

Question 7

2. Risk aversion?

Answer 7

Win must be larger than risk to loose, more that 50:50.

Question 8

2. Loss-aversion?

Answer 8

People dislike suffering losses -> to status que or other reference points.

Question 9

2. Hedging?

Answer 9

1 risk reduced by taking another that’s negatively correlated with the 1st.
(no 1 has bad outcome, then 2nd had good outcome)

Question 10

3. Costs?

Answer 10

Inputs = material, wages, rent, capital -> output.

Question 11

3. Market supply curve?

Answer 11

Spegelbild av marked demand curve.

Question 12

3. Screening by Self-Selection?

Answer 12

Firms strategy of separating diff byers with different WTP offers. Letting ind select.
EX: airlines first, business class, economy class.

Question 13

3. Monopoly?

Answer 13

One firm or Gov on the market.

Question 14

3. Oligopoly?

Answer 14

Small/few numbers of firms on market.

Question 15

4. Supply & Demand?

Answer 15

Price is higher than P, quantity producers WTS will exceed Q, (up) in supply curve. Quality that consumed will be less than Q along demand Curve (down) = excess of supply over Demand. Firms accepts lower prices & Consumer will respond.

Question 16

4. Pareto Efficiency?

Answer 16

Economic efficiency of outcome = change that benefits one, hurts someone else. (no justice/etical)

Question 17

4. Taxes?

Answer 17

Can create a shift in E & reduce Quantity traded on market. Sometimes Consumer pays tax and other times the producer.

Question 18

5. Social Efficency?

Answer 18

When we ignore the harm our action imposes on others ex bilköer, nedskräpning, anti-vaccare.

Question 19

3. Marginal cost?

Answer 19

Rises with Quantity.

Question 20

4. Information asymmetries?

Answer 20

Strategies to interrupt, conceal, reveal info. Play a key role in a market & affect outcomes. Reputation + trust important.

Question 21

5. Collective goods?

Answer 21

Can be used/consumed simultaneously by several people. Can’t exclude non-payers from benefit it. Ex försvar, vägar, radio, fyrar.

Question 22

5. Pure public goods?

Answer 22

..

Question 23

5. Price floors & price cealings?

Answer 23

Gov can keep markets away from E, by upper/lower limits on prices. (pga lobbying, politiska intressen, sociala behov)
Ex: Eu + jordbruksstöd.