lecture 3 - scarcity, work and choice Flashcards
what has technological progress been accompanied by?
dramatic rise in wages
what has happened to working hours in many countries?
changes in legal boundaries such as there may be a maximum amount of hours in which someone can work
how have people used economic progress?
to consume more goods but also enjoy more free time
how do have people enjoyed more free time but also consumed more?
the average working hours have feel whilst wages have risen
what has happened since late 1800s?
living standards have increased
what model is used in the unit?
the model of individual choice
shows different countries average ours and gdp per capita
what is hard to measure in relation to jobs?
work and effort
how do economics normally measure labour due to work and effort being immeasurable
number of hours worked individuals engaged in production
what is the assumption surrounding working hours?
the more hours worked the more goods produced
why is there a problem with using ceteris paribus when looking at the outcome of people with different working hours?
there may be factors that affect the way that they work rather than it just being the hours they put in
e.g difference in general mentality
what is production function?
en equation that expresses the relationship of factor inputs used by someone to the amount of output as a result
there is at least one fixed factor input
e.g studying
the amount of hours studying (input) relates to grade (output)
what would be a marginal product in this unit?
effect of an output if they were to work/study for an extra hour
how come as the curve increases marginal product diminishes?
as they study more it will start to flatten out due to various factors such as lack of sleep
production function would start to decrease
if production function slope strats to flatten due to marginal product becoming negative, what is this production function shape known as?
concave
how do you work ou the slope on the model of individual choice?
vertical distance / horizontal distance
e.g marks / hours
= the production function
what is a trade of?
how much of the input they put into achieving an output someone wishes to give up for someone else
what does an indifference curve show?
all of the combinations that provide equal utility or satisfaction
which way do indifference curves slope?
downwards
what does it mean if an indifference curve is higher?
it corresponds by having higher utility levels
have more of two goods
what is the marginal rate of substitution?
rate at which a consumer is ready to exchange a number of units of a good for another good
e.g giving up more marks in order to have more free time
what is the MRS on models of indifference?
it is just the slope of the indifference curve
used to map trade offs in terms of what’s preferred
instead of what is feasible
if the indifference slope is flat what does this mean?
the MRS is small
e.g if someones grade is already low they are les willing to substitute horus of free time compared to if grade was high (MRS would be bigger)
what do choices depend on?
constraints and involve trade offs
what is the opportunity cost?
the net benefit of the next best alternative action
what is an economic cost made up of?
monetary cost (transport) + subjective costs (effort)
what is the feasible frontier?
the maximum output that can be achieved with a given amount of input
(everything inside the indifference curve)
maps what is feasible
what is the MRT ?
the slope of the feasible frontier
represent the trade offs in terms of what is feasible
when is an action said to be infeasible?
if it lies outside of the feasible frontier
what is the definition of MRT?
the quantity of some good that must be sacrificed to acquire on unit of another
what happens when you bring the feasible frontier and indifference curves together?
shows the constraint trade off and the preference trade off
how would a person decide which point to choose using indifference and feasible frontier?
the point in which they cross
shows the highest utility
what is a contained choice problem?
these problems provide a way to rogourisly thin k about how to do they best for ourselves
given preferences
given contranist
when the things we value are scarce
what off the feasible frontier changes for reasons such as technological improvement?
it would be feasible to gain and have more free time
what isa budget constraint?
the feasible frontiers for consumption choices
what is the optimal choice of income?
where the indifference curve (MRS) equal the wage
what is the income effect?
the change in optimal choice when income changes, keeping the budget constraint slope the same
