EE #9: Making Economic Choices

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Presentation transcript:

EE #9: Making Economic Choices Journal: Do people ever act out of complete selflessness?

Economic Theory: predict what ppl will do Other things constant: assume only 1 thing changes at a time

Behavioral Theory: how ppl act Rational Self Interest: we want to MAXimize benefits & MINimize cost

Clean class after school: 20 mins 40 mins 60 mins 80 mins Reward: 1 movie ticket 2 movie tickets 3 movie tickets 4 movie tickets

Marginal: one more, extra, additional Marginal benefit: w/each additional unit, what is the EXTRA benefit? Marginal cost: w/each additional unit, what is the EXTRA cost?

Buy 4 tacos, get the 5th for free! MC: MB: Buy one pair of jeans, get the second at 50% off! Rational self-interest: Would most ppl buy 5 tacos? Would most ppl buy 2 pairs of jeans?

1 hour of studying 2 hours of studying 4 hours of studying 6 hours of studying Earn a D Earn a C Earn a B Earn an A