AM25 Realistic S&D

Inverted Class: Students required to watch L12, linked below, before coming to class.

Lecture on Thursday Dec. 28. Taken by Fouzia and Sabeela. Background required was:

L12: Realistic Models of the Housing Market

https://sites.google.com/site/economicsislamicapproach/ll12-realistic-s-d-models

Lecture provided further explanation of realistic S&D models.

Sample question for final:

1 What is the Law of One Price?

2 Explain how zero transaction costs and full information are both needed for Law of ONe Price AND for S&D theory

3 Explain how we can have multiple prices for identical goods -- failure of S&D AND of Law of One Price -- if there is transaction cost, and full information is not available to everybody.

4 Neoclassical theory argues that S&D equilibrium leads to EFFICIENT outcomes -- which maximize social welfare. Explain why this is not true, and why the outcomes can be bad from social point of view.