ECN205

For Monday 20 July 2020: Joni, Neko, and Kacey all live in the same city. They have budget constraints of 48 = 6x + 4y. Joni has a utility function of U = (xy)^1/2. Neko's is U = x^2/3*y^1/3. Kacey thinks Neko is crazy since her utility function is U = x^1/3*y^2/3. How much x and y will each of these consumers purchase? Who has the biggest utility of the three?

HW for 9/30: Imagine a market with 2000 people in it. 1000 have a utility function of U = (xy)^1/2, while 500 people have U = x^2/3y^1/3 and 500 are U = x^1/3y^2/3. All face a budget constraint of 60 = 5x + 3y. Show that the market demand for x is 12,000. (Hint: the first set of consumers will buy 6000 x. What happens when the price of x = 6?)

HW for 10/2: Imagine a market with 300 people who have preferences of U = x^2/3y^1/3 and 300 who are U = x^1/3y^2/3. The all have income of 45 and face prices of 5 for x and 10 for y. What is the market demand of x and this price? What about at price of x = 10?

Perfect and Imperfect Substitutes Discussed

Budget Constraint Video (requires WFU log-in)

LaGrangean Multipliers and Utility Max Video

For 7/21: What is the market demand for x at prices of 4, 6, and 9 if there are 1000 people who have preferences of U = x^2/3y^1/3 and 500 with U = x^1/3y^2/3? Assume all 1500 have budget constraints of 36 = Price x*x + 9y. (Hint: The first subset, with 1000 people, will consume 6000 units of x at price of x = 4.)

For W, 7/22: True or False? A person thinks a good is normal when they increase the quantity of the good they purchase after a price decrease occurs. (Explain)

For W, 7/22, Thaler

For 7/22, Ariely Video

Behavioral Articles: Thaler Interview Sunk Cost Fallacy Auto Enrollment in 401-k Gym Memberships Go Unused

Mystery Painter...?

For 7/23 (Review for Test): A person with preferences that U = x^2/3*y^1/3 has a budget constraint of 30 = 4x + 5y. How many x and y would this person choose consume in order to maximize utility. What about at a price of 8? What is the market demand for x at these prices, assuming there are 499 other people in this market who have similar characteristics to our representative consumer?

Unit 3: Firms

Overview of Firm Decisions

For M 10/16:

For Friday 10/18: What are fixed cost at this firm?

For 10/23:

Imagine two firms, both in the short run have 125 units of K and want to make 500 goods. The firms face prices of w = 15 and r = 10.

One firm's production function is q = K^1/3L^2/3 and another is q = (KL)^2/3.

Show that the first firm faces cost differences of 3870 across the short run and long run. The other firm faces cost differences of 4.

For 10/25: 1) Show that a firm with a production function of q = (KL)^1/3 faces decreasing returns to scale when it tries to double output. 2) Show that a firm with a production function of q = K^2/3L^1/3 faces constant returns to scale when it doubles output.

For 10/30: Develop cost of production functions for two firms, both of which face costs of inputs of w = 15 and r = 10. One firm faces a production schedule of q = (KL)^1/2 and the other q = (KL)^2/3. Calculate the marginal cost of production for both firms at an output of 1000.

Explanation for HW for the last firm. (Graph)

For 11/6: Coase. The Nature of the Firm. (Parts I and II.)

Good Explainer on Coase's Ideas of the firm. (Entrepreneur quality, transactions costs, and the type of product being made)

For 4/4:

Amazon, Inc. 2015 10K (Part I. Through p. 15)

GE 2015 10K (Start p. 18 through 31)

For 4/4: McKinsey Primer on Technology and Labor Demand

BLS on Technology and Labor Demand

Clinton Lost Blue-Collar Voters

New Yorker Article on Worker Displacement

Unit 4: Market Comparison

For 11/18

For 11/20: A competitive market is in equilibrium at a price of 27. A representative firm in this market has a cost function of TC = 120 + 6q^3/2. What is profit for this firm?

A competitive market is in equilibrium at P = 21. Show that a representative firm in this market with a total cost function of TC = 50 + 2q^3/2 will produce 49 goods and earn a profit of 293, thereby signaling to outsiders that there is opportunity to earn higher than normal profit in this industry.

A: A monopolist has a cost function of 300 + 1/2Q^2 and faces a demand for its product of Q = 765 - 15P. Show that it will produce 45 goods and charge a price of 48, thereby earning a profit of 847.5

For 11/22: Suppose a firm with a production function of q = (KL)^1/3 and input costs of TC = 2L + 2K wants to compare its profit in the short run (when it has 64 units of K) and the long run, when it can reduce costs to the lowest level. Assume P = 50 in both time periods.

A monopolist has a cost function of 500 + (1/2)Q^2 and a demand for its product of Q = 900 - 9P. What is the profit this firm earns?

For 11/30: What is the price elasticity of demand at the price-quantity combination that the monopolist faces in problem B above? Why does this make sense given what we know about monopolist's decision making?