Monetary Measures of Gains-to- Trade You can buy as much rice as you wish at RMB1 per kilogram once you enter the gasoline market. Q: What is the most you would pay to enter the market?
What Are We doing in this Chapter? We apply our basic framework of consumer choice to study issues of choices across different time periods, e Again in terms of theoretical framework, not much is new!
The Purpose of this Chapter To begin to understand the art of building an economic model To begin to understand three basic elements of modeling in economics: Purpose Simplification through assumptions -Value judgment
Main Issue state-contingent- consumption plan Preferences Under Uncertainty and Expected utility risk- aversion,risk- loving, and risk- neutrality Competitive Insurance
assets An asset is a commodity that provides a flow of services over time. +E.g. a house, or a computer. .A financial asset provides a flow of money over time -a security
