Class notes
ECN 201 Chapter 6&7 Notes
- Course
- ECN201
- Institution
- University Of Rhode Island
This is a comprehensive and detailed note on Chapter 6&7.
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Chapter 6 Shareholders-anyone who owns stock in the company
Firms-Anything that takes inputs and produces outputs
A firm’s profits legally belong to people who own firm assets
Conflict of interest- aline interest between managers and owners
We cant monitor what an executive is doing 100% of time, so we have
contracts to hit benchmarks
Piece rate pay- getting payed for how many you produced (UBER)
Workers effort
Fear of being fired,work ethic and feeling of responsibility
Employment rent=cost of job loss
Health deteriorates if there unemployed
Reservation wage= value of next best option
Employment rent= wage-reservation wage-disutility of effort
Firms start at the lowest just to get the employees, paying more
Chapter 7
Maximize profit for companies, can affect workers and consumers
Inputs-firm-outputs
How much do we pay workers? How much do we produce?
People buy for certain prices vs others
Market power- have a name in the market(Apple)
Price elasticity- if I raise the price how much more or less do I sell
Increasing returns to scale
Output increases faster than inputs-learning by doing
-Falling average costs
Constant returns to scale
-outputs and inputs increase proportionally
Cost function-how much are costs related to production
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