1. Midterm 2 Review

2. Midterm 2 (L9-L16)  Applications of buying and selling 1.Labor Supply 2.Intertemporal Choice 3.Uncertainty  Markets and Exchange 1.Pareto (In) efficiency 2.Competitive equilibrium  Producers 1.Production function 2.Profit Maximization 3.Labor markets

3. Applications

4. Uncertainty  Two states, probabilities  Bundle = lottery  Bernouli and Von Neumann-Morgenstern U. Examples:

5. Risk Aversion  Expected value of lottery:  Examples  Risk aversion better than Utility and risk aversion

6. Utility and Risk Aversion

8.  Possibility of Flood  Insurance contract  Budget set Uncertainty: Insurance

9.  Choice: Uncertainty: Insurance

10.  Fair insurance  Not fair insurance (Not) Fair Insurance Premium

11.  Edgeworth Box (apple-orange, IC, U)  Pareto Efficiency  Competitive Equilibrium  Competitive Equilibrium Pareto efficient?  Application: apple-orange, IC, U Markets and Exchange (key ideas)

12. Edgeworth Box (and Efficiency)

13. Competitive Equilibrium (Definition)

14. Competitive Equilibrium

15. Competitive Equilibrium (Geometry)

16. Competitive E and Pareto Efficiency