In Part II we will be studying three topics that seem, at first, to be quite unrelated:
- consumer choice and utility maximization
- production costs
- factor and resource markets
These three different topics actually have two things common. First, all of them involve the analysis and modeling of the decisions and dynamics that determine the nature of the supply and demand curves. In previous units, we just took the supply and demand curves as kind of a “given” or fact of life. But now we are going to go “behind” the curves to see why they have the shape they do.
Second, although we won’t get very deep into the mathematics of it, all of these topics involve some sort of “optimization under constraint” models. In effect, the math models used for all three topics is really the same even though the nature of the decisions are different.