Welcome to Econ 325 Economics of Gender

Week 3Beginning February 5

Monday, February 5

• Paper topic is due February 16• Need at least 2 resources, one of

which will be where you will get your numbers from

• Exam 1 a week from today• Study Chapters 1 through 3

ICA

• Describe one of Janet Stotsky’s findings with regards to gender difference.

What is a good versus a bad?• More goods make us happier• More bads make us worse off• Suppose a household regards the home-

product as a home-bad rather than a home-good. How would the household indifference map look?

Note

• Assuming that home products and income are both goods, indifference curves can not be upward sloping.

ICA2 (teams of 2 or 3)

• From Tom and Jerry’s (a household’s) point of view $ 1 of home-good is as good as $1 of income (market-good). This is true regardless of how much home good or market good they already have. Draw the household indifference map. Explain.

Different households have different indifference curves

• Example• Which family values home good

more?

The optimal time allocations

• The household PPF• The household indifference curves• Two household with identical PPF

but different preferences

Wednesday, February 7

• Paper topic is due February 16• Need at least 2 resources, one of

which will be where you will get your numbers from

• Exam 1 Monday• Study Chapters 1 through 3

Return ICA2

• From Tom and Jerry’s (a household’s) point of view $ 1 of home-good is as good as $1 of income (market-good). This is true regardless of how much home good or market good they already have. Draw the household indifference map. Explain.

ICA

• Despite the fact that the Black family and the Brown family have identical tastes, both members of the Black family work outside the household while one member of the Brown family stays home full time. How is this possible? Draw graphs and explain.

Other Gains of Household Formation • Economies of scale• As production of home-good increases

its average cost declines• Example

• Cost of dinner for one = $10• Cost of dinner for two = $15• Why?

• Graph• Average cost of dinner goes down

Other Gains of Household Formation • Production and consumption of

public goods goes up• What is a public good?• Two characteristics• 1) No rivalry in consumption• 2) Hard to exclude non-payers• Example?

• Wall decoration

Other Gains of Household Formation

• Positive externalities• What are externalities?

• Costs or benefits incurred by individuals other than producer or consumer

• Examples

Types of Externalities

• In production• Cost• Benefit

• In Consumption• Cost• Benefit

Other Gains of Household Formation • Risk pooling

• Example: If a household member loses her job, the others will cover the expenses

• Institutional advantages• Example: Health insurance premium for a

household of 3 is less than 3 times of the insurance premium for one individual.

Other Gains of Household Formation

• Transaction cost• Search cost• Monitoring cost• Shirking cost

Disadvantages of Household Formation

• External costs• Institutional disadvantages• Interdependence• Domestic violence• Specialization• Bargaining

Friday, February 9

• Exam 1 Monday• Covers

• Chapters 1 though 3 − Including the stuff we did not cover in class− Notes

Let’s look at the tables

2-1, Page 29

3-2, Page 57

3-3, Page 64

What is GDP?

• Gross Domestic Product• Measures market value of all final

goods and services produced domestically in a year

• Does it include the value of goods & services produced for household (own) consumption?

• The value of home made goods and services is excluded

Ways to estimate the value of home production

• 1. The opportunity cost approach• Value of home good = (hours spent

producing home good) x (market wage of the household member producing the home good)

• Problems?

Ways to estimate the value of home production

• 2. The market cost approach• Value of home good = (hours spent

producing home good) x (market wage of the professional producer of the home good)

• Problems?