ページ3:

ECN 001A 10/7
Test: 8Q (100pts) (80min) (free response)
Chp 3. Supply and Demand
market place (price system)
P
indogenous P. Qo (axes)
Pr
Po
.
Firms (company) -supplier of goods/services
Consumers
-
demander/buyer of I
→ "perfectly competitive
"
:
So much firms and consumers,
P
individual don't change big picture
Demand: Price S Quantity Demanded (Qo)
Law of Demand:
P↑ Qo↓
inverse
PV Qo↑
relation
(price: a kind of incentive)
Demand Chart.
20
P(31
15
lo
5
2
D
200
I↑
✓ ↓
decrease
change
-Q.
exogenous
increase (good) right
(bad) left
Qp
①4 in income (exo anons)
• Normal goods: Income↑, DT. increase
Inferior goods: Income↑, Pt - clecrease
.
8
.
Lseg.
2
Complements
in
: we
p of related goods
buy 2 together (ex hotdog & bun)
A
on
B. (ex. coke/papsi)
Substitutes: ""
Comp : PAT Dev.
Subs
PA↑ DBT.
P
Qo
Em St.
Qo
20
。
0
17.5
15
2
。
0
12.5
3
10
4
2
7.5
5
2
5
6
3
2.5
7
3
。
8
4
QT
②Change
in Taste/Prefs
in # Buyers.
Price Expectations

ページ4:

Supply
•
P S Qs
• Law of Supply: PT, Qs
P
S
P↓,
Qs
↑
decrease
Cleft)
T
Chad) increase
(right)
(good)
© Change
②Change M
în cost
#suppliers
③ Change in technology
Q5
(14)
of inputs
④Price Expectations

ページ5:

ECN 001A 10/7
P
P
P*
<P
Normal
Good,
↑
Income,
input cost
.5
DT
S↓
P
Q
Q Qo
QS Q0
equilibrium point (p*
.Q*).
→ Qo=Qs
P Qs>Q0. (excess supply/surplus)
Qo>Qs (excess demand/shortage)
ê
S
P₁
Q Q1
normal good, income ↑
P↑↑
P
P₁
Do
p*
Q
5
S₁
So
Q
21
input cost ↑ (bad, left)
P↑ Q↓
note: new eq. point = most recent SD point
Pi
p*
M
So
PTQT
P
Pl
So prad
p*
Conclusion: P↑ Q?

ページ6:

Chp.4 Elasticity: Responsiveness of buyers/sellers to
prize/income change
• Income Elasticity of Demand = εI
or
% >Q
=
% income
• necessities: 0 < x <\
°
Prize
elaticity of Demand
=
PED = E₁ = ED
can be
%000
=
%P
5
0
normal goods
• by "Law of Demand"
elastic
inferior goods
81 <0
luxuries: >1
|eo| > | :
20 < = inelastic
|8o| = | :
unit elastic
。 5 determinants (factors) of ED.
。 Cross- Price Elasticity of Demand = {₁₂ =
relations
Substitutes &> 0
existence of substitutes (0)
→ elastic
coke/pepsi
Complements o
(X)
no
relation
E₁ = 0
→ inelastic
disney park.
Share of
your budget devoted to the good.
%40
A
% SP
of related good
sale x2 → Qon
→> inelastic
$car +2
→ Qo↓
elastic
Elasticity
%0Q5
O Prive Elasticity of Supply = Es = % *P
example
Es
Necessities
vs. Luxuries
perfectly inelastic
Es=o
Oceanfront Land
inelastic
elastic
(relatively).
④Def. of Market:
Broadly vs. Narrowly
inelastic
elastic
O< Es < |
Cell Phone Taver
Es >
Hot dog Vendor
eg.
Drinks
Soft Drink
inelastic
elastic
determinants: The flexibility of Producers.
Time
long: elastic
short inelastic
P
12
before
after
before
after
->
G
b
after
QD
20
30
+50%
= -|
80 = -50%
- 33%
+100%
before Ep =
=-0.33
I different!
the (%) is based on
Price
because
dif. bose values.
Let's make the base value Same in 2 cases
Pbase = Pary =
Pretre + Pafter
2
Qo
betre +
=
owy
2.
midpoint method
Pz
SQ
P₁
E₁ =
Do (base)
base
if
we
use midpoint method
+1%25
then ED (B-> A) = -6/9
ED(ADO)
now |E| < |-
-10/25
+619
=
= -0.6
-0.6
inelastic
(1)
Pbasa
0
☺
Spare production capacity
Storage
Time and the Adjustment Process
short
time
→ long
elasticity inelastic
elastic
short
long
inelastic
S₁
Q Q Q
elastic
%ods
95%01
Quantity

ページ7:

Q: How do Ep and Es relate to each other?
Price
(per barrel)
SER
SLR
E2
$90
Es
$80
$50
Q1 Q2 Q3
D₁
D₂
Quantity produced
(barrels)
oil supply is
not easy
to
increase
in
the short mn.

ページ8:

Pa
ECN 001A 10/23
"
Next Tuesday exam 2
producer
Chp 5. welfare analysis consumer pads
个
P
totul surplus
=
s+ps
S
CS
-p*
CS
PS
Q*
-Q
PS
Qt
PD
S (elastic)
CS↓
PSV
Tax Revenue
Tax Revenue
CSL
PS↓
(inelas.)
>Q.
PA
P₁ = p*/
Qt
D
S (inelastic)
PSV.
Per-Duet
-PS-
D
=Q+
Ps
Po
=PATR
TR
NO:
DATE:
PL
Dead Weight Lost
(DWL)
D
CS-CS+TR+DWL
DWL CSV
5

ページ9:

Chapter 6.
pt
Pc
.
.
Prize
Price Controls
that can be charged
Ceilings : government set max.price for good/service
Price Floors
min.
QD > Qs: shortage (excess of demand).
ex.
rent control
2.
→ price↓
some ppl can't rent.
a
R
S
PF
p
Qp Q
'
D
→ Q
Qs > QD = surplus
persistent surplus.
Per-Duet

ページ10:

externalities: costs
Chapter Externalities & Public Goods
P
p
PE
5
•: where we are.
• should be
Social Demand
private demand.
QE
distortion.
Property Rights
buyers.
Q
include third
party (and buyers).
?? Coase theorem :
no barrier
15.
interest
in nego.,
party will
property rights specifrent
Private & Public Goods
• limited to "paying" customers
• Excludable. Goods:
Rival
no purchase, no use.
Goods: can't be enjoyed by. >1 person.
• usage by one person & availability for others.
Chapter 8 Business Costs and Production.
。 Labor
。
Capital
° other
factors of production.
Maximize Profits: T = TR-TC.
or
benefits of
a market activity affecting a third
party.
o-subsidy
S
SD
PD
Q* QE.
←
distortion
club
good!
Public
goods
excludable
private goods
Common-relohne
→rival
goods.
Both excludable and rival → Private Goods eg. shoes
non
''
non
Public Goods. eg.
and non Club Goods eg. Netflix.
non s
and
4
National Def.
Common Resource
Goods.
eg. public restrooms.
fish in ocean
tragedy of the commons.
+
eg. overfishing in international waters
TR= PXQ
Q?
#workers
total
output
MP
。
Production Function
-
profit
total revenue
total cost.
T
52
5
MP= Marginal Product.
2
15
10
Diminishing MP
3
30
15
4
-42
12
(Flower Pot Law)
5
52
10
short run
6
60
8
✓ d
7
65
5
fixed
factories
machines
vary
workers
8
67
2
9
63
-4
10
55
-8

ページ11:

-5.
11/4 ECN 001A
output #
I
15
40
20.
I
E
Short Run vs.
J
Long-Run
at least
Perial of production which one of inputs fixed
long
:
everything
variable.
variable costs (UC)
int.
Fixed costs (FL) →x change with
→TC = FC + VC
# we produce.
#worker.
Total Cost (TC)
÷Q
✓ dif.
average
ATC = T
←
ATC = AFC + AVC
AVC = V
AFC = FL.
5
MP
io #worker
MP<0
MPJ
TIL
Marginal Cost MC =
ATC
AQ
Sunk Cost:
costs incurred in the past.
commited to spend but can't spend.
should be ignored when making decisions.
eg.)
your sink, and
you bought $100.
·Stay at home
healthy
decisions:
both
go
to concert.
happy
uberly
loses $100.
Q
VC
FC
TC
AVC
AFC
ATC
MC
0
720
720
|
7
720
727
1
720
-727
7
2
20
720
740
10
360
370
13
3
45
120
765
15
240
255
25
4
88
720.
808
22
180
202
43

ページ12:

cost
=FL
TC.
MC.
ATC
ATCmin
AVC
+FC
VC
+FL
=FL
Q
FC
explain: MC=
AVC
SQ
=
ATC
SQ
AUC min
=
the cost
AFC
Q
increment of TC or VC
MC > ATC, then "AULT or ATCT
,
if
MC > AVC
on
vice versa.

ページ13:

ECN OOLA
116
etc. cheese cake factory
ATC.
Long-Run ATC curve
groceries Store To yrs. ago.
ATC↓
ATC.
Economies of Scale
Dis economies of Scale
Cbecoming bigger
less effcient
).
( scale ↑, QT).
Economies of "Scale"
→ Constant Returns to Scale
"
。 Economies of Scope "
5
60
2
16.
10.
18
80
#>0
*

ページ14:

-
Chp 9 Firms in a Competitive Market
Perfect/Pure Competition
charecteristic
lots of sellers and buyers.
-nearly identical good (eg. agricul. prod)
firms: price takers. →
taking
the price
from the market place.
-
entry
/exit
↑
free (easy)
-
to the market place of suppliers.
instantaneously
firm's goal: maximize profit.
note: not real,
just
a
ref. frame.
p* = 10
Q
TR
TC
兀
MR
MC
0
0
25
-25
-
T
10
34
-24
10
9
2
20
41
-21
10
7
3
30
46
-16
10
5
4
40
49
-9
10
3
5
50
51
-1
10
2
6
60
54
6
10
3
2
no
60
10
10
6
8
80
70
10
10
10
9
90
95
-5
10
25
10
100
10.
145
-45
50
Choose where MC=MR
→ Max π
MC MR
MC > MR
MC=MR stop!
MC CMR X
@ MC=MR=P is Qstop

ページ15:

P
market
one
particular firm
√ SR
MC
*
SUR
ATL
D=MR
D
ATC
Q
QF
QF
TL = TR-TL
↓
ATC= TC
Q
P.Q
TL= ATL.Q
Short
-run
PSATL
ATC >P> AVC
元
produceπ= TR-TFC-TUC
→
operate @ a
loss
PCAVC
→
shut-down
Short
xpwd: π= -TFC
run.
Long-Run
P>ATU
π
P<ATC
Losses, shut down, go out of business
Long Run Equilibrium
SRS
MC ATL
LRS
P
q
firms
mkt.
What happens if D 1?
吕
SRS.
P₁
Q
8
Q2
--------
other firms enter→
ST P↓ back to Pl
MC
SRS2.
TU
ATC
c
LRS
a.
Q3
21%2