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ECON 2103 Semester Notes

by: Malik Miller

ECON 2103 Semester Notes ECON 2103

Marketplace > Oklahoma State University > Economics > ECON 2103 > ECON 2103 Semester Notes
Malik Miller
OK State
GPA 3.92

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This covers the entire semester of notes with a breakdown of each section by exam. Enjoy!
Introduction to Microeconomics
Mary Gade
Microeconomics, Economics, business
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This 6 page Bundle was uploaded by Malik Miller on Sunday August 21, 2016. The Bundle belongs to ECON 2103 at Oklahoma State University taught by Mary Gade in Fall 2015. Since its upload, it has received 4 views. For similar materials see Introduction to Microeconomics in Economics at Oklahoma State University.


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Date Created: 08/21/16
ECON 2103 Chapter 1:  Every Decision= economic decision. Resources are SCARCE, wants are  UNLIMITED  Opportunity Cost: value next best alternative (what’s given up for something)  Marginal Cost (MC) vs. Marginal Benefit: cost for every additional unit vs. gained  benefits for added unit  Market Economy:  o Central planner replaced with decisions of firms and households o Prices are the “invisible hand” of buyers and sellers (B/S)  Market Failure: market fails at resource use o Externality­ impact of one hurts another (ex: pollution) o Market Power­ person or group unduly influences (corrupts) mkt prices  Supply of $ increases=>inflation=>price increase Chapter 2:  CIRCULAR FLOW CHART: On the TEST  Production Possibilities Curve: TEST o Displays efficiency, opportunity cost, and resource usage with technology  Positive vs. Normative Analysis: TEST o Positive­descriptive or analytic of how world IS o Normative­ prescriptive or how world OUGHT to be  Economic Conflicts o Efficiency­ get most out of available resources o Equity­ fairness of distribution resources Chapter 3:  Gains from Trade o #1 rule: EVERYONE benefits from TRADE o Absolute Advantage: whoever can produce the most of a good, CAN be  absolute in both goods o Competitive Advantage: whoever has the least opportunity cost of producing a certain good, each trader has this in one area. Chapter 4:  Demand Curve:  o Shift Curve Determinants: income, taste/preferences,  substitutes/compliments, number consumers, and expectations o Move along curve: price change  Supply Curve: o Shift Curve Determinants: input costs, technology, number producers,  expectations, natural disasters o Move along curve: price change  Equilibrium Graphing: when Demand=Supply o Above Equilibrium=surplus=DECREASE PRICE o Below Equilibrium=shortage=INCREASE PRICE o (Price Floor Lines above equilibrium) o (Price Ceiling Lines below equilibrium) Chapter 5:   Price Elasticity of Demand=% change in quantity demanded x % change Price o QD is inversely related to price  Midpoint Method= divide midpoint of two points by (final­initial) o ((Q2­Q1)/Q2+Q1 / (P2­P1)/(P2+P1))  ELASTIC if E>1 meaning Increase in Price=Decrease Revenue  INELASTIC if E<1 meaning Increase Price=Increase Revenue  Unit Elastic if E=1  Determinants Elasticity o Substitution Possibilities o Budget Share o Time to Adjust in Mkt  Elastic Supply measures change in supply with change in Price o Determinants  Time period, Substitute Resources  Elastic Supply=long term if >1 short term if<1 found by (new­old)/middle  Income Elasticity of Demand: responsiveness quantity demanded to change  income.  o % change quantity demanded/ %change income. o >0 means it is a normal good o <0 means it is an inferior good  Cross Price Elasticity of Demand: responsiveness of quantity demanded for good x to change price good y. o %change QD good x/ %change Price good y o >0 means substitute good o <0 means complimentary goods Moving to Exam 2: Chapter 6:  Price Ceiling: legal max price of a good (only effective if below EQ) o Consequences­   Nonprice factors used to ration supply  Black Market Develop  Quality Deteriorates  Future Supply Decrease  Price Floor: legal min price (only effective above EQ) o Mkt unskilled labor o Unemployment increase  Levy Taxes o Burden of tax depends on Elasticity  Consumers avoid paying more tax if demand is Elastic  Sellers avoid more tax if supply is elatic  Take­home: adding a tax doesn’t just hurt consumers Chapter 7:  Consumer Surplus (CS): difference of max amount consumers willing to pay and  actual pay  Producer Surplus (PS): difference between min price needed and price received  Total Economic Surplus (TES): CS+PS or total gain trade. Efficient if max TES  Lots of examples in this unit Chapter 8:  Everything from chapter 7  Knowing when Elastic or Inelastic goods based with tax  DEADWEIGHT: Loss in TES after a tax has been imposed  Efficient Taxes are placed on INELASTIC GOODS Chapter 9:  Pw is world mkt price Pd is domestic mkt price  Pd<Pw means export the good  Pd>Pw means import the good Exam 3 (THE HARDEST) begins Chapter 13:  Max Profits= Total Revenue(TR) – Total Costs (TC) o Costs  Explicit=direct monetary payment  Implicit=nonmonetary payment (wage, rent, interest) o Profits  Accounting=TR­Explicit costs  Economic (EP)=TR­TC, EP=0 means normal profit  Producing a good o Fixed Inputs­ quantity cannot be altered in short run o Variable Inputs­ can be altered in the short run o Short run­ all fixed inputs o Long Run­ all inputs are variable, free to enter or exit industry  PRODUCTION o Total Product (TP)= Quantity x Output o Marginal Product (MP)= change in TP / change in labor o Average Product (AP)= TP / Labor  LAW OF DIMISHING RETURNS o Ex: Too many people working on a project equals decrease marginal  product (amount produced) and rate of Total Product. o Definition: the point at which you receive less for the amount of work put into something. Like when you study too much and “overload” then get a  worse score on the exam than you should have.  Terminology of the market graphs o Fixed Costs (associated with fixed inputs) (FC) o Variable Costs (like variable inputs) (VC) o Total Costs (TC)= FC+VC o TC=FC when TP=0 o Marginal Cost (MC)= change TC /change TP OR change VC / change TP o Average Fixed Costs (AFC) = FC / TP o Average Variable Costs (AVC) = VC / TP o Average Total Costs (ATC) = TC / TP or AFC / AVC From here on will be straight notes because the lines for chapters blurred with all the info THE DIFFERENT TYPES OF FIRMS:   Perfect Competition  Monopoly  Oligopoly  Monopolistic  ALL FORMS PRODUCE AS LONG AS MR is > or = MC Perfect Competition:  These firms are price takers because the mkt controls the price  Price Taker means the Price=MR  They produce until MR=MC o P<AVC means temporary shut down of firm o P>AVC means operate o P<ATC means losses o P>ATC means profit o P=ATC means break­event point o FC>Profit means choose between operate or shut down  Long Run Equilibrium for Perfect Comp: no fixed resources, no barriers to entry or  exit, Economic Profit = 0, P=ATC  MOST COMPETITIVE  Monopoly:  Single sellers of well­defined product  No substitutes  Economies of Scale  Price>MR  Max price at MR=MC, must decrease price to increase sales  Barriers to Entry Price Discrimination­ any firm NOT in perfect comp with downward deman curve that  takes advantage of prices Reservation Price­ highest amount of money willing to be paid for a good Perfect Price Discrimination­ ability to sell @ each person’s reservation price Imperfect Price Discrimination­ divide customers into groups to find specific price  (segmenting market) Monopolistic Competition:  Many independent (small) firms  Differentiated Product  Substitutes o Decrease price might get new customers but not everyone o Increase price might deter some customers but not everyone  Downward demand curve  Low Barriers to entry o Zero Econ Profit in long­run  Short run Econ Profit greater than 0 as P>ATC Oligopoly:  Competition among few sellers  Market Power  Barriers to entry  Competition vs. Cooperation o Coop=monopoly actors o Compete=self­interest for profit  Oligopoly Equilibrium=NASH equilibrium o When you collude prices to have a trade­off that works for each party  and beyond that means equilibrium hurts both parties Game Theory: strategy of players and payoffs that has a dominant strategy to win the  best or a team player who does things even for both parties and not self interest Prisoner’s Dilemma= prisoner of your own self­interest strategy where you’d make less  unless you worked with the other person. FINAL was comprehensive and 25% of your grade. Test 3 was the hardest among  everyone so study that the most and brush up on other materials that you don’t  remember. I got a 100 on this test and would be more than willing to help study.


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