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by: Gwen

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# Microeconomic Principles - Week 2 ECN 212

Marketplace > Arizona State University > Economcs > ECN 212 > Microeconomic Principles Week 2
Gwen
ASU
GPA 3.4

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This is the 2nd week of notes for Microeconomic Principles
COURSE
Microeconomic Principles
PROF.
Dr. Nancy Roberts
TYPE
Class Notes
PAGES
4
WORDS
CONCEPTS
micro, Microeconomics, Economics, ASU
KARMA
25 ?

## Popular in Economcs

This 4 page Class Notes was uploaded by Gwen on Tuesday January 12, 2016. The Class Notes belongs to ECN 212 at Arizona State University taught by Dr. Nancy Roberts in Spring 2016. Since its upload, it has received 15 views. For similar materials see Microeconomic Principles in Economcs at Arizona State University.

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Date Created: 01/12/16
Demand    Demand is not linear.    P  Qd  \$500  6  \$400  16  \$300  30  \$200  55  \$100  60  0  100    ❏ movement from A → B is called an increase in quantity demanded, ​ not an increase in  demand  ❏ movement from C → D is called a decrease in quantity demanded, ​ not a decrease in  demand  ❏ only ​ pric can change the amount of quantity demanded  ❏ a movement of the ​ entire curv is considered an increase or decrease in demand  ● more consumers causes the curve to shift to the right  ● less consumers causes the curve to shift to the left  Determinants ​(ceteris paribus variables → what changes demand, ​ot pric)  1. population  2. income  ○ normal goods → a good whose demand  increases because of an increase in income;  determined by the individual  ○ inferior goods → a good whose demand  decreases because of an increase in income;  determined by the market  Ex: College students buy ramen noodles  because they’re cheap. If students have an  increase in income, they’d be more likely to buy  more mac ‘n’ cheese, which is more expensive.  This would cause a decrease in the demand for  ramen noodles. In this scenario ramen would be  an nferiorgood, and mac ‘n’ cheese would be a  normal ​ood.    3. tastes/preferences  4. consumers’ ​ expectations   Ex:​ If the government announced they were to increase the sales tax on Mercedes cars  in a month, the demand for Mercedes cars would increase in that month because of the  expectation that after that month, the car would cost much more.  5. △ (change) in the price of:  ○ substitute goods → goods that can be bought in place of another  i. absolute price (the price of a good) vs. relative price (the ratio of two  prices)  Ex:​ If the price of Coke went up, Qd would decrease and some of those  consumers would buy a substitute like Pepsi instead.            ○ complementary goods → goods that are bought to be used with another  Ex:​ If the price of tennis balls increased, people would stretch out the life of their  rackets and the demand for rackets would decrease.            Supply    P  Qs  \$1  0  \$5  10  \$10  20  \$40  50      ❏ movement from A → B is called an increase in quantity supplied​ot an increase in  supply  ❏ movement from D → C is called a decrease in quantity supplied,​ot a decrease in  supply  ❏ Consumers want to maximize u ​til​(happiness), producers want to maximize​rofi. ​ ❏ profit ≠ greed  ❏ without profits, there would be no production  ❏ Law of Supply:​  as price increases – and everything is held constant (ceteris paribus) –  quantity supplied increases  ❏ producers and consumers rely on each other; they are not enemies  ❏ Changes in price do not change demand or supply, they change ​ uantity demanded​and  quantity suppli. ​ ❏ a decrease in supply causes the curve to shift to the left  ❏ an increase in supply causes the curve to shift to the right  Determinants  1. number of suppliers   2. price of inpu (resource)   ○ price of labor  3. technology  4. △ price of a related good  Ex:If oats turn up a bigger profit, some wheat  farmers will switch to oats, causing a decrease in  supply.   5. producers’​ expectations            Supply and Demand  ❏ equilibrium price: one and only price where the  quantity supplied is equal to the quantity  demanded  ❏ “clearing the market” → no surplus, no shortage  ❏ consumers’ surplus: paying less than what  you’re willing and able to pay  ❏ producers’ surplus: selling a product for more  than what you’re willing to sell  Ex: The equilibrium price is where the supply  and demand graphs intersect. The area above  the equilibrium price is the consumer surplus,  and the area below is the producer surplus.    ❏ price ceiling: when the gov’t imposes a max. price a  good can be exchanged between buyer and seller, i.e.  usury laws (meant to help consumers)  Ex:​If the government imposes a price ceiling on  apartments lower than the equilibrium price, it would  affect the number of quantity demanded and  the quantity supplied.    ❏ price floor: when the gov’t imposes a min. price  producers and consumers can exchange a  good (meant to help producers)  Ex: Sometimes price floors are placed above  the equilibrium price, which would not affect the  quantity demanded and supplied for that  product.    ➢ if supply ncreases​, price decreases and  demand increases  ➢ if supply ​ecreases​, price increases and demand decreases  ➢ if demand i​ncreases, price increases and supply increases  ➢ if demand d​ecreases​, price decreases and supply decreases    ❏ deadweight/welfare loss: amount left from previous consumers’ & producers’ surplus  after a price ceiling/price floor is set

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