Econ week four notes
Econ week four notes Econ 150-21
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This 3 page Class Notes was uploaded by Olivia Notetaker on Sunday February 14, 2016. The Class Notes belongs to Econ 150-21 at La Salle University taught by Dr. Mshomba in Fall 2016. Since its upload, it has received 35 views. For similar materials see Intro Macroeconomics in Economcs at La Salle University.
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Date Created: 02/14/16
Econ week four notes th th February 9 and 12 - Quality decrease and there are black markets (an underground economy) with a shortage o Or, you ration to help fix the shortage - Natural outcome of a price ceiling= a shortage o To prevent the shortage, subsidize company making the product. That increases the supply line - Price floor- above equilibrium o Causes a surplus. Gov buys the surplus to fix it o The equilibrium price is not enough for the producer (don’t want them to be paid too low. Ex: minimum wage) - If demand increases, price increases and so does quantity o A drought: supply decreases, price increases, quantity decreases o - Demand decreases= price decrease, quantity decreases - Supply decreases= price increase, quantity decreases o Means we don’t know about price, but quantity definitely decreases o We must be given specific information on which is bigger to know what happens to price - Supply increase (from price of resources decreasing)= price decrease, quantity increase - Demand decrease (from income decreasing)= price decrease, quantity decrease o Price definitely decreases, but we don’t know about Q Don’t know because it doesn’t show magnitude. Need to draw another line to show this o This shows us the direction of the change, not the magnitude - Supply increases= price decrease, quantity increase - Demand increase= price increase, quantity increase o We don’t know about price, but Q definitely increases - Consumer surplus and producer surplus o These do not mean when Cost exceeds Benefits - Consumer surplus= difference between max amount a consumer is willing to pay and the actual price of the product o Surplus and price are inversely related o Area above price and below demand line= consumer surplus o As price goes up, this star/triangle area decreases - Producer surplus= difference between the actual price producer receives and minimum price a consumer has to pay o Good for the producer o Direct relationship between surplus and price o Area below price but above supply line - Public good- 2 characteristics: 1) nonrivalry: one person consuming a product does not keep another from consuming same product; 2) nonexcludability: everyone can have the benefits of a product - Quasi-public goods: public good that includes exclusion - Private goods: 2 characteristics: 1) rivalry; 2) excludability - Cost of excluding is too high, private firms can provide public goods because production costs of public goods can be covered by profits generated by closely related private goods - Public goods cause free-riders. Firms won’t produce public goods because goods that benefits exceed costs aren’t made - Negative externality: producing something has a negative impact on another o Ex: production causes pollution which affects somewhere else o Causes harm to a third party o Taxes cause supply line to shift L - Government has to intervene with market failures
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