Second Week of Notes- January 19-21
Second Week of Notes- January 19-21 ECON2020
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This 3 page Class Notes was uploaded by Morgan Genelin on Monday February 15, 2016. The Class Notes belongs to ECON2020 at University of Colorado taught by Murat Iyugan in Winter 2016. Since its upload, it has received 49 views. For similar materials see Principles of Macroeconomics in Economcs at University of Colorado.
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Date Created: 02/15/16
January 19, 2016 Chapter 3 Demand: Schedule: relationship between price and demand in a table Curve: relationship on graph Shifts: PYNTE (price of related goods, income, number of buyers, taste, expectations) Movement: price or quantity o If the first thing changed in a statement is price or quantity, it is a movement Market demand: summation of individual demands o How to add: horizontally from a fixed price Supply Schedule: same but with supply instead of demand Curve: relationship on graph Shift: SPENT (Sellers Input price, price of related goods, expectations, number of sellers, technology) Movement: price or quantity (same rule as demand) Market Supply: Summation of individual supply’s (add the same way as demand) Competitive Market: Many buyers and sellers Homogenous product Price takers (not makers) Compliments: Increase in price A causes decrease in supply/demand B Substitutes: Increase in price A causes increase in supply/demand B Normal Good: Income increases, so demand increases Inferior Good: Income increases, so demand decreases Technology: increase in technology, increase in supply (shift) Input: good used to produce the final product. Increase in price leads to decrease in S/D Equilibrium: when quantity supplied equals quantity demanded Surplus Shortage Changes in equilibrium: Both S/D up: P? Q up Both S/D down: P? Q Down S up D down: P down, Q? S down D up: P up Q? January 21, 2016 Chapter 4 Price controls and Quotas 1. Why? a. IF price is deemed high: help consumers (price ceilings) b. IF price is deemed low: help sellers (price floors) i. Both are judgement calls c. Quantity is deemed high: Limit the supply (quotas) 2. Price Controls try to improve social welfare i. Attempting to contain problems 3. Controls that Restrict i. Price ceiling 1. The equilibrium is too high a. So put a price ceiling to help the consumer 2. It is binding if it is below equilibrium a. If binding, it causes a shortage (Qd>Qs) b. This is the deadweight loss 3. Low quantity, bad allocation, low quality, wasted resources ii. Price Floor 1. The equilibrium is too low a. So put it to help the producers 2. It is binding if it is above the equilibrium a. Causes a surplus (Qd<Qs) 3. Low quantity demanded, bad allocation, high quality, wasted resources, black market development 4. Quotas a. Limit on the quantity of some good that can be bought/sold i. Vertical restriction 1. Decide on price: if there is a difference, the gap goes to a quota holder while if this was a tax the gap would go to the government.