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## Week 6 Notes

by: Abigail Johnson

20

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4

# Week 6 Notes ECN 222 - 005

Abigail Johnson
UNCW
GPA 3.59

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Week 6 Notes
COURSE
Macroeconomics
PROF.
TYPE
Class Notes
PAGES
4
WORDS
CONCEPTS
Macroeconomics
KARMA
25 ?

## Popular in Economcs

This 4 page Class Notes was uploaded by Abigail Johnson on Sunday February 21, 2016. The Class Notes belongs to ECN 222 - 005 at University of North Carolina - Wilmington taught by Adam Talbot Jones in Spring 2016. Since its upload, it has received 20 views. For similar materials see Macroeconomics in Economcs at University of North Carolina - Wilmington.

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Date Created: 02/21/16
2/21/16 4:48 PM MONDAY FEB 15 What causes surpluses/shortages? • Market changes faster than equilibrium has moved • Floors and Ceilings can cause these • Binding price floor à surplus • Binding price ceiling à shortage Price floor picture • Minimum wage: move from \$7 to \$15 an hour. o Pro: not in poverty anymore § QD(workers who keep jobs with pay raise) win • Con: more people are willing to work for 15/hr than 7/hr. This difference is a surplus of labor (i.e., unemployment) o Q -0 (Dob losses) lose • QD= hired at \$15/hr • Q = original equilibrium 0 • Qs= those willing to work at 15/hr • Q0-Q Dloss of jobs (entry level jobs are mostly lost) Price ceiling picture • Gasoline Market • Equilibrium is \$2, Ceiling is \$1 (new law)à shortage • Pros: those who can get gas win • Cons: oil companies lose, those who can’t get gas lose • Q = demand at only \$1 D • Q0= original equilibrium • Qs= supply at only \$1 • Q -Q = true loss from equilibrium 0 D • QD-Q S shortage Shortageàrationing 1. Long lines- first come first served 2. Discrimination according to sellers’ biases/preferences (connected individuals) • Inefficient: goods do not necessarily go to the buyers who value them most highly • Let prices change: the rationing mechanism is efficient, potentially not fair (or equitable) Changes in equilibrium (3-Steps) • Does Demand or Supply shift at all? Which one or both? • Which way does the curve shift? • Draw in new S&D lines and see what happens to price and quantity (plus new equilibrium point) [Price increase/decrease; Quantity increase/decrease] **Go through the 3-step process for any given problem BEFORE looking for the answer. Graph of D&S combinations WEDNESDAY FEB 17 Retake times (form to sign-up on BB): Wed 5, 8pm CH 212 Thursday 8am CH 231, 3:30pm CH 212 Friday 1pm CH 212 Monday 8am CH 211 Use the 3-step method to analyze the effects of each event on the equilibrium price and quantity of music downloads. 1. Event A: A fall in the price of CDs • Demand • Demand shifts left (decrease) • decrease price, decrease quantity 2. Event B: Sellers of music downloads negotiate a reduction in the royalties they must pay for each song they sell. • Supply • Supply shifts right (increase) • Decrease price, increase quantity 3. Event C: Event A & B both occur. • Price decrease, quantity ? Use the 3-step method to determine the cause of each: 1. Gas prices over last 8 months; Pdecrease, Qincrease • supply increase 2. Gas prices in the summer; Pincrease, Qincrease • demand increase 3. Tickets to superbowl; Pincrease, Qsame • supply ? (technically), demand increase • supply is fixed Ch. 10 (Measuring a Nation’s Income) GDP: measures total income of population • Also measures total expenditure • Income = expenditure (Every dollar a buyer spends is a dollar of income for the seller) Income doesn’t = happiness, but it can buy other rewarding aspects of life Gross Domestic Product: The market value of all final goods and services produced within a country in a given period of time • Market Value: the weighted value of individual products within a market (dollars) o Anything without a “market value” is not included • Final: the end user, last person to buy the good, the true “consumers” o Assumption that the final good includes the price/cost/value of any intermediate goods (inputs) • Goods: physical, tangible items • Services: intangible items (phone service, dry-cleaning, etc.) • Produced: includes currently produced goods (annual, fiscal, etc.), not produced in the past • Within a Country: within the borders of a given country. Physical. • In a Given Period of Time: usually yearly or quarterly (3 months) Consumers (C) + Firms/Investments (I) + Government (G) [Exports- Imports (NX) net exports] = Y (GDP ) US Y=C+I+G+NX • Consumption: total spending by households on goods and services o Exception: housing costs § Renters: rent payment § Homeowner: imputed rental value (“as if” renting the home), not purchase price or mortgage payment.

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