Popular in Micro Economics
Popular in Department
This 7 page Class Notes was uploaded by Mike Meng on Sunday February 22, 2015. The Class Notes belongs to ECON 142 at Kansas taught by Dr. Brian Staihr in Spring2015. Since its upload, it has received 91 views.
Reviews for Weekly Notes
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 02/22/15
First Lecture After First Exam 02232015 D Chapter 5 D Demand curve represents the value or bene ts people see in the good D Supply curve represents the cost associated with the good D E Market failure P140 D A situation where the market falls to produce the efficientbest correct optimal level of output D It justi es the government intervention into the economy Cases of market failure Public goods P155 Public goods are 1 Nonrival consumption most goods if I consume it someone else can t consume the same good but for public good someone consumes it can t stop someone else to consume the same single one good It s non rival llllllll D 2 Nonexclusive B if you don t pay you don t get the good but for public good not paying don39t prevent you form getting it It s non exclusive D D mosquito spray example D Because of the freerider problem there would be no demand and it leads to no supply So the market will fail with the goods D D Four categories of goods P154 Excludable Nonexcludable Rival private goods common resources Nonrival public goods national defense Is the internet a public good Externalities P138 Externalities a cost or a bene t that cost by a transaction that ren t part of the transaction spill over effect Coworkers getting u shots you bene t mllllllllllllll Cost or bene t caused by the transaction that are not part of the ransaction A bene t or a cost that affects someone who is not Private v external costs and bene ts Positive v negative externalities The sets of costs P138 Private cost material External cost pollution Social costs private costs external costs can be negative llllllllllllllf 39llllll D The demand and supply curve indicate only private bene ts and costs We are adding the external bene ts and cost by shifting the curves D When there is a extra external costs to producer we shift the supply curve up D If we incorporates external costs quantity to produce is smaller D Like tax on cigarettes to reduce the external cost D When there is a extra bene t to consumer we shift the demand curve up D If we incorporate external bene ts quantity to produce is bigger P140 D Like student loans to improve the bene t of more graduates to bene t the society And tax break Both increase positive externalities Mr Pigou Idea of using taxessubsides to address externality Chapter 6 Price Elasticity Law of demand when the price changes the quantity demanded will be changed Bread shoes Elasticity Responsiveness ll How much would the price changing a ect quantity demanded The atter the graph is the bigger elasticity gets llllllllllllllllllllllll D To measure the quantity demanded that is caused by price changing B Your demand is elastic when the quantity demanded change D The bigger change in quantity demanddemand more or demand less the bigger elasticity of demand gets the demand is more elastic D If the price changed and you buy the same amount you were going to buy anyway you didn t respond your demand is not elastic D D Elasticity determines how much revenue you earn D The law of demand when the price is set at a low price quantity demanded is high when price is high quantity demanded is low E Which option is going to make more money Total revenue quantity demanded price D D D What make a good have a demand that is elastic or inelastic D 1 number of substitutes D more substitute elastic D less or no substitute inelastic D 2 luxury or necessity D luxury is elastic D necessity is inelastic D 3 how broadly the market is de ned B if it s de ned narrowly elastic B if it s de ned broadly inelastic U More requirement more speci c elastic less requirement of consuming inelastic D 4 Size of the good in the consumer s budget price relative to income D D D D large part of budget elastic small part of budget inelastic 5 the amount of time consumer adjust to the new price The more time consumer use to adjust to the new price the more elastic the demand gets D Qllllllllllllllllllllllllll In the short term inelastic in the long term elastic How elastic works P183 Demand is you total revenue Elastic lower price increase Elastic higher price decrease lnelastic lower price decrease lnelastic higher price increase Calculating Elasticity The original price New price Original quantity demanded New quantity demanded Price elasticity change in quantity demanded average quantity emanded change in priceaverage price Quantity in on the top H D Elasticity is a negative number but if absolute value of price elasticity is between 0 1 the demand is inelastic D If it is greater than 1 the demand is elastic D Using elasticity D H Price elasticity change in quantity demanded average quantity demanded change in priceaverage price D Quantity in on the top H D change in quantity demanded change in price elasticity D B using this we are able to calculate the quantity demand after the change of the price and the new revenue after the price change D D The elasticity changes as you move along the demand curve if the demand curve is a straight line The top part is elastic and the lower part is inelastic D The top part is more expansive then it39s more likely to be a bigger part of people s budget so it s more elastic D B Cross price elasticity of demand P185 B When we are talking about changing price of one goods affects the substitutes the cross price elasticity is positive B When we are talking about change price of complements the cross price elasticity is negative D D Elasticity of supply P190 Elasticity of supply change in quantity supplied average quantity supplied change in priceaverage price D Quantity in on the top As more time passes the elasticity becomes more elastic lncome elasticity of demand P186 How does the quantity change when income changes Combining elasticity with tax imposed on demand and supply curves Percentage of any tax that will fall on the buyers Elasticity of supplyelasticity of supply elasticity of demand Percentage of any tax that will fall on the sellers Elasticity of demandelasticity of supply elasticity of demand the more elastic the supply is the more of the tax falls on the buyer the more elastic the demand is the more of the tax falls on the eller lUlllllllllllllllllllllllllllll
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'