New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

ECON 2020 (Dr. Macy Finck) September 12-16

by: Gabrielle Ingros

ECON 2020 (Dr. Macy Finck) September 12-16 Econ 2020

Marketplace > Auburn University > Economics > Econ 2020 > ECON 2020 Dr Macy Finck September 12 16
Gabrielle Ingros
GPA 3.8

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

These are the notes from the lectures given in class.
Principles of Economics: Microeconomics
William M. Finck
Class Notes
25 ?




Popular in Principles of Economics: Microeconomics

Popular in Economics

This 14 page Class Notes was uploaded by Gabrielle Ingros on Sunday September 18, 2016. The Class Notes belongs to Econ 2020 at Auburn University taught by William M. Finck in Fall 2016. Since its upload, it has received 10 views. For similar materials see Principles of Economics: Microeconomics in Economics at Auburn University.


Reviews for ECON 2020 (Dr. Macy Finck) September 12-16


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: 09/18/16
ECON 2020 Lecture 2: Trade Markets Fish Coconuts  Two tables represent two economies o Every time we work a trade  problem, Them 10 20 the opportunity cost will be  constant so you only  need the two end points Us 12 48  Trade: Fish Coconuts Them 10 20 Opportunity Cost of a Us 12 48 Coconut Opportunity Cost of a Fish o They will produce 10 fish OR  2C ½F 4C ¼ F 20 coconuts o We will produce 12 fish OR 48 coconuts  Absolute Advantage – the ability to produce more in a given time frame o Which economy should produce each good?  Comparative Advantage – the ability to produce at a lower marginal (additional)  opportunity cost  Opportunity Cost of Good X = Quantity of Y/Quantity of X o They: 20/10 = give up 2C every time they produce 1 fish  Give up ½ fish every time they produce 1 coconut o Us: 48/12 = give up 4C every time we produce 1 fish  Give up ¼ fish every time we produce 1 coconut  The Comparative Advantages will always be split between two markets o So let them produce fish and we will produce coconuts (choose the lower  opportunity cost to determine who produces what)  Drawing Graph of above tables – Production: assume that the economies  completely specialize according to their comparative advantage  ECON 2020 o P = production o Production (write down coordinates): Them = (10F, 0C) and Us: (0F, 48C)  Production and Consumption:  GIVEN: o Assume that the economies agree to trade 3 coconuts for each fish traded o Assume that the fish­producing economy is willing to trade 4 fish for  coconuts  How much of each good will each economy produce and  consume?  Production: o Them: 10 fish and 0 coconuts o Us: 0 fish and 48 coconuts  Trade: o They export (we import) 4 fish o We export (they import) 12 coconuts  Consumption: o Them: produce 10 fish – send 4 fish = 6 fish o Them: produce 0 coconuts + import 12 coconuts = 12 coconuts  Them: 6 fish and 12 coconuts o Us: produce 0 fish + import 4 fish = 4 fish o Us: produce 48 coconuts – 12 coconuts = 36 coconuts   Us: 4 fish and 36 coconuts o Add these numbers back together to check if correct  i.e. (them: 6 fish + us: 4 fish = 10 fish)  i.e. (them: 12 coconuts + us: 36 coconuts = 48 coconuts)  Back to graph: ECON 2020  Consumption: o Them: 6 fish and 12 coconuts o Us: 4 fish and 36 coconuts  Example #2 o Goods are grits and  shrimp o This economy is  producing 60 grits  and 0 shrimp  Production: 60 grits and 0 shrimp  Consumption: 30 grits and 15 shrimp  Exports = production – consumption o Exports: 60 ­30 = 30 grits  Imports = consumption – production o Imports: 15 – 0 = 15 shrimp  Terms of Trade for Import = export/import o 2 grits : 1 shrimp  International trade arises primarily from Comparative Advantage ECON 2020  If we have a Comparative Advantage in production, we will export the good.  If  not, we will import the good. Lecture 3: International Trade Markets  Export Markets Graph: o Sd = supply domestic & Qd = demand domestic o Pn = no­price equilibrium & Qn = no­trade equilibrium  When the market opens to free trade, international consumers are added to  demand o Dw = world  demand & Pw = world price &  Qs = domestic  production ECON 2020 o Qd = domestic  consumption  Note: identify this  market as an export  market (because there is world demand and the world price is higher than the  no­price)  Note: identify the number of units that are being exported   Note: identify the changes in social welfare by measuring changes in consumer  and producer surplus o Subtract B from C  US exports = Qs –  Qd ECON 2020  Lost consumer  surplus =  Pw,A,C,Pn (“upside down boat”)  Gained Producer surplus = Pw,B,C,Pn (“right side up boat”) ECON 2020  Net welfare  gain =  A,B,C o Consumers  are worse off,  but producers  are so well off that the net  welfare gain  still increases  (“the pie is getting bigger”)  Import Markets Graph: ECON 2020 o Pn = no­price equilibrium & Qn = no­trade equilibrium o When the market opens to free trade, international producers are added to  supply  o US Imports = Qd – Qs  o Qd = domestic  consumption  Identify as  import market (world  supply and the world  price is lower than  the no­ price) o Lost Producer  Surplus =  Pn,A,C,Pw o Gained  Consumer  Surplus =  Pn,A,B,Pw o Net Welfare  Gain = A,B,C ECON 2020  Types of Trade  Restrictions: o Tariff – a tax  levied on goods imported into a county  o Import Quota – a specific limit or maximum quantity of a good permitted  to be imported into a country during a given period  Impact of a Tariff graph: o Pw + t =  world price  plus tariff o Pre­tariff  imports = Qd – Qs ECON 2020 o Post­Tariff imports = Qd1 – Qs1 o Number of imports is shrinking (blue line to pink line) o A = gained producer surplus (much smaller than lost consumer surplus)  The government is now earning T on every unit imported into this market (tax x  imports) o B = gained tax revenue  ECON 2020 o C =  deadweight  loss (how  much worse  off we are as a society  when a tariff is placed on  the import  market)  How many units imported before tariff? (blue) How many after? (pink) o Value of Tariff = (Pw + t) – (Pw) = T  Tariff vs. Quota: o Import quotas have a similar impact, except area B goes to foreign  producers rather than the U.S. government o With tariffs, foreign producers with the lowest costs will import the most o With quotas, only foreign producers with permission may import,  regardless of costs Lecture 4: Elasticity  Elasticity – a measure of the relative responsiveness of one variable to a change in another  Price Elasticity of Demand – the ratio of the percent change in the quantity  demanded to the percent change in the price ∆Qd  E d= ∆P o Note: Ed is always negative, but just ignore the negative sign ∆Qd  ∆Qd= originalQd  ∆ P= ∆P originalP o Convert to % by multiplying by 100 ECON 2020  Example: o When the price of a good has fallen from $10 to $8, the Qd increases from 200 to 250.  Find Ed.  %ΔQd = (250 – 200)/200 = .25  %ΔP = (10 – 8)/10 = .2  Ed = .25/.2 = 1.25  Midpoint Formula:  2 Q +Q 1 ¿ ¿ ¿ 2 ¿  ¿ (Q 2Q 1) ¿ ∆Qd Midpoint Forumla= Avg.Qd =¿ ∆P Avg.P  Example #1 (Using numbers from previous example): o Ed = (50/225)/(2/9) = .222/.222 = 1  Example #2: o Ed = 1.2 o Qd = 100,000 o P = $0.50  What is the ΔQd when ΔP is $0.05? o Solution: 1.2 = (ΔQd/100,000)/(.05/.50) = 1.2 = ΔQd/100,000 = 12,000  So, ΔQd = 12,000 Units  Possible Elasticity Coefficients: o Perfectly Elastic – Ed = infinity (a tiny change in P causes an infinite  change in Qd) ECON 2020 o Elastic – Ed > 1 (%ΔQd > %ΔP); flat o Unit Elasticity – (%ΔQd = %ΔP)  Nothing really happens; boring o Inelastic – Ed < 1 (%ΔQd < %ΔP); steep ECON 2020  Sin Taxes – taxes on “bad” goods such as alcohol & cigarettes o Perfectly Inelastic – Ed = 0 (a huge change in P causes no change in Qd)


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


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'

Why people love StudySoup

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Anthony Lee UC Santa Barbara

"I bought an awesome study guide, which helped me get an A in my Math 34B class this quarter!"

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.