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Econ 201 Lecture 9 Notes

by: Samantha Shea

Econ 201 Lecture 9 Notes ECON 201

Samantha Shea

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These notes cover what was talked about in class on Monday, October 3rd.
Micro Economics
Professor Liedholm
Class Notes
Microeconomics, Lecture Notes
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This 4 page Class Notes was uploaded by Samantha Shea on Monday October 3, 2016. The Class Notes belongs to ECON 201 at Michigan State University taught by Professor Liedholm in Fall 2016. Since its upload, it has received 3 views. For similar materials see Micro Economics in Microeconomics at Michigan State University.


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Date Created: 10/03/16
Lecture  9 Monday,  October  3,  212:38  PM • Midterm  Exam-­‐ October  5th • Location  A-­‐O:  107  South  Kedzie            P-­‐Z:  101  Biochemistry • Review  Session  -­‐ October  3rd  105  S.  Kedzie • Exam  Tips:   ○ Review  1,2,4,5,  and  6 ○ Class  Notes/  Powerpoints ○ Practice § Review  Quizzes § Practice  Midterm § Problem  Set  #1 Problem  Set  #1 1. Understand  PPF:  opportunity  cost 2. Spartan  Lemon  Lime  and  Sprite  are  substitute  goods.  An  increase  in  the  price  of   Spartan  Lemon  Lime  will: Shift  the  demand  curve  of  Sprite  to  the  right 3. An  increase  in  supply:  shifts  supply  curve  to  right Price  is  lower Increase  in  quantity  demanded 4. 0.3  is  inelastic Price  decreases Total  revenue  decreases Last  Time • Taxation ○ Statutory  Burden ○ Economic  Burden • Elasticity  of  Supply • Descriptive  Profile  of  Firms Topic  for  this  Section • Business  Firm  -­‐ Chapter  13 1. Objective 2. Economic  vs.  Accounting  Profit 3. Production  Function • Circular  Flow • Business  Firm  -­‐ Chapter  13 1. Objective 2. Economic  vs.  Accounting  Profit 3. Production  Function • Circular  Flow • Firm ○ An  economic  institution  that  transforms  inputs  (resources)  into  goods  and   services ○ Inside  the  firm  operates  like  a  command  economy • Objective  of  a  firm ○ Profits? ○ Total  revenue  -­‐ total  costs  =  Profit ○ Maximum  profits § How? ○ Maximize  Greed? ○ Other  objectives • Wall  Street ○ Movie  starring  Michael  Douglas  as  a  corporate  raider ○ Attempting  to  take  over  Teldar  Paper  Company ○ A  corporation  with  owners  (stockholders)  and  managers  separated • Economic  Versus  Accounting  Profit ○ Other  objectives • Wall  Street ○ Movie  starring  Michael  Douglas  as  a  corporate  raider ○ Attempting  to  take  over  Teldar  Paper  Company ○ A  corporation  with  owners  (stockholders)  and  managers  separated • Economic  Versus  Accounting  Profit Due  to  differences  in  how  costs  are  treated ○ ○ Opportunity  cost-­‐whatever  must  be  given  up § Also,  explicit  costs+   implicit  costs □ Explicit  costs:  input  (resource)  costs  that  require  an  outlay  of   money □ Implicit  costs:  input  (resource)  costs  that  do  not  require  an   outlay  of  money ® "hidden  costs" ® Typically  for -­‐owned  resources • Measured  as  opportunity  cost ○ Labor § Best  alternative  employment ○ Financial  costs § Interest  payments • Lawn  Mowing  Company Accounting Economic Profit Profit Revenue $200,000 $200,000 Explicit  Costs -­‐$170,000-­‐$170,000 Implicit  Costs -­‐$40,000 Profit $30,000 -­‐$10,000 • Attending    MSU/Year Tuition 15,000 Housing $10,000 Other $3,000 Private $28,000 Public $22,000 Total  Explicit $50,000 Implicit $30,000 Total  Opportunity  cost  $80,000 • Production Production  function:  the  term  economists  use  to  describe  the  technology   Total  Explicit $50,000 Implicit $30,000 Total  Opportunity  cost  $80,000 • Production ○ Production  function:  the  term  economists  use  to  describe  the  technology   of  production ○ Portrays  the  relationship  between  the  quantity  of  inputs  (resources)  and   the  output  of  a  good  or  service ○ Production  functions  apply  to  firms • Inputs:   Anything  used  in  the  production  process ○ ○ Two  general  types ○ Fixed-­‐ cannot  be  changed  during  the  production  period  (time) ○ Variable-­‐ can  be  changed  during  the  production  period  (time)


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