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ECO 211

by: Ashley Notetaker

ECO 211 ECO 211

Ashley Notetaker

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Gordon Smith
Class Notes
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This 7 page Class Notes was uploaded by Ashley Notetaker on Monday October 3, 2016. The Class Notes belongs to ECO 211 at Anderson University taught by Gordon Smith in Fall 2016. Since its upload, it has received 5 views. For similar materials see Microeconmics in econmics at Anderson University.


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Date Created: 10/03/16
ECO 211: Principles of Microeconomics Notes Outline Chapter 6 – Principles of Microeconomics (Mankiw) Objectives:  Gain factual knowledge pertaining to the field of microeconomics  Learn fundamental principles, generalizations, and theories, including basic  concepts of market interactions, market efficiency, market inefficiencies, product  markets, and factor markets  Learn to apply course material, such as modeling and graphical representation, to  improve thinking, problem solving, and decision making as it regards microeconomic issues SLOs: SLO 1: Demonstrate basic understanding of business knowledge  Understand the basic concepts of microeconomics; including how markets  function, how market participants interact, and the different types of markets in  which business transactions take place SLO 2: Demonstrate application of business knowledge  Apply basic modeling tools to better describe and evaluate the micro­economy Notes: Government Policies Government policies and their effects on market outcomes: 1. Price controls: Price ceiling –  Non­binding –  Binding – Page 1 of 7 © Gordon Smith ECO 211: Principles of Microeconomics Notes Outline Shortage –  When the price mechanism is artificially constrained, other allocation mechanisms take over: 1. 2. 3. 4. 5. Price floors –  Non­binding –  Binding –  Page 2 of 7 © Gordon Smith ECO 211: Principles of Microeconomics Notes Outline Surplus –  When the price mechanism is artificially constrained, other allocation mechanisms take over: 1. 2. 3. 4. 5. The minimum wage: 2. Taxes: The impact of taxes: 1. 2. 3. Page 3 of 7 © Gordon Smith ECO 211: Principles of Microeconomics Notes Outline Income tax vs. sales tax: a story of semantics An income tax affects quantity A sales tax affects price Sales tax paid by the buyer Sales tax paid by the seller Page 4 of 7 © Gordon Smith ECO 211: Principles of Microeconomics Notes Outline A sales tax results in two things:  When the sales tax is paid by the buyer,  1. The cost borne by the seller  2. The cost borne by the buyer   When the sales tax is paid by the seller,  1. The cost borne by the seller  2. The cost borne by the buyer  In either case,  Elasticity Page 5 of 7 © Gordon Smith ECO 211: Principles of Microeconomics Notes Outline Examples: Demand curve is more elastic Supply curve is more elastic  Problems and Applications: Question #7c   Congress and the president decide that the United States should reduce air pollution by  reducing its use of gasoline. They impose a $0.50 tax on each gallon of gasoline sold.  Are consumers of gasoline helped or hurt by this tax? Why? Page 6 of 7 © Gordon Smith ECO 211: Principles of Microeconomics Notes Outline  Problems and Applications: Question #8a   Suppose the minimum wage is above the equilibrium wage in the market for unskilled  labor. Using a supply­and­demand diagram of the market for unskilled labor, show  the market wage, the number of workers who are employed, and the number of  workers who are unemployed. Also show the total wage payments to unskilled  workers. Page 7 of 7 © Gordon Smith


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