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Econ Notes

by: SophieSol

Econ Notes ECON 1011

GPA 3.92
Principles of Economics I
Yezer, A

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About this Document

Here are this week's notes for Econ!
Principles of Economics I
Yezer, A
Class Notes
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Popular in Principles of Economics I

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This 5 page Class Notes was uploaded by SophieSol on Friday September 18, 2015. The Class Notes belongs to ECON 1011 at George Washington University taught by Yezer, A in Fall 2015. Since its upload, it has received 20 views. For similar materials see Principles of Economics I in Economcs at George Washington University.


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Date Created: 09/18/15
1 Comparative Advantage OF 1000AFO AFO Iowa and Florida produce oranges and wheat F either 1000 lbs orangesacre or 1000 lbs wheatacre WF 1000AFW AFW A AFO AFW A DP1000 WF1000 I A WF1000 OF1000 H000 WF OF Florida s PPFacre OF 1000WF 0 100AO W 500Aw An Aw A An Aw A Oi100 WlSOO l AWlSOO Oi100 D 100 15 WI OI Iowa s PPFacre OI 10015 WI Florida oranges in terms of wheat inexpensive lowa oranges in terms of wheat expensive Florida slope of PPF is 1 I OF 1000WF lowa slope of PPF is 15 I OI 10015 WI l either 100 lbs orangesacre or 500lbs wheatacre So wheat has the lower opportunity cost in Iowa This means that Iowa has a comparative advantage in wheat Florida has a comparative advantage in oranges 100 Florida PPF L Equal Consumption line slope is 1 At points A and B if everyone is equal in production 0 Florida has the absolute advantage because it produces 500lbs of oranges and 500lbs of wheat Iowa produces 833le oranges and 833le wheat o PPF OI 100 15W But OW so W 100 15W or 12W100 so W m a Gains fromi 500 1500 0 Iowa has the comparative advantage in wheat because it produces 500 lbs wheat To balance this Florida must produce 500bs oranges 0 Then orida can produce an additional 250lbs of oranges and wheat o with specialization and trade Total 750lbs oranges 750lbs wheat no trade 583bs of oranges and 583 lbs wheat o gains from trade 750583 167bs of each good 0 2 Marshallian Cross supply and demand assume quantity supplied rises with price xaxis 0 OS Price P low D high S P small S high D Quantit The higher the price the higher the supply and the lower the quantity demand Shifts up or left decrease supply 0 Increase in demand makes curve shift up or right 0 Let price P Quantity demand Q lt Os o If output gt sales inventory rises and rms cut price 0 Let price P Q gt OS if output lt sales inventory falls and rms raise price o If price P QD 05 0 Inventory is stable because sales production Price is stable 0 Proof by contradiction shows that denial of a proposition results in a logical contradiction o If price gt P inventory rises and price rises o If price lt P inventory falls and price rises o If price P inventory is stable and price is stable Q P stable market equilibrium 3 Supply curve 0 sum of supply by producers shifts occur but not if the price changes 0 causes movement along curve 4 Demand Curve 0 sum of individual demand shifts occur but does not increase because price changes Movement along curve 5 Application lines outside store price too low l P Order today deliver in months price too low l P Merchandise quick sale price too high l P Full of Merchandise P A wages too low B too high U39lbUUNH Collectively we control everything but individually we don t control anything TVDical Halquot2 for pint It pint pint 439 I Market demand 3 o l v 1234567 1234567 12345678910 11 1391 Pintsweek pintsweek millions of pintsweek Reading this graph Look at the males where the arrow is When beer sells for 1pint they buy around 65 pintsweek Females buy around 35 pintsweek when it is 1pint So add these 6535 10 which is what the market demand curve shows Men and Women I HEIDI Add horizontally total price sum 2 Slope of supply curve is positive and slope of demand curve is negative Supply increases and demand increases 0 Price oor limitmax amount 0 Given price P oor gt P means quantity produced gt quantity sold excess supply 0 Price ceiling minimum amount l excess demand 0 If binding market equilibrium price is illegal


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