Week 4 Notes
Popular in Elementary Economics
Popular in Business
This 12 page Class Notes was uploaded by Lauren Huettemann on Saturday September 19, 2015. The Class Notes belongs to ECON 201 at Ball State University taught by Zhukov in Summer 2015. Since its upload, it has received 79 views. For similar materials see Elementary Economics in Business at Ball State University.
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Date Created: 09/19/15
Elementary Microeconomics Professor Boris Zhukov Textbook Foundations of Microeconomics plus NEW MyEconLab Kit 7E edition by R Bade and M Parkin ISBNl3 9780133577976 Outline Shifters and shapes of a PPF 0 Example Demand and Supply shifterscurve Changes in demand Midpoint method 0 Example Vocab II Shifter of PPF a No common points b Change in factors of production i Increase in capital increaseupward shift ii Large amount of people to retire decreasedownward shift 0 Change in technology d Natural disastersdiscoveries i Discoveries increaseupward shift ii Disasters decreasedownward shift Shapes of PPF a Concave i Increase in opportunity cost ii As X increases Y decreases b Linear c Convex i Implies opportunity cost is decreasing ii X increases and Y stays the same or vise versa iii Decreasing slope 111 Example 1 Jeremy J 50 cups of coffee in 1 hour amp 1 cake in 2 hours Lisa L 25 cups of coffee in 1 hour amp 2 cakes in 3 hours 2 J 50 cups in 1 hour 12 cake in 1 hour L 25 cups in 1 hour 23 cake in 1 hour 3 Absolute value J with coffee L with cake 4 Comparative advantage J With coffee L With cake 5 Opportunity cost J 50 cakes 12 cake L 25 cups 23 cake 100 cups 1 cake 752 cups 1 cake 1 cup 1100 cake 1 cup 272 cake Steps 1 Given 2 Normalize the variable to 1 hour a Divide coffee by cake 3 Find opportunity cost a Normalize IV VI b J gives up less cake then L c L gives up less coffee then J Shifters Demand a Law of demand downward slope b Demand schedule list of quantity demanded at each different price with in uences stay the same c Demand curve graph between quantity demanded and price d Market demand sum of demands of all buyers in a market Changes in Demand a Change in quantity that is planned to be bought b New demand schedule and curve c Can increasedecrease i Increase shift right quantity demanded is greater ii Decrease shift left quantity demanded at price is smaller d Shifters in uences on buying plans that change demand i Prices of related goods ii Expected future prices iii Income VII a iV Expected future income V Number of buyers Vi Preferencestastes Supply Quantity supplied amount of any goodserviceresource people are Willingable to sell at speci c period Law of supply inverse between price and quantity supplied i Once Q reaches P it will reverse 1 P increases Q increases 2 P decreases Q decreases Market supply sum of supplies of all sellers in market Substitute in production good that can be produced in place of another good i Supply decreases substitute increases Complement in production good produced along with another good i Supply increases price of complements in production increases and Vise versa VIII Prices of Resources and Other Inputs IX a Supply changes when price of resource used to produce good changes i Resource and input prices drive production cost b Higher cost in production smaller quantity supplied at each price c Expectations on future prices drive supply d More sellers larger supply e Productivity output per unit of input i Increase in productivity lowers production cost While increasing supply ii Decrease in productivity decreases supply iii Technology and use of capital in uence productivity Change in Quantity Supplied vs Change in Supply a Change in supply in uences on plans by sellers i Except price of good b Change in quantity supplied change in quantity of good that suppliers plan to sell resulting from change in price of good Market Equilibrium a Quantity demanded quantity supplied i Buyers sellers balance b Equilibrium price price Where quantity demanded quantity supplied c Equilibrium quantity quantity bought and sold at equilibrium price d Equilibrium opposing forces in balance e Law of market forces surplus price falls surplus price above equilibrium Shortage price rises price below equilibrium XI Predicting Price Changes a 3 questions i Does the event in uence demandsupply ii Does it increasedecrease demandsupply l Shift demand supply curve rightleft iii New equilibrium price and quantity and how have they changed b Explain and predict changes only consider changes in equilibrium pricequantity XII Demand amp Supply Curve a Same direction i Equilibrium quantity changes same direction as demand and supply when they shift same direction ii Demand increases more than supply rise in price iii Supply increases more than demand price falls b Opposite direction i Demand changes more than supply equilibrium quantity shifts with demand ii Supply changes more than demand equilibrium quantity shifts with supply XIII Supply Shifters a Change in inputfactors of production cost b Number of sellers c Technologyproduction d Expected price price increases quantity decreases e Taxessubsidies f Prices of related goods i Substitutes in production ii Complement in production positive relationship XIV Midpoint Formula Q2 Q1Q2Q12 P2 P1P2P12 XV Example PX QX 1 6080 60 802 2 60 80 m 3 60 8O 70 A needs to be bigger than B because the quantity demanded is reduced when going from B to A 4 4 2 m 5 4 2 6WD 7 60 80 D 4 23 8 Steps 1 Plug in quantity coordinates into equation 2 Solve variables in parentheses Reduce Plug price coordinates into equation Solve in order of operations Reduce Plug in Quantity and Price into equation Solve Demand relationship between quantity demanded of good amp price Quantity demanded quantity that consumers are Willing amp able to buy at speci ed price at a particular point in time Law of Demand inverse between prices amp quantity of a good P Q 3 PH Q Elasticity a measure of responsiveness of one variable to change in other variable all other variable remain constant Price of Elasticity of Demand measure of responsiveness of quantity demanded of good to change in price