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1、Microeconomics,Yan YAN,Chapter 1:The Fundamentals of Economics（A.Introduction）,You want to buy a clock in the grocery near the campus.The price is$20.A friend tells you that it is$10 in the supermarket in downtown.Would you buy the clock in the supermarket？You want to buy a computer which is$2510.wh
2、ile it is$2500 in the supermarket in downtown.Wherever you buy the computer,it would return to the producer if there is any problem.Where would you buy it？,Chapter 1:The Fundamentals of Economics（A.Introduction）,1.1 Scarcity and EfficiencyWhat is economics?Economics is the study of how societies use
3、 scarce resources to produce valuable commodities and distribute them among different people.What is efficiency?Efficiency denotes the most effective use of a societys resource in satisfying peoples wants and needs.In economics,we say that an economy is producing efficiently when it cannot make anyo
4、ne economically better off without making someone else worse off.,Chapter 1:The Fundamentals of Economics（A.Introduction）,1.2 Microeconomics and MacroeconomicsWhat is Microeconomics?It is concerned with the behavior of individual entities such as markets,firms and households.Founder:Adam smith,What
5、is Macroeconomics?It is concerned with the overall performance of the economy.Funder:John Maynard,Chapter 1:The Fundamentals of Economics（A.Introduction）,1.3 The logic of economicsThe post hoc fallacy It involves the inference of causality.It occurs when we assume that,because one event occurs anoth
6、er event,the first event caused the second event.广东省的人口死亡率为5.4，是全国最低的省份，由此我们就推定生活在广东一定有利于身体健康。Failure to hold other things constantIt refers to the failure to hold other things constant when thinking about an issue.税率对收入的影响Fallacy of compositionWhen you assume that what is true for the part is also
7、true for the whole,you are committing the fallacy of composition.一个农场主丰收 VS.所有农场主都丰收,Chapter 1:The Fundamentals of Economics(B.The Three problems of economic organization),There are three problems of economic organization:What commodities are produced and in what quantities?How are goods produced?Fo
8、r whom are goods produced?There are three types of economies:Market economyCommand economyMixed economy,Chapter 1:The Fundamentals of Economics(C.Societys technological possibilities),1.4 inputs and outputsInputs are commodities or services that are used to produce goods and services.Outputs are the
9、 various useful goods or services that result from the production process and are either consumed or employed in further production.饺子的投入与产出：投入：面粉、肉、蔬菜、调味品、包饺子的技术、擀面杖产出：饺子,Chapter 1:The Fundamentals of Economics(C.Societys technological possibilities),Factors of production:Another name for inputsIt
10、can be classified into three board categories:land,labor and capitalLand(natural resource):represents the gift of nature to our productive process.Labor:consists of the human time spent in productionworking in automobile factories,tiling the land,teaching school,or baking pizzas.Capital resource fro
11、m the durable goods of an economy,produced in order to produce yet other goods.建造房子需要什么生产要素？,Chapter 1:The Fundamentals of Economics(C.Societys technological possibilities),1.5 The Production-Possibility FrontierSuppose the income is fixed,we can choose to produce gun or butter.(shown in the chart),
12、Chapter 1:The Fundamentals of Economics(C.Societys technological possibilities),Chapter 1:The Fundamentals of Economics(C.Societys technological possibilities),Chapter 1:The Fundamentals of Economics(C.Societys technological possibilities),Chapter 1:The Fundamentals of Economics(C.Societys technolog
13、ical possibilities),1.6 Opportunity costThe cost of the forgone alternative is the opportunity cost of the decision.How to calculate opportunity cost?Suppose the country decide to increase its gun purchase from 9000 guns at D to 12000 units at C,what is the opportunity cost of the decision?1 million
14、 butter.,Chapter 1:The Fundamentals of Economics,Exercise&DiscussionAssume that Econoland produces haircuts and shirts with inputs of labor.Econoland has 1000 hours of labor available.A haircut requires hour of labor,while a shirts requires 5 hours of labor.Construct Econolands production-possibilit
15、y frontier.,Chapter 1:The Fundamentals of Economics,Consider the following problem:after your 8hours a day of sleep,you have 16 hours a day to deliver between leisure and study.Let leisure hours be the X variable and study hours be the Y variable:1)plot the straight-line relationship between all com
16、binations of X and Y on a blank piece of graph paper.2)let us say that you absolutely need 6 hours of leisure per day,no more,no less.On the graph,mark the point that corresponds to 6hours of leisure.3)now consider a movement along the curve:assume that you decide that you need only 4 hours of leisu
17、re a day.Plot the new point.,Chapter 2：Markets and Government in a Modern Economy,Imagine what process does meat experience?What is market?It is a mechanism through which buyers and sellers interact to determine prices and exchange goods and services.Price=DemandPrice DemandPrice DemandPrice coordin
18、ate the decisions of producers and consumers in a market.Higher prices tends to reduce consumer purchases and encourage production.Lower prices encourage consumption and discourage production.Prices are the balance wheel of the market mechanism.,Chapter 2：Markets and Government in a Modern Economy,M
19、arket EquilibriumIt represents a balance among all the different buyers and sellers.Please note the following questions：1.Is it always true that when demand is increasing,price will also increase?A hotel in Egypt2.Is it true that demand is the only reason for price rise and fall?An example from Golf
20、 in USIs it true that buyer is the important reason for price?An example of price of peanut and wine in the bar,Chapter 2：Markets and Government in a Modern Economy,Homework1.What are the most important problems in economics?2.Please give the definition of input and output.3.In the example of butter
21、 and guns,assume that the productivity of butter has doubled because of technology innovation,while the productivity of guns has not changed.Please plot the new points and PPF according to the previous example.,Chapter 3:Basic Elements of Supply and Demand,Chapter 3:Basic Elements of Supply and Dema
22、nd(A.The demand schedule),3.1 The Demand Curve,There exists a definite relationship between the market price of a good and the quantity demanded of that good,other things constant.This relationship between price and quantity bought is called the demand schedule,or the demand curve.,Chapter 3:Basic E
23、lements of Supply and Demand(A.The demand schedule),The law of downward-sloping demand（需求向下倾斜规律）When the price of a commodity is raised(and other things are held constant),buyers tends to buy less of the commodity.Similarly,when the price is lowered,other things being constant,quantity demanded incr
24、eased.Why the quantity demanded tends to fall as price rises?Substitution effectIncome effect,Chapter 3:Basic Elements of Supply and Demand(A.The demand schedule),3.1.1 Forces behind the demand curve,Chapter 3:Basic Elements of Supply and Demand(A.The demand schedule),3.1.2 Shifts in demand,Does the
25、 demand increase or fall?Will a warm winter shift the demand curve for heating oil leftward or rightward?What will happen to the demand for baseball tickets if young people lose interest in baseball and watch basketball instead?what happens to the demand for a college education if wages are falling
26、for blue-collar jobs while salaries for college-educated investment bankers and computer scientist are rising rapidly?,Chapter 3:Basic Elements of Supply and Demand(B.The supply schedule),3.2 Supply curveIt shows the relationship between its market price and the amount of that commodity that produce
27、rs are willing to produce and sell,other things held constant.,Chapter 3:Basic Elements of Supply and Demand(B.The supply schedule),Chapter 3:Basic Elements of Supply and Demand(B.The supply schedule),Chapter 3:Basic Elements of Supply and Demand(B.The supply schedule),Does the supply curve mover le
28、ftward or rightward?What would happen to the world supply curve for oil if a revolution in Iraq led to declining oil production?What would happen to the supply curve for clothing if tariffs were increased on Chinese imports into the US?What would happen to supply curve for computers if Intel introdu
29、ces a new chip that dramatically increases computing speeds?,Chapter 3:Basic Elements of Supply and Demand(C.Equilibrium of supply and demand),3.3 Equilibrium of supply and demandWhat is Equilibrium of supply and demand?Supply and demand interact to produce an equilibrium price and quantity,or a mar
30、ket equilibrium.The market equilibrium comes at that price and quantity where the forces of supply and demand are in balance.At the equilibrium price,the amount that buyers want to buy is just equal to the amount that sellers want to sell.When the force of supply and demand are in balance,there is n
31、o reason for price to rise or fall,as long as other things remain unchanged.,Chapter 3:Basic Elements of Supply and Demand(C.Equilibrium of supply and demand),Chapter 3:Basic Elements of Supply and Demand(C.Equilibrium of supply and demand),Chapter 3:Basic Elements of Supply and Demand(C.Equilibrium
32、 of supply and demand),Chapter 3:Basic Elements of Supply and Demand,Exercise&DiscussionA freeze in brazils coffee-growing region will lower the price of coffee.(X)“protecting”American textile manufacturers from Chinese clothing imports will lower clothing prices in US.(X)The rapid increase in colle
33、ge tuition will lower the demand for college.(X)The war against drugs,with increased interdiction of imported cocaine,will lower the price of domestically produced marijuana.(X),Chapter 3:Basic Elements of Supply and Demand,From the following data,plot the supply and demand curves and determine the
34、equilibrium price and quantity.What would happen if the demand for pizza tripled at each price?What would occur if the price were initially set at$4 per pizza?,Chapter 3:Basic Elements of Supply and Demand,Answer,Chapter 3:Basic Elements of Supply and Demand,2.The price of substitute and complement
35、for Commodity X is rising,which will make the quantity of X changes 50 and 80 individually.Under the combined effect of substitute and complement,the quantity of X will()A.increase 30 unitsB.decrease 30 unitsC.increase 130 unitsD.decrease 130 units,4.The demand for tomato changes,because()A.consumer
36、s think the price is too highB.there is harvest of tomato this yearC.consumers predict the price will fallD.the technology of tomato planting is improved,1.When the price of badminton rackets falls,holding other things constant,the quantity for badminton will()A.decreaseB.not changeC.increaseD.not b
37、e sure,3.If the price of car renting increase,the demand for public transportation is()A.decreasingB.constantC.increasingD.not sure,Chapter 3:Basic Elements of Supply and Demand,5.assume the demand function of Commodity X is Qd=50-5P and supply function is Qs=-10+5P.1)please give the equilibrium pri
38、ce and quantity and plot the demand curve and supply curve2)because of the increase of income,the demand function changes into Qd=60-5P,holding other things constant,what will be the new equilibrium price and quantity?Please plot the new curves3)because of the innovation of technology,the supply fun
39、ction is Qs=-5+5P,hold other things constant,please calculate the equilibrium price and quantity and plot the new curves.,Chapter 4 Application of Supply and Demand,4.1 Price elasticity of demand and supply为什么最近上海房价涨势如此凶猛，还有人会趋之若鹜地购买？4.1.1 Price elasticity of demandElasticity：The quantitative relati
40、onship between price and quantity purchased.Price elasticity of demand(also called price elasticity)measures how much the quantity demanded of a good changes when its price changes.Food,fuel,food is inelasticEuropean holiday is elastic,Chapter 4 Application of Supply and Demand,Economic factors dete
41、rmine the size of price elasticities for individual goods:elasticities tend to be higher when the goods are luxuries,when substitutes are available,and when consumers have more time to adjust their behavior.4.1.2 Caculating elasticities,Chapter 4 Application of Supply and Demand,When a 1 percent cha
42、nge in price calls forth more than a 1 percent change in quantity demanded,the good has price-elastic demand.For example,if a 1 percent increase in price yields a 5 percent decrease in quantity demanded,the commodity has a highly price-elastic demand.When a 1 percent change in price produce less tha
43、n a 1 percent change in quantity demanded,the good has price-inelastic demand.For example,when a 1 percent increase in price yields only a 0.2 percent decrease in demand.When the percentage change in quantity is exactly the same as the percentage change in price.In this case,a percent increase in pr
44、ice yields a 1 percent decrease in demand.This is called unit-elastic demand.,Chapter 4 Application of Supply and Demand,Chapter 4 Application of Supply and Demand,Chapter 4 Application of Supply and Demand,Chapter 4 Application of Supply and Demand,Chapter 4 Application of Supply and Demand,Chapter
45、 4 Application of Supply and Demand,1.Is slope as same as elasticity?2.For slope equals to 1,does it mean that elasticity is not change at any point?3.is it true that steep slope mean inelastic demand and flat slope mean elastic demand?,Chapter 4 Application of Supply and Demand,4.1.3 Elasticity and
46、 RevenueTotal revenue is defined price times quantity.If you know the price elasticity of demand,you know what will happen to total revenue when price changes.When demand is price-inelastic,a price decrease reduce total revenue.When demand is price-elastic,a price decrease will increase total revenu
47、e.In the borderline case of unit-elastic demand,a price decrease leads to no change in total revenue.,Chapter 4 Application of Supply and Demand,Exercise 1Summer ice is a seller of ice cream.The buyers are divided into children and adult.Now the price for ice cream is$2 for each.Summer ice tends to
48、lower the price by$1.the buyers response to the price falling is shown bellow.What is the price elasticity of two kinds of buyers.If the price is$2 for each,please calculate the total revenue.If the price is$1 for each,please calculate the total revenue.If the price is$2 for adult and$1 for children
49、,please calculate the total revenueIf the price is$1 for adult and$2 for children,please calculate the total revenueWhat is the best choice and please explain the reason.,Chapter 4 Application of Supply and Demand,Cross Price ElasticityCross price elasticity=The percentage change in quantity demande
50、d of Goods A/The percentage change in price of Goods BIf Cross Price elasticity is positive,that means Goods A and Goods B are substitutes If Cross Price elasticity is negative,that means Goods A and Goods B are complementsTea and coffee are often taken as substitutes.Which one is the possible cross
