ECON101 Lecture Notes - Lecture 6: Reservation Wage

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cyancockroach853

21 Jan 2019

School

University of Alberta

Department

Economics

Course

ECON101

Professor

Gordon Lee

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ECON101 Lecture 5: Market Economies, Circular Flow, Supply & Demand

ECON101 Lecture Notes - Lecture 6: Reservation Wage

ECON101 Lecture 7: Supply, Supply Curves, & Equilibrium

ECON 101

Lecture 6

01/21/2019

LECTURE #6: SUPPLY & EQUILIBRIUM

CHAPTERS 3 & 4

SUPPLY:

The supply function shows the quantity of a good supplied at different prices given the technology, prices

of inputs, and other relevant variables. Using functional notation:

(Q=quantity; S=supply; P=price; …, = other things)

Quantity supplied: the amount that producers are willing to sell during a given time period.

Law of Supply:

As the price of a commodity increases, the quantity supplied increases.

As the price of a commodity decreases, the quantity supplied decreases.

(Basically, as the price of a commodity increases, producers are willing to supply more because they will

make more money. But as the price of a commodity decreases, they are less willing to supply more/more

willing to supply less, because it means less profit for them.

3 different types of supply curves:

1. Upward-sloping:

This happens when quantity supplied and price

are both increasing.

2. Upward and then vertical sloping:

This can happen when price is increasing, but producers

Just don’t have the ability to produce more. This could

Be due to some sort of limit, like a shortage of resources.

3. Backwards-sloping:

This happens with the LABOUR supply curve. As salary

Increases, workers are willing to work more. However, they

Eventually reach a point called the ‘reservation wage’, when

More pay doesn’t mean they’re willing to work more.

Qx = Sx (Px, ……)

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Document Summary

The supply function shows the quantity of a good supplied at different prices given the technology, prices of inputs, and other relevant variables. Qx = sx (px, ) (q=quantity; s=supply; p=price; , = other things) Quantity supplied: the amount that producers are willing to sell during a given time period. As the price of a commodity increases, the quantity supplied increases. As the price of a commodity decreases, the quantity supplied decreases. (basically, as the price of a commodity increases, producers are willing to supply more because they will make more money. But as the price of a commodity decreases, they are less willing to supply more/more willing to supply less, because it means less profit for them. 3 different types of supply curves: upward-sloping: This happens when quantity supplied and price are both increasing: upward and then vertical sloping: This can happen when price is increasing, but producers. Just don"t have the ability to produce more.

Related Questions

1. According to the law of demand, an increase in the price of a good causes Select one:

a. a downward movement along the demand curve for that good.

b. a rightward shift of the demand curve for that good.

c. an upward movement along the demand curve for that good.

d. a leftward shift of the demand curve for that good.

2.The relative price of a textbook is

Select one:

a. the amount it cost to make the textbook.

b. the money price of the textbook divided by the money price of some other good.

c. what the author earned for writing the textbook.

d. the price of the textbook compared with what students think it should cost.

3.Which of the following best represents the law of demand?

Select one:

a. As the price of good increases, the quantity demanded of that good decreases.

b. As the demand for a good increase, the price of that good increases.

c. As the price of a good decrease, the demand curve for that good shifts to the right.

d. As the price of a good decrease, the demand for the good increases.

4. The absolute price of a good is its

Select one:

a. subjective price.

b. money price.

c. relative price.

d. projected price.

5. The fact that when the price of a good goes up, people buy less of it is known as the

Select one:

a. law of demand.

b. concept of market equilibrium.

c. need for inferior goods.

d. law of supply.

6.The price of a commodity in terms of another commodity is

Select one:

a. the law of demand.

b. the money price.

c. a substitute.

d. the relative price.

7.Other things being equal, an increase in the price of a good leads to an increase in the amount produced. This is known as

Select one:

a. the law of supply.

b. the law of demand.

c. ceteris paribus.

d. equilibrium.

8.he direct relationship between changes in price and changes in quantity supplied is

Select one:

a. shown by a shift in the supply curve.

b. the law of relative production.

c. the law of supply.

d. a change in supply.

9. The law of supply states that other things being equal,

Select one:

a. supply creates its demand.

b. supply will increase if productivity increases.

c. supply will increase to meet demand if demand increases.

d. as price increases, quantity supplied increases.

10. a price increase will lead to an increase in quantity supplied. This statement is

Select one:

a. a normative statement.

b. untrue always.

c. the law of supply.

d. the law of demand.

11.All of the following will cause a shift in the supply of jeans EXCEPT

Select one:

a. an increase in the cost of producing jeans.

b. a per-unit government subsidy on the production of jeans.

c. a decrease in the number of jean manufacturers.

d. a decrease in the prices of jeans.

12.An increase in the price of steel to producers of refrigerators will cause

Select one:

a. the demand for refrigerators to decrease.

b. the supply curve for refrigerators to shift left.

c. the quantity demanded to feel to increase.

d. the quantity supplied of refrigerators to increase.

ivorysardine587

When demand for a good is very elastic, revenue ________ when the price falls.

(2)

An elasticity measure less than one means that demand is __________.

(3)

An elasticity measure greater than one means that demand is __________.

(4)

The Latin expression ceteris paribus means

	having made all other necessary changes.
	holding constant all other variables.
	assuming all households have similar incomes.
	given the level of income in the economy.

(5)

A variable measured in terms of money is called a ____________________.

	real variable
	nominal variable
	macroeconomic variable
	microeconomic variable

(6)

Which of the following is true about the importance of money in economics?

	Money is important in both macroeconomics and microeconomics.
	Money is important in macroeconomics but not microeconomics.
	Money is important in microeconomics but not macroeconomics.
	Money is not important in either microeconomics or macroeconomics.

(7)

What is the difference between normative and positive economics?

	Positive economics is descriptive and predictive; normative economics is prescriptive.
	Positive economics highlights the positive aspects of the economy; normative economics highlights the average features.
	Positive economics studies the actions of individuals; normative economics studies the actions of households.
	Positive economics is an applied social science; normative economics is a theoretical social science.

(8)

The slope of the demand curve is negative because

	the quantity of a good demanded decreases as income declines.
	the quantity of a good demanded increases as income declines.
	the quantity of a good demanded increases as the price declines.
	the quantity of a good demanded decreases as the price declines.

(9)

What is the result of an increase in the price of bread, a normal good?

	The demand curve shifts to the right.
	The demand curve shifts to the left.
	The quantity demanded increases.
	The quantity demanded decreases.

(10)

What is the effect on demand for bread when the price of bagels, a substitute for bread, rises?

	The demand curve for bread shifts to the right.
	The demand curve for bread shifts to the left.
	The quantity of bread demanded increases.
	The quantity of bread demanded decreases.

(11)

Which of the following would cause the supply curve for bread to shift inward?

	An increase in the price of bread
	An increase in the price of bagels
	A decrease in the price of bread
	An increase in the price of flour

(12)

An improvement in technology shifts the supply curve outward because

	at every price, firms find producing the good to be more profitable.
	the price of the good increases.
	at every price, firms find producing the good to be less profitable.
	the price of the good decreases.

(13)

Which of the following factors does not affect how much bread a baker is willing to produce?

	The price of bread
	The demand for bread
	The cost of inputs
	Technology

(14)

How do expectations of prices affect how much of a good producers are willing to sell?

	Expectations of prices affect only demand, not supply.
	Actual prices, not expectations of prices, affect supply.
	If producers expect prices to fall in the future, they supply less at every price.
	If producers expect prices to rise in the future, they supply less at every price.

(15)

When the price of a good is above equilibrium level,

	the quantity demanded exceeds the quantity supplied.
	the quantity supplied exceeds the quantity demanded.
	the supply curve shifts to the left.
	the supply curve shifts to the right.

(16)

At a price of P₀ in the diagram below, which of the following statements is true?

	Supply equals demand.
	There is excess demand.
	There is excess supply.
	There is scarcity.

(17)

If demand for bread increases at every price, the equilibrium price of bread will

	fall.
	rise.
	remain unchanged.
	depend on income.

(18)

If the demand for bread declines, then

	at the original equilibrium price, there is excess demand.
	at the original equilibrium price, there is excess supply.
	the supply curve shifts to the right.
	the supply curve shifts to the left.

(19)

Peanut butter and jelly are complementary goods. When the price of peanut butter rises, the demand for jelly ________ and the price of jelly ________.

	rises; falls
	rises; rises
	falls; rises
	falls; falls

(20)

The measure of elasticity that economists use is

	always a positive number.
	always a negative number.
	positive when demand is elastic and negative when demand is inelastic.
	negative when demand is elastic and positive when demand is inelastic.

(21)

Which of the following formulas is the correct expression for the slope of a line?

(22)

Graphically how would an increase in income affect the demand for hamburgers?

	The slope of the demand curve would increase.
	The slope of the demand curve would decrease.
	The demand curve would shift outward, parallel to the original demand curve.
	The demand curve would shift inward, parallel to the original demand curve.

(23)

Given the equation P = $6.00 ? $.40Q, where P is the price of the good and Q is the quantity of the good demanded, how many units will this consumer demand if the price is $3.60?

	1.44 units
	3 units
	3.6 units
	6 units

(24)

Which of the following is true about unit elasticity?

	Revenues remain unchanged when the price changes.
	Elasticity of demand increases as one moves down the demand curve.
	Elasticity of demand decreases as one moves down the demand curve.
	The elasticity of demand is greater than one at every point along the demand curve.

(25)

Which of the following could be a determinant of the quantity demanded of a good?

	The price of the good
	The price of related goods
	Income
	Expectations about the future price of the product
	All of the above

violethare488

13. If the price of gasoline increases and car dealers experience a decrease in demand for sport utility vehicles, then gasoline and sport utility vehicles are:

Select one:

a. substitutes.

b. unrelated goods.

c. inferior goods.

d. complements.

14. Specifically, a change in the quantity supplied is referring to:

Select one:

a. A movement along a given supply curve resulting from a change in price

b. A shift in the supply curve either up or down

c. A change in the minimum price sellers are willing to sell for resulting from a change in a determinant of supply (like input prices, technology, or taxes)

d. A shift in the supply curve either left or right

15. Which of the following would be classified as an intermediate good?

Select one:

a. The fabric purchased by a jean manufacturer to make their pants.

b. The wood purchased by a homeowner to build his own deck.

c. The book purchased by a student for their economics class.

d. The bottling machine purchased by Coca Cola to use in one of the bottling plants.

16. The single best indicator of a recession is:

Select one:

a. negative nominal GDP growth.

b. increasing unemployment.

c. falling prices.

d. negative real GDP growth.

17. A leftward shift of a product supply curve might be caused by:

Select one:

a. a decline in the prices of needed inputs.

b. some firms leaving an industry.

c. an improvement in the relevant technique of production.

d. an increase in consumer incomes.

18. The law of supply predicts that when price increases, holding all else constant, the quantity supplied by firms increases.

Select one:

True

False

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ECON101 Lecture Notes - Lecture 6: Reservation Wage

ECON101 Lecture 5: Market Economies, Circular Flow, Supply & Demand

ECON101 Lecture Notes - Lecture 6: Reservation Wage

ECON101 Lecture 7: Supply, Supply Curves, & Equilibrium

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