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Economics 2150A/B Lecture Notes - Lecture 1: Economic Equilibrium, Statics, Negative Number

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ceruleandeer653
15 Jun 2018
School
Western University
Department
Economics
Course
Economics 2150A/B
Professor
Stirling

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Tuesday, September 12, 2017
Econ 2150 ā€” Analyzing Economic Problems Ch.1
Market Model!
-Only concerned with a single market at a time!
-Consider only a single good ā€” Apples!
-2 sets of agents; consumers (Demand) & producers (Supply)!
Demand!
-Represents actions of our consumers!
-The quantity that consumers are willing to buy at any giving price level!
Law of demand: !
-Demand is downward sloping and consumers will buy more when price decreases!
-Factors that determine demand!
1. Preferences!
2. Relationship to other goods!
3. Price of other goods!
4. Income!
5. Price!
6. Number of Consumers!
Supply!
-The quantity that producers are willing to bring to the market at any given price!
Factors that Determine Supply!
1. Price of factors of production ā€” Inputs!
2. Price of the good!
3. Technology!
4. Number of suppliers in the market ā€” Market Structure!
"1
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Tuesday, September 12, 2017
5. Price of other goods!
Ex. Demand Q^d = 500-4p (Downwards sloping)!
Supply = Q^s =-100+2p (Upwards sloping)!
At p1 there is excess supply!
At p2 there is excess demand!
Equilibrium = 500-4p=-100+2p!
##=600=6p!
##=p*=100!
Sub into Q^d= 500-4p!
##= 500-4(100)!
#Q*#= 100!
##Equilibrium @ 100!
-Also, one can consider the demand curve as shows, for any given Quantity the
maximum price consumers will pay!
-Supply curve is the minimum amount suppliers are willing to receive for any given
quantity!
Comparative Statics!
-moving from equilibrium price and quantity to a new equilibrium price & quantity
when some factor changes in the model!
-Consider a shift in ex.1 in the demand curve!
ā€¢Increase in income generates a positive shift in the demand curve, thus increasing
equilibrium!
-Anything that shifts the demand curve rightward there is an increase in both the
equilibrium price and quantity !
-Anything that shifts the demand curve leftward causes a decrease in both
equilibrium supply and demand!
-For all shifts in the demand curve equilibrium price and quantity shift in the same
direction!
"2
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ECON 2150A/B Full Course Notes
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ECON 2150A/B Full Course Notes
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Document Summary

Only concerned with a single market at a time. Consider only a single good apples. 2 sets of agents; consumers (demand) & producers (supply) The quantity that consumers are willing to buy at any giving price level. Demand is downward sloping and consumers will buy more when price decreases. Factors that determine demand: preferences, relationship to other goods, price of other goods. The quantity that producers are willing to bring to the market at any given price. Factors that determine supply: price of factors of production inputs, price of the good, technology, number of suppliers in the market market structure. Tuesday, september 12, 2017: price of other goods. Also, one can consider the demand curve as shows, for any given quantity the maximum price consumers will pay. Supply curve is the minimum amount suppliers are willing to receive for any given quantity.

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Related Questions

Any point along the market demand curve shows

1. the quantity of the good that firms would be willing and able to supply at a specific price

2. the relationship between the price of the good and total quantity demanded at a series of pricesĀ 

3. the opportunity cost of supplying a given quantity of goods to the market

4. the quantity of the good that consumers would be willing and able to purchase at a specific price

5. how population changes affect the quantity demanded at a specific price

1)The law of demand states that as the price of a good rise, _____.

A. buyers purchase more of the good because the price of a substitute has risen.

B. buyers purchase less of the good because their real income decreases with an increase in price.

C. buyers purchase more of the good because they expect prices to be even higher in the future

D. buyers purchase less of the good because they expect prices to fall in the future.

Ā 

2) A movement along a demand curve can be attributed to a change in:

A. the quantity demanded of a good.

B. the demand for a good.

C. the substitution effect of consuming a good.

D. the opportunity cost of producing a good.

Ā 

3) If we say that demand for a good has increased, we mean that there has been:

A. a leftward shift of the demand curve.

B. a rightward shift of the demand curve.

C. a leftward movement along the demand curve.

D. a rightward movement along the demand curve.

Ā 

4) Which of the following will cause the demand curve for a normal good to shift to the right?

A. An increase in the price of a complementary good.

B. A decrease in income.

C. A decrease in the price of the good.

D. An increase in the price of a substitute good.

Ā 

5)Which of the following best defines supply?

A. The amount of a good that is produced at the least possible cost, other things constant

B. The amount of a good that producers are willing and able to sell at each possible price, other things constant.

C. The amount of a good that consumers want to buy at different income levels

D. The amount of a good that producers want to sell at a fixed price

Ā 

6)The market supply curve of a particular product indicates the total quantities:

A. that are actually sold during a given time period.

B. that sellers are willing to offer for sale at a fixed price.

C. that buyers are willing to purchase at alternative prices.

D. that sellers are willing and able to offer at alternative prices.

Ā 

7)When quantity demanded of a good exceeds the quantity supplied at the prevailing market price, _____.

A. the demand curve shifts rightward until the surplus is eliminated

B. the market is in equilibrium.

C. the price of the good will tend to increase.

D. the price of the good will decrease

Ā 

8)A shortage of textbooks is most likely to cause:

A. an increase in the price of textbooks.

B. a decrease in the supply of textbooks.

C. a decrease in the price of paper.

D. an increase in the cost of printing.

Ā 

9)The most important characteristic of the equilibrium price is that it:

A. maximizes the quantity demanded.

B. clears the market, leaving neither a surplus nor a shortage.

C. minimizes the quantity demanded.

D. guarantees that producers earn the profit.

Ā 

10)If both demand and supply increases in a market that is initially in equilibrium, the price will:

A. increase only if demand increases more than supply.

B. increase only if supply increases more than demand.

C. remain unchanged while quantity will increase.

D. remain unchanged while quantity will decrease.

1 Other things remaining the same, a left shift in the supply curve will lead to:

A. a decrease in the equilibrium price and the equilibrium quantity.

B. an increase in the equilibrium price and the equilibrium quantity.

C. an increase in the equilibrium price and a decrease in the equilibrium quantity.

D. a decrease in the equilibrium price and an increase in the equilibrium quantity.

2 Two goods are said to be complements when a fall in the price of one good:

A. leads to a fall in price of the other good.

B. leads to a left shift in the demand for the other good.

C. leads to a right shift in the demand for the other good.

D. doesn't affect the demand for the other good.

3 In a competitive free market:

A. all exchanges take place involuntarily.

B. there is no provision for the protection of property rights.

C. there is only one seller and many buyers.

D. the government does not impose price controls.

4 Which of the following correctly explains the role of economic agents in a free market?

A. Economic agents allocate goods to those buyers who value the goods the most.

B. Economic agents allocate goods to those buyers who need the goods the most.

C. Economic agents set production quotas for sellers in the market.

D. Economic agents set prices according to the production cost of each good.

5 Which of the following was an effect of the price ceiling placed on gasoline in the U.S. in the 1970s?

A. Gas stations ran out of gas as the quantity of gas demanded exceeded the quantity supplied.

B. Car owners started buying luxury cars that were less fuel-efficient as the price of gas was very low.

C. Those who valued gas the most were able to buy gas under the price ceiling.

D. The inventory of unsold gas increased and gas stations incurred losses.

6 Willingness to accept is:

A. the highest price that a producer is willing to receive to sell an extra unit of a good.

B. always higher than the marginal cost of production.

C. always lower than the marginal cost of production.

D. the lowest price that a producer is willing to receive to sell an extra unit of a good.

7 Assume that the economy is in a recession and consumers are expecting a fall in their income levels. This will cause a(n):

A. right shift in the market demand for all goods.

B. left shift in the market demand for all goods.

C. an increase in the total quantity demanded of all goods.

D. decrease in the total quantity demanded of all goods.

8 Which of the following factors is expected to cause the demand curve for coffee to shift to the right?

A. A higher personal tax on the income of all consumers

B. An increase in the supply of coffee due to better weather

C. A higher tax on the sale of tea, a substitute for coffee

D. A fall in the manufacturing cost of coffee

9 If the demand and supply curves for a commodity shift to the right and the shift in demand is greater than the shift in supply, then in comparison to the initial equilibrium, the new equilibrium will be characterized by:

A. the same price and quantity.

B. a lower price and quantity.

C. a higher price and a lower quantity.

D. a higher price and quantity.

10 Which of the following statements correctly describes a perfectly competitive market?

A. Haggling and bargaining are commonly observed in a perfectly competitive market.

B. Buyers in a perfectly competitive market pay different prices according to their individual demand.

C. In a perfectly competitive market, individual sellers and buyers can influence the market price.

D. All participants in a perfectly competitive market are price-takers.