PG33
513 WORKSHOP PLAN
SUMMER 2005
DR. SHINGLETON
DESIGNED IN NEW TIMES ROMAN,
16 FONT, PORTRAIT
ONLINE SAVED IN HTML
NOTE TO SELF: BRING TOOLS
WORKSHOP2. AUG03
EACH GROUP SHOULD IDENTIFY
THE FIRM FOR ITS PAPER. WE RAN OUT OF
TIME LAST WEEK BEFORE WE DID THIS.
ü
Choose one
spokesperson, identify the firm, and explain why you chose it.
ü
Is demand or
supply changing most quickly in the industry?
Any ideas?
ü
Turn in a
one-page sheet identifying the firm and the members of your group.
REVIEW QUIZ QUESTION
ü
The question is
available at the website if you missed the class. You won’t get credit but it would
probably be quite useful for you to
attempt to write up an answer.
ü
IT'S AS EASY AS
A, B, C
ELASTICITY 4
ELASTICITY OF DEMAND
LOGIC
DEFINITION
ELASTIC VS INELASTIC
PERFECTLY ELASTIC/PERFECTLY INELASTIC
REVENUE AND PRICE PATTERNS
PRICE ELASTICITY AND TOTAL REVENUE
LESS COMPLEX FORMULA
EXAMPLE:
CAUSES QUANTITY TO FALL FROM 300 TO 270 TONS
PCT CHANGE IN Q = [(30/300)*100]-100 = 10PCT
PCT CHANGE IN P =[(.60/2.00)*100]-100= 30PCT
ELASTICITY OF DEMAND = 10/30 = .33
LONG RUN/SHORT RUN
EVERYTHING IS MORE ELASTIC IN
THE LONG RUN
EXAMPLES: WINDSHIELD WIPERS,
GASOLINE
OTHER ELASTICITIES
GENERAL RULE FOR CAUSE AND EFFECT
INCOME ELASTICITY
CROSS-ELASTICITY
SUBSTITUTES VS COMPLEMENTS W/O THE MATH
SUBSTITUTES VS COMPLEMENTS WITH THE MATH
PROBLEM(S): #4.2
4.6 4.12 PG 99-100
MARGINAL COST/MARGINAL
BENEFIT 5
EFFICIENCY
DEMAND IS A MARGINAL BENEFIT CURVE
CONSUMER SURPLUS
SUPPLY IS A MARGINAL COST CURVE
PRODUCER SURPLUS
NOT JUST PROFIT
SUPPLY AND DEMAND GIVE US AN
EFFICIENT MARKET
OVER AND UNDER PRODUCTION
DEADWEIGHT LOSS
TAXES, SUBSIDIES, QUOTAS
IS IT FAIR?
RULES
OUTCOMES
EFFECTS ON EFFICIENCY
PRICE REGULATION CH6
CEILING/MAXIMUM PRICES
EXAMPLE: RENT CONTROL IN
EFFECTIVE ONLY WHEN BELOW EQUILIBRIUM
COMPARE Q TO FREE MARKET
IDENTIFY WINNERS AND LOSERS
HOMELESS PROBLEM
POLITICAL IMPLICATIONS
BLACK MARKETS
DISCRIMINATION
DOES SOCIETY GAIN?
FLOOR/MINIMUM PRICES
EXAMPLE: MINIMUM WAGES
EFFECTIVE ONLY WHEN ABOVE EQUILIBRIUM
COMPARE Q TO FREE MARKET
IDENTIFY WINNERS AND LOSERS
UNEMPLOYMENT PROBLEM
DISCRIMINATION
FRIEDMAN ON BLACK TEENAGE UNEMPLOYMENT
DOES SOCIETY GAIN?
BENEFITS
COMPARE MINIMUM PRICE AND
MAXIMUM PRICE OUTCOMES
BOTH REDUCE THE Q THAT IS ACTUALLY BOUGHT AND SOLD
Q IS ALWAYS THE SMALLER OF Qd OR Qs
TAXES AS A WEDGE CH
6
TAX AND EQUILIBRIUM
EFFECT ON
PRICE
QUANTITY
DEADWEIGHT LOSS
COMPARE MINIMUM/MAXIMUM PRICE OUTCOMES WITH TAX
ALL REDUCE THE Q THAT IS ACTUALLY BOUGHT AND SOLD
PROBLEM(S): #6.2 6.4 PG 143
LOGICAL BASIS OF DEMAND CH7
MARGINAL UTILITY OF THE LAST DOLLAR
INDIVIDUAL DEMAND
MARKET DEMAND
EXAMPLES, AS TIME ALLOWS
QUIZ ON SUPPLY AND DEMAND