Economic excercise II
CAPTHER 4:THE MARKET FORCES OF SUPPLY AND DEMAND
What is market
A market is group of
buyers and sellers of a particular good
or service . the buyers as a group determine the demand for the product, and the sellers as
group determine the supply of the product.
Markets take many
forms. Sometimes markets are highly organized ,such as the markets for many
agricultural commodietes .in these markets,buyers and sellers meet at a
specife time and place where an auctioneer help
set prices and arrange sales . more often ,markets are less
organized.for example consider the
market for ice cream in aparticuler town.buyers of ice cream do not meet
to gether atany on time. The sallers of ice cream are in different locations and offer somewhat different products. There
is no auchtioneeer calling out the price
of ice cream each sellers posts a
price for an ice-cream cone,and
each store,nonetheless,these consumers and producers of ice cream are closely connected.
Chapther 5: ELASTICITY AND THIS APPLYCATION
The law of demand
states that a fall in the price of good raises
the quantity demanded.the price elasticity of demand measures howes I the mach the quantity demanded respons to a
change in price.demand a the for good is
ssaid to be elastic if the quantity demanded
responds substantially to changes in the price.demand is said to be enelastic if the quantity demanded responds only slightly to changes in the price.
The price
elasticity of demand for any good measures how willing consument are to move
away from the good as it price rises.thus
the elasticity reflects
the many economic ,social,and psycholocigal forces that shape consumer tastes.
1.Availability of close substitutes
2.Necessitives
versus luxuries
3.Definition of the market
4.Time horizon
Chapther 6: SUPPLY,DEMAND,AND GOVERNMENT POLICIES
When the
government,moved by the complaints and
campaign contributions of the ice-cream eaters imposes a price ceiling on the market for ice cream two
autcomes are possible .in panel (a)of figure 1, the government imposes a price
ceiling of $4 per one, in this case
,because the price that balances supply and demand ($3) is bellow the ceiling
,the price the ceiling is not binding .market forces naturally move that
economy to the equilibrium,and the price
ceiling has to effect on the price or the quantity sold. Panel (b)
of figure 1 shows the other ,more interesting ,possibility .in this case
,the government imposes a price ceiling
of $2 per cone,because the equqlibrium price of $3 is above the price ceiling is a binding
constrain on the market the forces of supply and demand tend to move the
price.
Chapther 7:CONSUMERS,PRODUCERS,AND THE EFFICIENCY OF
MARKET
This chapther
,introduced the basic tools of welfare
economics-consumer and producer surplus-and used them to evaluate the efficiency of free markets we showed that be fores of supply and demend allocate resources efficiency ,that is even tough each buyer and seller and a market
is corcenned only abaout his or
her own wlfare ,they are to gether let by an invisible hand to an
equilibrium that maximizes the
total benefits to buyer and sellers .
A word of warning
in is order. To conclude that markets are efficient, we mae several asummtions about how market work . when
these asummtions do not
hold our conclusion that the
market quilibirium is efficient my no
longer be true.
first ,our analysis
assumed that that markets are
perfectly competitive, in the word
however competitions is sometimes far
from perfect.
Second ,ouranalysis
assumed that a outcome in a market metters only to the buyersand the
sallers in that market.
Market power and externalities are example of a
general phenomenon called market
failure-the inability of some unregulated markets to allocate
resouerces efficiently.
CHAPTHER 8: APPLICATION;THE COST OF TEXATION
Now let`s of
welfare economics to measure the use
the,sellers, gains and loses from a taxt
a good.to do this, we must take into
account how the taxt affects buyers and the government.the benefit received
by and a market is measured by consumer surplus- the amount buyers are willing
to pay for the good minues the
amount they actually pay for it.the
benefit received by sellers in a
market is meansured
by producer surplus-the amount
sellers receive for the good minus
thir costs.
CHAPTHER 9: APLICATION:INTERNATIONAL TRADE
Consider the
market for steel.the steel market is well suited do examining thegains and lossesfrom
international trade.steel is made in many
countries around the word,and there is much word trade in steel.
Mereover ,the steel market is one in which policymarket ofen consider (and
sometimes inplement) trade restrictions
to protect domestic steel producers from foreign competitors.we examine hare the steel market in the imaginary
country of isoland
CHAPTHER 10:EXTERNALITIES
The market
failures examined in this chapther fall
under the general cathegory called externalities an externality aries when a person engags in an activity
that influences the well-being of
a bystander and yet neither pays nor receive any compensation for that effect.if the
impact on the bystander is ardverse,it is called a negative externality ; if it
is beneficiel , it iscalled a negative extenality.in the prensentace of extenalities society`s interst in a market
outcome extends beyond the
well-bring of bystanders f buyers and
sellers who participatein
the market:it also in cludes the
ell-bring who are affected indirectly.because buyers and sellers neglect the external effects of their actions when deciding how much to demand or supplythe market equilibrium fails to maximine the total benefit to society as a whole.will emit too
much pollutions unless the government prevents or discourages them from doing
so.
CHAPTHER 11: PUBLIC GOODS COMMON RESOURCES
The oetizens smallown U.S.A.,like seeing
fireworks on the fourth of july. Each of
the town`s 500 residents places a $1,000 Of benfits exceed the $1,000 of sosts
it is efficient for smallwonn resident
to have a fireworks display on the fourth of july.
Would the private
mrket produce the efficient outcome? Probably not.imagin that Ellen ,a
smallown entreprencur, decided to put on
a fireworks disply. Ellen would surely have trouble selling tickets
to the event because has potential
customers would quickly figure
out that the couldsee the fireworks even without a ticket. Because
fireworks as not excludable, people have an incentive to bee freriders.a free
riders is person who receives the benefit of the good but does not pay for it .
because people would have an incentive to be free riders rather that
ticket buyers, the market would
fail to provide the efficient outcome.
One way to view
this market failure is that it aries because of an externalilty. If Ellen
makes puts on the fireworks
display , see confers an external benefit on those who see the display without paying for it. When even tought
the fireworks display is socially desirable,it is not take the
external benefits into account. Privately
rational but socially inefficient
disicion not to put on the display.
CHAPTHER 12: THE DESIGN
OF THE TAX SYSTEM
In this chapther,
we build on these lessons to discus the
design of a tax system. We begin
with a financial overview of the U.S
government, when thinking about the tax system it is useful to know some basic
facts about how the U.S.governmet raises and spends money. we then consider
the fundamental principles of taxation. most people agree
that taxes should imposes as small a cost
on society as possible and that the burden of taxes should be distributed fairly. That is, the tax system
should be both efficient and equality.as
we will see, however stating these goalds is easier that achieving them.
CHAPTHER 13: THE COSTS OF PRODUCTION
We begin our
discuusstion of costs at hugry Helen`s cookie Factory. Helen the owner of the
firms. Buys flour,sugar,chocolate, chips,and other cookie igeredients. Shealso buys the mixers and ovens andhires workers torun
this equipment. She than sells the
cookiers to comsumers .by examining some of the issues that Helen faces in the bussines, we can lern some lessons
about costs that apply to all
firms in the economy.
What is a firms profit? The amount that the fim receiver for tha sale of its
out(cookies) is called its
Total
revenue.the amount that the firms puys to buys input (flour,sugar,workers,ovens
and so forth) it
Called
ist total costs.that is,
Profit=total
revenue -
tatal costs
CHAPTHER14: FIRMS IN
COMPETTIVE MARKETS
We examine the behavior of competitive firms,such a your
local gas station. You may racall that a
market is competitive if each buyers and
sellers is
Smell compared to the size
of market and therefore has
little abilityto influence market
prices. By contast , if a fims and
influence the market price of the good
it sells, it is said to have market
power latter in the book, we examine the
behafior of firms with market power,such as your local water company. our analysis of coperitive firms I this chapther will shad light on the decisionsthe liebehid the
supplay curve in a comperitiive market.
CHAPTHER 15: MONOPOLY
A we examine the prodiction and pricing decisions of
monopolies , we also con considers the implications of monopoly fo society as a whole .monopoly
firms, like competitive firms aim to maximize profit. But this goal has very different ramificatios for comperititve and monopoly firms . in competitive markets,the
buying decisions of self-interesed consumers and the selling decisions
of self –imtersed producers are
unwittingly guided by competition the
out comen a market with a monopoly is often not in the best interest of
society.
CAPTHER 16: OLIGOPOLY
Figure 1 summarizes
the four types of market structure. The firs question to ask about any
market is how many firmst there are. If there is only one firm, the market is a
monopoly if there are only a fewirms,
tha market is an olipogoly. If there are many firms ,we need to task another
question: do the firms sell identical or
differentiated producs? If many firms sell differentiated products , the market
is monopolistically competitive. If many firms
sell idencital , the market is
perfectly competitive , economists define
the various products we can examine
oligopoly.
CHAPTHER 17:MONOLISTIC COMPETITION
One the other
hand,the markets for books seems monopolistic. Because each book is unique,
publishers have some latitude in choosing what price the charge. The sellers in
this market are price makers rather that price takers. And indeed , the price
of books greatly exceeds marginal costs. The price of a typical hardcover,nover
,for istance , is about $25, whereas the cost of printing one additional copy
of the novel is less that $5. This market structure is called monpopolistic
competition. Monopolistic competition describes a market with the following
attributes ;
1.many sellers: the
are many firms competing for the some group of customers.
2. product
differentiation:each firm produced a producers
that is at least slightly different from those of otherfirms.
3.free entry:
firms can enter on (or exit) the market restriction.
A moment`s thought reveals a long list of markets with these
attributers;books,CDs,movies,computer ,games,restaurants, piano lessons,
cookies ,furniture and so on. Monopolistic competition, like olipogoly is a market market structure that lies between the extreme cases of competition and
mon
CHAPTHER 18: THE MARKETS OF THE FACTORS OF PRODUCTION
The make it`s
hiring decision, the firms must consider law the size of it work force affects
the amount of output produce. In other words, it mustconsider how the number of apple pickers affects the quantity
apples is can harverst and
sell.table 1 gives a numerical examplein the first column is the number of
workers. In the second column is the
quantity of aplles the workers harvest each week.
These to
columns of number describe the firm`s ability to produce . recall that
economists use the term production function to describe the relationship between the quantity of the input used in
production and the quantity of output from production . here the “input” is the
apple pickers and the “output” is the
apples,the other inputs- the trees
themselves,the land, the firms trucks and tractors and so on-are held
fixed for now. This firm`s production
function shows that if the firms hires 1 worker
will pick 100 bushels of apples per week. If them firms hires 2 workers,
the 2 workers together will pick180 bushels per week and so on.
CHAPTHER 19: EARNINGS AND DISCRIMINATION
Ho important are
ability,erffort, and change in determining wages? It is heard to say because ability, effort,
and change are difficult to measure. But indirect evidence suggest that they
are very important. When labor economists
study wages, th relate a worker`s wage to those variables that can be measured , such as years of scolding, years of experience, age
and job characteristics. Although all of these
measured variables affect a worker`s wage as theory predicts the acound for less that halb of thevariation in wages and our economy. Because
so much of the variation in wages is
left unexplained, omitted, variables, including ability,effourt,and change,
must play and important role.
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