L6 - Economics 101:Principles of Microeconomics Professor...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 101:Principles of  Microeconomics Professor Jo Hertel Lecture 7 – Review Exam announcements: Calculators allowed, no books, no notes Exam rooms according to sections you’re officially enrolled in - posted on www.ssc.wisc.edu/~jhertel/exam.htm A note about exam length
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 About solving problems First: what assumptions does your model have? (what specifics are you given in the question?) Where you are not given specifics, assume the most standard model Second: go step by step, using only reasoning from the model you’re using! (knowing definitions is important here) When in doubt, a graph often helps.
Background image of page 2
3 Standard model: upward sloping supply, downward sloping demand If not told otherwise, assume the market is in equilibrium price quantity S D p* q* The demand curve shows quantity demanded at any price The supply curve shows quantity supplied at any price A market equilibrium is a price at which quantity supplied is equal to quantity demanded
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 1-Supply and Demand The demand curve is derived from consumers’ w-t-p. It shifts when w-t- p changes, f.ex. when income (present or expected), normal good (e Y >0): income ↑, demand ↑ (standard case) inferior good (e Y <0): income ↑, demand ↓ prices of related goods (B), substitutes (e AB >0): p B ↑, demand A ↑ complements (e AB <0): p B ↑, demand A expectations or preferences price A quantity A S D p* q* p* new q* new D’
Background image of page 4
1-Supply and Demand The supply curve is derived from producers’ costs. It shifts when cost changes, f.ex. when input prices, technology or expectations change. Remember: A
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/01/2008 for the course ECON 101 taught by Professor Hansen during the Fall '07 term at Wisconsin.

Page1 / 30

L6 - Economics 101:Principles of Microeconomics Professor...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online