Lec2_08 - and average costs – Why • Which line is the...

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Supply and Demand Supply and Demand Review Review
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Where I Was Friday Where I Was Friday
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Administrative Stuff Administrative Stuff Read article posted on CTools for discussion section First homework posted on CTools Due Friday, Jan. 18 Check CTools site for useful information Midterm dates Friday Feb. 8, Mon. March 24 Avoid externalities in lecture
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Questions? Questions? About the course? About the Program in the Environment? About me?
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Today Today Welfare & Efficiency
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Supply and Demand Review Supply and Demand Review Supply curve What is the supply curve? Where does it come from?
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Cost Curves Cost Curves Building Dams for Irrigation 1 acre-foot = 1 acre covered to depth of 1 foot Costs: Dam Q/Dam Q, Total ? Cost #1 1 M AF 1 M AF $10/AF #2 1 M AF 2 M AF $20/AF #3 1 M AF 3 M AF $30/AF #4 1 M AF 4 M AF $40/AF
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Cost Curves, Continued Cost Curves, Continued Q,T Marginal Total Average #1 1 M $10/AF $10 M $10/AF #2 2 M $20/AF $30 M $15/AF #3 3 M $30/AF $60 M $20/AF #4 4 M $40/AF $100 M $25/AF
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Cost Curves Cost Curves Total costs are NOT put on the same graph as marginal
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Unformatted text preview: and average costs – Why? • Which line is the private supply curve? Why? 10 20 30 40 50 1 2 3 4 MAF $/AF MC AC Supply Shifts Supply Shifts • Movement along the supply curve – Price • Shift of supply curve – Input cost – Technology – Number of firms – [Physical factors, e.g., weather; resource abundance] Demand Curve Demand Curve • What is it? • Where does it come from? Adding in Demand Adding in Demand 10 20 30 40 50 1 2 3 4 MAF $/AF MC AC Demand Q = 9 ‑ 0.2P, or P = 45 ‑ 5Q Demand Shifts Demand Shifts • Movement along the demand curve – Price • Shift of demand curve – Prices of substitutes & complements – Income – Tastes & preferences – Number of consumers Equilibrium Equilibrium 10 20 30 40 50 1 2 3 4 MAF $/AF MC AC Demand Bureau of Reclamation uses AC pricing. BuRec Policy BuRec Policy • Should the BuRec use MC pricing? • Should the BuRec use AC pricing?...
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This note was uploaded on 04/02/2008 for the course ECON 370 taught by Professor Helfand during the Winter '08 term at University of Michigan.

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Lec2_08 - and average costs – Why • Which line is the...

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