Perloff_397614_IM_Ch02

Perloff_397614_IM_Ch02 - Chapter 2 Supply and Demand...

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Chapter 2 Supply and Demand ± Chapter Outline 2.1 Demand The Demand Function The Demand Curve Summing Demand Curves 2.2 Supply and Demand The Supply Function The Supply Curve Summing Supply Curves Effects of Government Import Policies on Supply Curves 2.3 Market Equilibrium Finding the Market Equilibrium Market Forces That Drive the Market to Equilibrium 2.4 Shocking the Equilibrium: Comparative Statics Comparative Statics with Discrete (Relatively Large) Changes Comparative Statics with Small Changes How Shapes of Demand and Supply Curves Matter 2.5 Elasticities Demand Elasticity Elasticity Along the Demand Curve Other Demand Elasticities Supply Elasticity Long Run Versus Short Run 2.6 Effects of a Sales Tax Two Types of Sales Taxes Equilibrium Effects of a Specific Tax How Specific Tax Effects Depend on Elasticities The Same Equilibrium No Matter Who Is Taxed The Similar Effects of Ad Valorem and Specific Taxes
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Chapter 2 Supply and Demand 5 2.7 Quantity Supplied Need Not Equal Quantity Demanded Price Ceiling Price Floor 2.8 When to Use the Supply-and-Demand Model ± Teaching Tips This chapter reviews basic supply and demand concepts from the principles level. Your interactions with the class from the first session or two should give you a good indication of how much class time to spend on it. If it has been some time since their principles course, students may need fairly consistent prompting to recall the basic supply-and-demand model. For example, many will remember that there is a Law of Demand, but won’t remember the law itself. Encourage students in the strongest terms to read the chapter carefully. It is well worth the time spent at this stage to make sure everyone has solid recognition of these basic tools and concepts. The introduction of demand curves and equations is a good opportunity to review the basic geometric concepts of slope and intercept. This doesn’t take much time, as most students can recognize slope and intercept of a written equation, but there is sometimes a surprising lack of connection between what appears in an equation and the resulting graph. Draw a demand curve and tell the class that the slope of this curve is 2. Then ask the students what will happen in the graph if the slope increases to 4. Although it is likely that several, perhaps most students will know immediately, some will not. This is also a good time to introduce nonlinear demand functions to illustrate the use of calculus. Assigning some of the quantitative problems at the end of the chapter and collecting them (even if you don’t intend to collect homework throughout the term) is another good diagnostic. When reviewing demand, be sure students are clear on the difference between movement along the curve and a shift of the entire curve. Two points should be helpful. First, note to them that both in Equation 2.3 and on the graph in Figure 2.1, price is the only independent variable present. Thus only price can cause a movement along the curve. Second, underscore the role of other variables. After compiling a list of the
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Perloff_397614_IM_Ch02 - Chapter 2 Supply and Demand...

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