Econ301_week1

Econ301_week1 - Econ 301 Intermediate Microeconomics Week...

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Unformatted text preview: Econ 301 Intermediate Microeconomics Week 1, Jun 14-Jun 18 Jingbo Cui (ISU) Econ 301-Summer 2010 Week 1, Jun 14-Jun 18 1 / 59 Outline 1 Supply and Demand (Ch.2) Demand Supply Market Equilibrium Comparative Statics Elasticities Effects of a Sales Tax Government Intervention When to Use the Supply-Demand Model 2 Experiment 1 - Double Auction Jingbo Cui (ISU) Econ 301-Summer 2010 Week 1, Jun 14-Jun 18 2 / 59 Supply and Demand (Ch.2) Demand Definition I How much people are willing to buy at given prices. The following factors affect the demand for a good:- Price of the good- Tastes- Information- Income- Prices of related goods, complements and substitutes- Government rules and regulations- Other Jingbo Cui (ISU) Econ 301-Summer 2010 Week 1, Jun 14-Jun 18 3 / 59 Supply and Demand (Ch.2) Demand Definition II Tastes : people have heterogeneous tastes(i.e. people like different things). Examples: I like salty foods more than sweet foods. Many people prefer sweet over salty foods. I like green peppers, some people hate them. Question How different would the grocery store be if people had homogenous (i.e. the same) tastes? Information :The things that we know/believe about products. Example, I believe that organic food is better for me than regular food. Is it? Question How important is information (or misinformation) in shaping what we buy and dont buy? Income We all (even Bill Gates) have a limited budget. No one buys what they want. We buy what we want GIVEN our limited budget. Question If you had 1 million dollars, would you buy the same goods, shop at the same stores, go to college? What about if you had 10 million dollars? Jingbo Cui (ISU) Econ 301-Summer 2010 Week 1, Jun 14-Jun 18 4 / 59 Supply and Demand (Ch.2) Demand Definition III Prices of other goods- Substitute A product that you view as similar or identical to the one you are considering purchasing. Examples: Levis Jeans and Lee Jeans are close substitutes. Jeans and dress pants are also substitutes (they are both pants), but they are not as close of substitutes.- Complement A good that you like to consume at the same time as the product that you are considering buying. Examples: a soda and hot dog or a shirt and tie. Government Rules and Regulations Taxes (e.g. a sales tax) and subsidies (e.g. Iowa ethanol fuel subsidies). Jingbo Cui (ISU) Econ 301-Summer 2010 Week 1, Jun 14-Jun 18 5 / 59 Supply and Demand (Ch.2) Demand Definition IV Quantity Demanded- The amount of a good/service that consumers are willing to buy at a given price, holding constant other factors that influence purchases. Demand (or Demand Curve) The quantity demanded at each possible price, holding constant other factors that influence purchases....
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Econ301_week1 - Econ 301 Intermediate Microeconomics Week...

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