This preview shows pages 1–4. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: Formula Sheet that you can use for quizzes and exams. Individual ordinary demand and Inverse demand Demand Q = f ( P, { I,p,A,n } ) Ordinary Demand Q = D MP D = + 1 I + 2 p + 3 A + 4 n All factors but P affect D, the reason P is outside When only D changes demand changes, P does not change demand When A and n goes up D goes up, demand goes up For normal good 1 positive, I goes up demand goes up Normal good 1 is positive, I goes up D goes up, demand goes up Inferior good 1 negative, I goes up D goes down, demand goes down Substitute good, 2 positive, p goes up, D goes up, demand goes up Complement good, 2 negative, p goes up, D goes down, demand goes down Inverse Demand P = D M 1 M Q = a m d Q Where a = D M and m d = 1 M absolute slope of inverse demand for given M, D increase implies a increase, demand increases . Supply Supply Q = f ( P, { T,p,w,t a ,s u ,n } ) Supply Q = S + NP S = + 1 T + 2 p + 3 w + 4 t a + 5 s u + 6 n all factors but P affect S, the reason P is outside S increases, supply increases, P does not affect S, P does not change supply T, n, and s u all increase S, supply increases 3 and 4 are negative, their increase, decreases S, supply goes down 2 is negative for substitute, p goes up supply goes down 2 is positive for complement, p goes up supply goes up Inverse Supply P = S N + 1 N Q = b + m s Q Where b = S N and m s = 1 N the slope of inverse supply When S increases, b decreases, b goes down supply goes up 1 Equilibrium from Inverse demand and supply Q * = a b m d + m s P * = bm d + am s m d + m s = b + m s Q * = a m d Q * Change in equilibrium price and quantity Change in demand DD when fixed factors change Variable P p I A n Action P p I A n Results Q DDU DD SG DD NG DD DD DD CG DD IG Change in equilibrium P and Q when DD and SS change DDU DD DD SSU Q P Q P SS Q P Q P ? Q ? P SS Q P Q ? P Q P ? a = D What causes a to go up? a is positively related with A , n , p of substitute, I for normal a is negatively related with p of complement, I for inferior b = S What causes b to go up? b is positively related with w , t a , and p substitute b is negatively related with T , s u , n , and p complement 2 Change in equilibrium quantity and price : Q * = a b m d + m s P * = m s a + m d b m d + m s Change in demand only With b = 0, a > 0 = DD , Q * and P * both positive With b = 0, a < 0 = DD , Q * and P * both negative Change in supply only With a = 0, b > 0 = SS , Q * < 0 and P * > With a = 0, b < 0 = SS , Q * > 0 and P * < Simultaneous change in demand and supply When a and b both nonzero, play Q * and P * games When a and b both positive, DD and SS = P * > , Q * ??...
View
Full
Document
 Fall '11
 PAULFERRARO

Click to edit the document details