supply_and_demand_I_-_equilibri

supply_and_demand_I_-_equilibri - Increasing marginal costs...

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Supply and Demand Markets and Resource Allocation Equilibrium and Efficiency
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What is a market? Meeting place (?) for buyers and sellers Farmer’s market in Royal Oak eBay New York Stock Exchange American Economic Association annual meetings Stores Scalpers outside Breslin
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Well-organized markets Property rights Contract enforcement Lots of buyers and sellers Price taking behavior Good information About price About quality Low transactions costs
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Demand Marginal benefit, marginal utility, reservation price, demand price The buy decision Price < MB, buy it Price > MB, don’t buy it Consumer surplus = MB - price Market demand Diminshing marginal benefit
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3 Person houses in E.L. 65 50 47 42 1 2 3 4 Demand Curve
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Supply Marginal cost, reservation price, supply price The sell decision Price > MC, sell it Price < MC, don’t sell it Producer’s or seller’s surplus = Price - MC Market supply
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Unformatted text preview: Increasing marginal costs Quantity Price P - 1 Q - 1 Supply Curve Equilibrium High prices lead to surpluses Quantity supplied exceeds quantity demanded Price falls Low prices lead to shortages Quantity demanded exceeds quantity supplied Price rises Market clearing price Equilibrium Allocation of Resources What and how much is produced? Where supply equals demand How are the goods and services produced? By those sellers with the lowest supply prices Who gets the goods and services? Those demanders with the highest demand prices Quantity Price S = MC D = MB High Pric e Quantity Demanded Quantity Supplied Surplus Market Clearing Price Efficient Allocations Marginal benefit equals marginal cost Lowest cost production Highest value consumption Efficiency not equity...
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This note was uploaded on 10/17/2011 for the course EC 201 taught by Professor Haider during the Spring '10 term at Michigan State University.

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supply_and_demand_I_-_equilibri - Increasing marginal costs...

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