econ2020-chapter03a-notes

econ2020-chapter03a-notes - Dr. Duffy Microeconomics Notes...

Info iconThis preview shows pages 1–14. Sign up to view the full content.

View Full Document Right Arrow Icon
Dr. Duffy Microeconomics Notes from CHAPTER 3 of Frank and Bernanke
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Three Basic Questions   Three Problems All Economic Systems  Must Address What should be produced? How should it be produced? For whom will it be produced?
Background image of page 2
Types of Economies Command Economy : government makes all  important decisions about production and  distribution. Market Economy :  individuals and private  firms make the major decisions.  Extreme  case (no government intervention) is called  laissez-faire ” economy. Mixed Economy  has elements of both.  All  modern economies are mixed.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
A Pure Market Economy. . . . . .has never existed. The closest to it was probably England in the 19th century. There has never been a pure “command economy” either, although some of the older communist regimes (Stalin, Pol Pot) may have been close.
Background image of page 4
U.S. Economic System Largely a market system However, we do have some laws and  regulations that affect market decisions. Can you think of some policies (state,  federal or local) that affect certain  markets?
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Price Determination Assuming no or little government  intervention in a market, what determines  price? Explaining prices is a fundamental  question that drove the development of  modern economics. It is only recently (late 19 th  century) that a  good understanding of price determination  developed.
Background image of page 6
Supply and Demand Supply and Demand determine prices in individual markets. Price is the mechanism that brings supply and demand together.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Rationing by prices Through prices, the market rations the scarce goods of society among possible uses.
Background image of page 8
The Demand Schedule The demand schedule (demand curve) shows the relationship between a commodity’s market price and the quantity of that commodity that consumers are willing and able to purchase, other things held constant. Generally, the higher the price, the less the quantity demanded.
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Dailey Demand Schedule for Pizza in Chicago $5 4 4 8 3 12 2 16 1 20 Price ($/slice) Quantity Demanded (1000s of slices per day)
Background image of page 10
The Daily Demand Curve for Pizza in Chicago Price ($ per slice) Quantity (1000s of slices per day) 4 8 2 16 3 12 Demand
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Law of Downward Sloping Demand When the price of a commodity is raised (and other things are held constant), buyers tend to buy less of the commodity. Similarly, when the price is lowered, other things being constant, quantity demanded increases. There are two explanations for downward sloping demand curves.
Background image of page 12
Substitution Effect When the price of a good rises, I will substitute other similar goods for it. For example, if the price of beef rises,
Background image of page 13

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 14
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 65

econ2020-chapter03a-notes - Dr. Duffy Microeconomics Notes...

This preview shows document pages 1 - 14. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online