Lecture 5
Money Banking and Financial Markets
Econ 301
L.DeMarco
Interest rates affect Bonds
You have a bond issued 2 years ago that has coupon 0.5% maturity is 10 years , interest rates at the time
were 0.25% and it is priced at par $1,000
Federal reser
Intermediate Micro 220:320:BG Summer 2016 Practice(6/30)
Instructor: Jieun Choi
1. A Consider Cournot model of oligopoly where each firm simultaneously makes a
quantity decision. Let vi and y2 denote the quantities (of a homogeneous product)
produced by f
Intermediate Micro 220:320:B6 Summer 2016
Practice(6/25)
Instructor: Jieun Choi
1. A perfectly competitive industry has a large number of potential entrants. Each firm
has an identical cost structure such that long-run average cost is minimized at an
outp
Chapter 4
Utility
Utility Functions
A
utility function U(x) represents a
preference relation f
~ if and only if:
p
x
x
U(x) > U(x)
x p x
U(x) < U(x)
x ~ x
U(x) = U(x).
Utility Functions
Utility
is an ordinal (i.e. ordering)
concept.
E.g. if U(x) = 6 and
Chapter 23
Firm Supply
1
Firm Supply
How does a firm decide how much product
to supply? This depends upon the firms
technology
market environment
2
Pure Competition
A firm in a perfectly competitive
market knows it has no influence
over the market price
Chapter 21
Cost Minimization
Cost Minimization
Profit
maximizer
Cost-minimizer
c(w1,wn,y):
firms total cost
function to produces y 0
The Cost-Minimization Problem
The
production function is
y = f(x1,x2).
Take the output level y 0 as given.
Given the
Chapter 20
Profit Maximization
Economic Profit
A
firm`s objective : to maximize profits
levels are y1,yn.
Input levels are x1,xm.
Product prices are p1,pn.
Input prices are w1,wm.
Output
The Competitive Firm
The
competitive firm takes all output
pric
Quiz 1
Intermediate Micro
01122023202B6 Summer 2016
June 2, 2016
* Total Score is 3pt
1. True/False (0.5pt)
(a) ( 7 ) Monotonicity implies that indifference curves are never increasing.
(b) ( F ) If there are two goods and the prices of both goods double,
Chapter 8
Slutsky Equation
Effects of a Price Change
Substitution effect: the commodity is
relatively cheaper, so consumers
substitute it for now relatively more
expensive other commodities.
Income effect: the consumers budget
of $y can purchase more th
Chapter 24
Industry Supply
1
A Competitive Industry
Every firm in the industry is a price-taker
Total quantity supplied at a given price is
the sum of quantities supplied at that
price by the individual firms.
2
S
(p
)
S
(p
).
Short-Run Supply
In a short-
Chapter 19
Technology
Firms decision
Input
Output
How
to produce outputs?
Production Functions
y
denotes the output level.
An input bundle is a vector of the
input levels; (x1, x2, , xn).
The technologys production
function states the maximum amount
Intermediate Micro 220:320:BG Summer 2016 Practice
Instructor: Jieun Choi
1. Suppose that a firm has a production function given by = Ll/ZK/l/3 , where L=number
of w0rkers, K=units of capital. The rental price of K is given by r = 1, and that the wage
rat
Chapter 3
Preferences
A
decision-maker always chooses its
most preferred alternative that is
available
How do we know which one is the
most preferred choice than other
alternatives?
Preference Relations
Comparing
two different consumption
bundles, x and
Chapter 2
Budget Constraint
Consumption Choice Sets
A
consumption choice set is the
collection of all consumption choices
available to the consumer.
What constrains consumption choice?
Budgetary, time and other
resource limitations.
Budget Constraints
Quiz 5
Intermediate Micro
01:220:320:B6 Summer 2016
July 5, 2016
Total Score is 3pt
1. (1.5pt) A Consider Cournot model of oligopoly where each firm simultaneously makes a
quantity decision. Let y1 and y2 denote the quantities (of a homogeneous product) p
Benefit, Cost, Surplus
Resources are allocated efficiently and in the social interest when they are used in
the ways that people value most highly.
This occurs when the quantities produced are at the point on the PPF at
which marginal benefit equals ma
Exercise 6/14
Intermediate Micro (220:320:B6, Summer 2016)
(1) Consider the production function
decreasing returns to scale?
. Does this exhibit constant, increasing, or
(2) Consider the production function
or decreasing returns to scale?
(3) A firm has a
Intermediate Micro economics (S01:220:320:B6)
MIDTERM 2 EXAM
INSTRUCTIONS: Read each question carefully to make sure you understand it. Please choose
one answer to each multiple choice question and mark your number in each parenthesis.
No calculator! You
Chapter 9
Buying and Selling
Buying and Selling
Trade involves exchange - when something is
bought something else must be sold.
What will be bought? What will be sold?
Who will be a buyer? Who will be a seller?
And how are incomes generated?
How does the
Lecture 4
Money Banking and Financial Markets
Econ 301
L.DeMarco
From Lecture 3 the bank had a few options to help with shortfall
borrow : 1. fed funds market , or 2. from the fed
3. sell securities
4. call some loans
How would you decide?
What is the re
Lecture 3
Money Banking and Financial Markets
Econ 301
L.DeMarco
Flows of Funds Through the
Financial System
Primary markets : first issuance of securities
IPO, first issuance bonds and other securities
Actual firm/entity raises capital
Secondary mark
Long-Run Classical Model
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
What determines output?
What determines prices?
What determines interest rates? Graph
What is loanable funds theory?
What is Says law?
What is the quantity the
Chapter 25
Monopoly (1)
1. Monopoly (2) will be covered on June 30th
2. Chapter 26 will be replaced by Monopoly (2)
3. Chapter 28 will be covered on June 30th
Pure Monopoly
A
monopolized market has a single seller.
The monopolists demand curve is the
(do
Course: Microeconomics
Text: Varians
Intermediate
Microeconomics
1
Last chapter we talk about
preference, describing the ordering
of what a consumer likes.
For a more convenient mathematical
treatment, we turn this ordering into
a mathematical function.
2
Intermediate Micro 220:320:B6 Summer 2016
Practice(6/23)
Instructor: Jieun Choi
1. ASuppose that a monopolist faces a linear demand function given by p(y) = 10005y.
Its cost function is given by C(y) =
, where y is the level of output
and C(y) is the firm
Quiz 3
Intermediate Micro
01:220:320:B6 Summer 2016
June 21, 2016
Total Score is 3pt
1
1
1. (2pt) A firm has a production function given by y = f (L, K) = L 3 K 3 . The input price of
L is equal to 2, and the price of K is equal to 1. Let the price of out
Course: Microeconomics
Text: Varians Intermediate
Microeconomics
1
The principal behavioral postulate is
that a decision-maker chooses its
most preferred alternative from those
available to it.
The available choices constitute the
budget set.
How is the m
Chapter 5
Choice
Review
Budget
constraint : PxX+PyY=m
Slope of budget line: - Px/Py
->MRS: - MUx/MUy
Both are a kind of trade ratio
between x and y, but MRS is in your
mind while the relative price is given
to you (determined by market)
Rational Constr
Chapter 28
Oligopoly
Oligopoly
A monopoly is an industry consisting a single firm.
A Duopoly is an industry consisting of TWO firms.
An Oligopoly is an industry consisting of A FEW
firms. Particularly, each firms own price or output
decisions affect its c