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12.Oct.2004 EC1000 Microeconomics Class 1 week 3
EC1000 Microeconomics
Tutor: Jarir [email protected]
Tutorial SlideshowsSemester one 2005
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
EC1000 Microeconomics Class 1 Week 3
PPF & Circular Flow
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
EC1000 Microeconomics Class 1 week 3
Markets for Goods & Services
Markets for Factors of Production
Firms Sell and Households Buy
Firms Buy and Households Sell
HouseholdsFirmsThey Consume Goods &
Own Factors of productionFirms Produce Goods &
Hire Factors of production
Goods and Services Bought
Spending
Goods and Services Sold
Revenue
Labour & Capital Supplied
Income
Inputs of production needed
Wages, Rents & Profits
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
EC1000 Microeconomics Class 2 Week 5
Supply & Demand
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
S
p
Q
S1
Supply and Quantity Supplied
0
P
Q
S
p
Qq q
a b a
b
Increase in Supply: Shift in the Supply curve
Increase in Quantity Supplied: A move along the curve
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
S
D
Pe
Qe
S``
S`
qaqb
Pa
Pb
e
a
b
Changes in Supply No Change in Demand
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
S
D
D`
Pe
Qe
D``
qcqd
Pd
Pc
e
c
d
Changes in Demand No Change in Supply
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
S
D
D`
Pe
Qe
S``S`
qf qg
Ph
pg
e
Increase in Supply & Demand
f
hD``
qh
g
?
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
Increase in Demand and a Decrease in Supply
0
P
Q
S
D
D`
Pe
Qe
Pj k
Pi
eD``
?
i
S`
j
qf
S``
k
qk
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
Pe
Pn,m
PL
Increase in Supply & Decrease in Demand
0
P
Q
S
DD`
Qe
D``
S``S`
qmqn
e
L
n
m
?
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
Decrease in Supply & Demand
Pe
Pq
0
P
Q
S
DD`
Qe
D``
qpqq
ep
0
P
Q
S
D
Qe
Po
q
S`
O
S``
?
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
F.Y.I
Price Rise if :
• Demand > Supply
• Increase in Demand > Increase in Supply
• Decrease in Demand < Decrease in Supply
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
EC1000 Microeconomics Class 3 Week 7
Costs of Taxation
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
D
S
e
Consumer / Producer Surplus
Consumer Surplus
Producer Surplus
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
D
S
e
Consumer / Producer Surplus
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
D
S
e
Consumer / Producer Surplus
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
D
S
e
Consumer / Producer Surplus
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
D
S
e
Consumer / Producer Surplus
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
D
S
e
Consumer / Producer Surplus
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
D
S
e
Consumer / Producer Surplus
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
D
Se
Consumer / Producer Surplus
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
Pa
Pb
D
S
e
b
Tax & Deadweight Loss
a
Deadweight Loss
Tax
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
Pa
Pb
D
S
e
b
Deadweight Loss: Elastic Supply & Demand
a
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
D
S
e
Deadweight Loss: Inelastic supply
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
D
S
e
Deadweight Loss: Elastic supply
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
Pa
D
S
e
Deadweight Loss: Inelastic Demand
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
0
P
Q
Pe
Qe
PaD
S
e
Deadweight Loss: Elastic Demand
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
EC1000 Microeconomics Class 4 week 9
Notes in Costing
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
£
Quantity of Output
ATC
Qa
MC
AVC
FCa
Efficient Scale
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
P= C
Quantity of OutputQmax
MC = Supply
P = AR= MRa
Competitive market (price taker firm)
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
Quantity of Output
ATC
Qmax
MC
a D
MR
P= C
Pm
Profit
12.Oct.2004 EC1000 Microeconomics Class 1 week 3
F.Y.I
• MC > ATC : ATC is rising
• MC intercepts ATC at its lowest point.
• Diminishing Marginal Product causes MC to rise.