Supply and demand: applications

Spring 2013Topic 3

Housing

Housing lessons

Shifters

Short-run vs. long-run dynamics

Short-run shifters

Price of related goods: mortgage

What determines the price?

Points and rate

Availability

Short-run shifters

Price of related goods: mortgage

Availability

Changes to the Community Reinvestment Act

Technological change

Tertiary markets

De facto deregulation

Short-run shifters

Price of related goods: mortgage

Availability

Short-run shifters

Price of related goods: mortgage

Availability

Rates

Short-run shifters

Price of related goods: mortgage

Availability

Rates

Short-run shifters

Price of related goods: mortgage

Availability

Rates

Long-run demand response

Speculative housing demand

Flipping

Momentum investing and speculative bubbles

Long-run supply response

Wages

Wages

Supply and demand model

Wages

Supply and demand model

Minimum wage

Positive and negative implications

Discrimination

Wages

Supply and demand model

Minimum wage

Why are the effects small?

Wages

Supply and demand model

Minimum wage

Why are the effects small?

Is this the correct model?

Monopsony model

Minimum wage reconsidered

What is economics?

Scarcity

Limited resources, unlimited wants

What is economics?

Scarcity

Economics is the study of the choices made due to scarcity

What is macroeconomics?

Microeconomics

Individual choices

Individual markets

What is macroeconomics?

Microeconomics

Macroeconomics

How individual choices combine to determine the macroeconomic BIG THREE

What are the big three?

Inflation

Nov. 2012

1.8%

What are the big three?

Inflation

Unemployment

Dec. 2012

7.8%

What are the big three?

Inflation

Unemployment

Output and growth

3rd quarter, 2012 estimate

$15.811 trillion

3.1%

How economists work

The scientific method

Observational versus experimental

How economists work

The scientific method

Economic models

The role of assumptions

How economists work

The scientific method

Economic models

Positive vs. normative economics

A first model: PPF

Production Possibilities Frontier

Models what the economy is capable of producing

A first model: PPF

Production Possibilities Frontier

Factors of production

Physical capital

Labor

Natural resources

Technological knowledge

A second model: the Circular Flow

Models the interconnections in the economy

Models how much of the productive potential the economy will use