101 lecture 6

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101 lecture 6

  1. 1. Microeconomics Lecture 6 Supply, Demand, and Government Policies Exam 2 Review
  2. 2. price ceiling price floor tax incidence Key Terms
  3. 3. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Supply Demand
  4. 4. 1.What is the equilibrium price? 2.What is the equilibrium quantity? 3. If the market price was 80, how many pizzas would be sold? 4. If the market price was 30, how many pizza would be sold? 5. If the market price was 80, would there be a shortage, surplus, or equilibrium? 6. If the market price was 30, would there be a shortage, surplus, or equilibrium? 7.What would be the quantity demanded at a price of 80? 8.What would be the quantity supplied at a price of 80? 9.What would be the quantity demanded at a price of 30? 10.What would be the quantity supplied at a price of 30? 10 Questions
  5. 5. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  6. 6. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  7. 7. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  8. 8. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  9. 9. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  10. 10. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  11. 11. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QD = QS
  12. 12. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QD = QS QS - QD 5 - 5
  13. 13. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QD = QS QS - QD 5 - 5 No Shortage No Surplus
  14. 14. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  15. 15. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  16. 16. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  17. 17. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  18. 18. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  19. 19. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QD
  20. 20. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QD
  21. 21. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QD
  22. 22. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QD
  23. 23. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QD QS
  24. 24. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QD QS QS - QD 8 - 2
  25. 25. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QD QS Surplus of 6 QS - QD 8 - 2
  26. 26. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  27. 27. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  28. 28. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  29. 29. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  30. 30. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  31. 31. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10
  32. 32. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QS
  33. 33. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QS
  34. 34. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QS
  35. 35. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QS
  36. 36. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QDQS
  37. 37. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QDQS QS - QD 3 - 7
  38. 38. Price Quantity Supply Demand 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 QDQS Shortage of 4 QS - QD 3 - 7
  39. 39. 1.What is the equilibrium price? 50 2.What is the equilibrium quantity? 5 3. If the market price was 80, how many pizzas would be sold? 2 4. If the market price was 30, how many pizza would be sold? 3 5. If the market price was 80, would there be a shortage, surplus, or equilibrium? surplus 6. If the market price was 30, would there be a shortage, surplus, or equilibrium? shortage 7.What would be the quantity demanded at a price of 80? 2 8.What would be the quantity supplied at a price of 80? 8 9.What would be the quantity demanded at a price of 30? 7 10.What would be the quantity supplied at a price of 30? 3 10 Questions
  40. 40. Tax Liability Tax Incidence
  41. 41. Tax Liability Tax Incidence Who is legally responsible to pay the tax to the government
  42. 42. Tax Liability Tax Incidence Who is legally responsible to pay the tax to the government Who actually pays the tax
  43. 43. Just because I have the Tax Liability does not mean that I have the Tax Incidence
  44. 44. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Pizza Tax Demand Supply
  45. 45. 1.What is the equilibrium price before the tax? 2.What is the equilibrium quantity? 3. If the tax is 20 SAR, what will be the new price? 4. If the tax is 20 SAR, how many pizza would be sold? 5.What will be the total revenue with the new tax? 6. How much tax will the seller pay? 7. How much tax will the buyer pay? 8. How much will the total tax be? 9. How much did the seller earn after paying the tax? 10.Why isn’t the new price 70? Pizza Tax Questions
  46. 46. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax
  47. 47. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax
  48. 48. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax
  49. 49. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax
  50. 50. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax
  51. 51. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax
  52. 52. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax
  53. 53. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax Tax on Supplier of 20 Shift the curve up by 20
  54. 54. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax Tax on Supplier of 20 Shift the curve up by 20
  55. 55. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax Tax on Supplier of 20 Shift the curve up by 20
  56. 56. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax Tax on Supplier of 20 Shift the curve up by 20
  57. 57. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax Tax on Supplier of 20 Shift the curve up by 20
  58. 58. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  59. 59. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  60. 60. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  61. 61. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  62. 62. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Buyer Price Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  63. 63. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Buyer Price Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  64. 64. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Buyer Price Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  65. 65. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Buyer Price Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  66. 66. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Buyer Price Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  67. 67. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Buyer Price Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  68. 68. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Buyer Price Seller Price Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  69. 69. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Buyer Price Seller Price Taxes of 20 Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  70. 70. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Buyer Price Seller Price Taxes of 20 Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  71. 71. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Buyer Price Seller Price Taxes of 20 Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  72. 72. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Demand Pizza Tax Buyer Price Seller Price Taxes of 20 Supply no tax Supply with tax Tax on Supplier of 20 Shift the curve up by 20
  73. 73. • Taxes discourage market activity • Value creation is reduced • Buyers and sellers share the burden • Buyers pay more, sellers receive less Taxes
  74. 74. Prepare for Exam 2 1. Read Chapters 4, 5, and 6 2. Review lecture slides on blog 3. Review lecture questions on blog 4. Review your class notes 5. Study alone for a while 6.Then study with smart friends 7. Don’t be late for exam 8. Bring pencil and calculator
  75. 75. Chapter 4 The Market Forces of Supply and Demand market competitive market quantity demanded law of demand demand schedule demand curve normal good inferior good substitutes complements quantity supplied law of supply supply schedule supply curve equilibrium equilibrium price equilibrium quantity surplus shortage law of supply and demand
  76. 76. Chapter 5 Elasticity and Its Application elasticity price elasticity of demand total revenue total expenditure income elasticity of demand cross-price elasticity of demand price elasticity of supply
  77. 77. ELASTICITY EQUATION BENCHMARK Price Elasticity of Demand Cross-Price Elasticity Income Elasticity Price Elasticity of Supply Midpoint Formula Inelastic | Elastic 1 Compliments | Substitutes 0 Inferior | Normal | Luxury 0 1 Inelastic | Elastic 1 %∆QD %∆P %∆QS %∆P %∆QD1 %∆P2 %∆QD %∆I ∆Q ∆PQ Px
  78. 78. Chapter 6 Supply, Demand, and Government Policies price ceiling price floor tax incidence

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