This document discusses oligopolies and game theory. It explains that when there are few dominant firms in a market, they can engage in practices like price fixing to restrict output and fix higher prices. This allows them to recognize their interdependence and act together to maximize joint profits. However, cartel agreements are often unstable as firms have an incentive to cheat and exceed their output quotas for higher individual profits. This prisoners' dilemma framework illustrates why cooperation is difficult even when it benefits all parties. Game theory models are useful for understanding interdependent pricing and other strategic decisions in oligopolistic markets.
this is notes on chapter 2 of ten principles of economics by mankiw. topics covered:
THE ROLE OF ASSUMPTIONS
ECONOMIC MODELS
THE CIRCULAR-FLOW DIAGRAM
THE PRODUCTION POSSIBILITIES FRONTIER
MICROECONOMICS AND MACROECONOMICS
THE ECONOMIST AS POLICY ADVISER
this is short notes on chapter 2 of ten principles of economics by manikiw
This chapter discusses public goods and common resources. Public goods are non-excludable and non-rival, meaning one person's use does not reduce availability to others. They are underprovided by markets due to free-riding incentives. Common resources are non-excludable but rival in consumption. They are prone to overuse, or "the tragedy of the commons." The government can use policies like taxes, permits, and regulation to more efficiently provide public goods and manage common resources.
Consumer surplus is a measure of consumer welfare that represents the difference between what consumers are willing to pay for a good or service and what they actually pay. Consumer surplus is represented by the area under the demand curve and above the market price. An increase in supply costs leads to higher market prices and a reduction in consumer surplus, while an increase in market demand causes consumer surplus to rise. When demand is inelastic, consumer surplus is greater because some buyers are willing to pay high prices, but when demand is perfectly elastic, consumer surplus is zero as the price paid equals willingness to pay.
This document provides an overview of the theory of consumer choice. It introduces key concepts like the budget constraint, indifference curves, marginal rate of substitution, and consumer optimization. The budget constraint represents the combinations of goods a consumer can afford based on prices and income. Indifference curves represent combinations of goods that provide equal utility. Consumers optimize by choosing the highest indifference curve possible given their budget constraint. The theory is then applied to explain consumer decisions around income and price changes, labor supply, and saving.
This document outlines 10 principles of economics from the textbook "Principles of Economics" by N. Gregory Mankiw. It discusses fundamental lessons about individual decision making, interactions among people, and the economy as a whole. Specifically, it summarizes that people face trade-offs and respond to incentives; markets are generally good but governments can remedy failures; productivity drives living standards; and inflation results from increasing the money supply, creating short-run trade-offs with unemployment.
This document discusses oligopolies and game theory. It explains that when there are few dominant firms in a market, they can engage in practices like price fixing to restrict output and fix higher prices. This allows them to recognize their interdependence and act together to maximize joint profits. However, cartel agreements are often unstable as firms have an incentive to cheat and exceed their output quotas for higher individual profits. This prisoners' dilemma framework illustrates why cooperation is difficult even when it benefits all parties. Game theory models are useful for understanding interdependent pricing and other strategic decisions in oligopolistic markets.
this is notes on chapter 2 of ten principles of economics by mankiw. topics covered:
THE ROLE OF ASSUMPTIONS
ECONOMIC MODELS
THE CIRCULAR-FLOW DIAGRAM
THE PRODUCTION POSSIBILITIES FRONTIER
MICROECONOMICS AND MACROECONOMICS
THE ECONOMIST AS POLICY ADVISER
this is short notes on chapter 2 of ten principles of economics by manikiw
This chapter discusses public goods and common resources. Public goods are non-excludable and non-rival, meaning one person's use does not reduce availability to others. They are underprovided by markets due to free-riding incentives. Common resources are non-excludable but rival in consumption. They are prone to overuse, or "the tragedy of the commons." The government can use policies like taxes, permits, and regulation to more efficiently provide public goods and manage common resources.
Consumer surplus is a measure of consumer welfare that represents the difference between what consumers are willing to pay for a good or service and what they actually pay. Consumer surplus is represented by the area under the demand curve and above the market price. An increase in supply costs leads to higher market prices and a reduction in consumer surplus, while an increase in market demand causes consumer surplus to rise. When demand is inelastic, consumer surplus is greater because some buyers are willing to pay high prices, but when demand is perfectly elastic, consumer surplus is zero as the price paid equals willingness to pay.
This document provides an overview of the theory of consumer choice. It introduces key concepts like the budget constraint, indifference curves, marginal rate of substitution, and consumer optimization. The budget constraint represents the combinations of goods a consumer can afford based on prices and income. Indifference curves represent combinations of goods that provide equal utility. Consumers optimize by choosing the highest indifference curve possible given their budget constraint. The theory is then applied to explain consumer decisions around income and price changes, labor supply, and saving.
This document outlines 10 principles of economics from the textbook "Principles of Economics" by N. Gregory Mankiw. It discusses fundamental lessons about individual decision making, interactions among people, and the economy as a whole. Specifically, it summarizes that people face trade-offs and respond to incentives; markets are generally good but governments can remedy failures; productivity drives living standards; and inflation results from increasing the money supply, creating short-run trade-offs with unemployment.
This chapter discusses elasticity, which measures how responsive one variable is to changes in another variable. It focuses on price elasticity of demand, which measures how much quantity demanded responds to changes in price. Price elasticity is calculated as the percentage change in quantity divided by the percentage change in price. Examples are used to illustrate factors that determine whether demand is elastic or inelastic, such as availability of substitutes. The elasticity also depends on whether a good is a necessity. The chapter explores how elasticity is related to the slope of the demand curve and total revenue.
An economic system is how a nation organizes production and distribution of goods and services. A market economy answers three basic economic questions through individual choice rather than government directives: what to produce based on consumer demand, how to produce using individually owned enterprises, and for whom to produce goods and services that people can afford. A market economy has advantages like variety, lower prices, and acting in self-interest but also disadvantages like unequal distribution and market failures.
This document discusses monopolies and monopoly power. It defines a monopoly as a sole seller in a market that faces a downward-sloping demand curve. Monopolies maximize profits by producing where marginal cost equals marginal revenue. Unlike competitive firms, monopolies set price above marginal cost, resulting in deadweight loss. Governments address monopoly power through antitrust laws, price regulation, or public ownership.
The document outlines 10 principles of economics:
1. People face tradeoffs in decision making as resources are scarce.
2. The cost of something is measured by what one gives up to obtain it, including opportunity costs.
3. Rational people think at the margin, weighing marginal costs against marginal benefits.
This document summarizes key aspects of monopolistic competition. It describes monopolistic competition as having many firms selling differentiated but similar products, with free entry and exit in the long run. In the short run, monopolistically competitive firms profit maximize at a quantity where price exceeds average total cost. In the long run, these firms operate at a loss and produce at a quantity where price equals average total cost, resulting in excess capacity compared to perfect competition. The document also discusses how advertising and brand names contribute to product differentiation in monopolistic competition.
P
Q
D
$200
12
$250
10
1. The document discusses the concept of elasticity and how it can help understand how variables respond to changes in other variables.
2. It provides examples of different types of elasticities including price elasticity of demand, which measures how quantity demanded responds to changes in price. Demand is more elastic when good substitutes exist, a good is a luxury, the good is narrowly defined, or in the long run.
3. The slope of the demand curve is related to elasticity, with flatter curves indicating more elastic demand. Demand can be perfectly inelastic, inelastic, unit elastic, elastic, or
This document provides an overview of theories related to firm behavior, including:
- Apple has been very successful while Japanese Airlines (JAL) recently declared bankruptcy with large debts.
- Economists can provide advice to firms on price, output, profit, and costs to maximize profits and efficiency.
- Theories of the firm aim to understand optimal pricing, production, and profits based on costs, revenues, and market structure.
Price elasticity of supply measures how much the quantity supplied of a good responds to changes in its price. Supply is more elastic when producers can easily increase output by utilizing spare capacity, high stock levels, short production times, or flexible reallocation of resources. Supply is inelastic when producers face constraints increasing output in response to higher prices. The elasticity of supply determines whether a change in demand results in a large or small change in price.
This document discusses perfect competition in markets. It defines a perfectly competitive market as one with many potential buyers and sellers, homogeneous products, and prices determined by market forces alone. Firms in a perfectly competitive market are price takers and will enter or exit the market in response to profits and losses. The key characteristics of a perfectly competitive market include free entry and exit, perfect information, and mobility of resources.
Macroeconomics_Elasticity and its Applicationsdjalex035
This chapter discusses elasticity, which measures how responsive buyers and sellers are to changes in price. It defines price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. Factors that make demand more elastic include availability of substitutes, whether a good is a necessity or luxury, how broadly the market is defined, and the time period considered. Price elasticity of supply is defined similarly for quantity supplied. Factors that make supply more elastic include the ability to change production and longer time periods. The chapter examines how elasticity relates to total revenue and applies elasticity concepts to different markets.
The document discusses the characteristics and behavior of firms in a perfectly competitive market. It defines a competitive market as having many small firms and buyers, homogeneous products, and free entry and exit. In the short run, individual firms maximize profits by producing where marginal revenue equals marginal cost. In the long run, firms enter and exit the market until price equals minimum average total cost and profits are zero. The market supply curve is determined by the marginal cost curves of individual firms.
This document discusses different types of goods: private goods, public goods, common resources, and natural monopolies. It defines excludability and rivalry as characteristics used to classify goods. Public goods are non-excludable and non-rival, leading to free-rider problems where the market fails to provide them. Common resources are non-excludable but rival, prone to overuse in the tragedy of the commons. The document stresses the importance of well-defined property rights to avoid market failures.
El documento discute varios temas relacionados con la desigualdad de ingresos y la pobreza en los Estados Unidos. Explica cómo se mide la desigualdad, los factores que han contribuido a su aumento reciente, y los problemas asociados con medir adecuadamente el índice de pobreza. También analiza diferentes filosofías políticas sobre la redistribución del ingreso y políticas para reducir la pobreza.
The document discusses the market forces of supply and demand. It defines demand and supply, and explains how demand and supply curves are determined by various factors. The demand curve shows the relationship between price and quantity demanded, while the supply curve shows the relationship between price and quantity supplied. The market reaches equilibrium when quantity demanded equals quantity supplied at the market price.
This document discusses different types of goods: private goods, public goods, common resources, and natural monopolies. It explains that public goods are non-excludable and non-rival, so the free-rider problem prevents private markets from providing them. Common resources are rival but non-excludable, leading to overuse under open access and the "tragedy of the commons". The document also covers cost-benefit analysis and the role of property rights in addressing market failures for non-private goods.
The document discusses consumer preferences and how consumers make choices. It explains that consumers have preferences that can be represented by indifference curves, and that they face budget constraints determined by their income and prices. It then discusses how consumers will choose the bundle of goods that gives them the highest attainable level of utility or satisfaction, which is where their indifference curve is tangent to their budget constraint, meaning the marginal rate of substitution between goods equals the price ratio. This optimal point balances marginal benefits and costs. Changes in prices or income shift the budget constraint and can change the optimal choice.
This presentation basically tells how the firm makes decisions in a competitive market. To make concepts here more understable, I have prepared graphs and mathematical equations.
This chapter discusses elasticity, which measures how responsive one variable is to changes in another variable. It focuses on price elasticity of demand, which measures how much quantity demanded responds to changes in price. Price elasticity is calculated as the percentage change in quantity divided by the percentage change in price. Examples are used to illustrate factors that determine whether demand is elastic or inelastic, such as availability of substitutes. The elasticity also depends on whether a good is a necessity. The chapter explores how elasticity is related to the slope of the demand curve and total revenue.
An economic system is how a nation organizes production and distribution of goods and services. A market economy answers three basic economic questions through individual choice rather than government directives: what to produce based on consumer demand, how to produce using individually owned enterprises, and for whom to produce goods and services that people can afford. A market economy has advantages like variety, lower prices, and acting in self-interest but also disadvantages like unequal distribution and market failures.
This document discusses monopolies and monopoly power. It defines a monopoly as a sole seller in a market that faces a downward-sloping demand curve. Monopolies maximize profits by producing where marginal cost equals marginal revenue. Unlike competitive firms, monopolies set price above marginal cost, resulting in deadweight loss. Governments address monopoly power through antitrust laws, price regulation, or public ownership.
The document outlines 10 principles of economics:
1. People face tradeoffs in decision making as resources are scarce.
2. The cost of something is measured by what one gives up to obtain it, including opportunity costs.
3. Rational people think at the margin, weighing marginal costs against marginal benefits.
This document summarizes key aspects of monopolistic competition. It describes monopolistic competition as having many firms selling differentiated but similar products, with free entry and exit in the long run. In the short run, monopolistically competitive firms profit maximize at a quantity where price exceeds average total cost. In the long run, these firms operate at a loss and produce at a quantity where price equals average total cost, resulting in excess capacity compared to perfect competition. The document also discusses how advertising and brand names contribute to product differentiation in monopolistic competition.
P
Q
D
$200
12
$250
10
1. The document discusses the concept of elasticity and how it can help understand how variables respond to changes in other variables.
2. It provides examples of different types of elasticities including price elasticity of demand, which measures how quantity demanded responds to changes in price. Demand is more elastic when good substitutes exist, a good is a luxury, the good is narrowly defined, or in the long run.
3. The slope of the demand curve is related to elasticity, with flatter curves indicating more elastic demand. Demand can be perfectly inelastic, inelastic, unit elastic, elastic, or
This document provides an overview of theories related to firm behavior, including:
- Apple has been very successful while Japanese Airlines (JAL) recently declared bankruptcy with large debts.
- Economists can provide advice to firms on price, output, profit, and costs to maximize profits and efficiency.
- Theories of the firm aim to understand optimal pricing, production, and profits based on costs, revenues, and market structure.
Price elasticity of supply measures how much the quantity supplied of a good responds to changes in its price. Supply is more elastic when producers can easily increase output by utilizing spare capacity, high stock levels, short production times, or flexible reallocation of resources. Supply is inelastic when producers face constraints increasing output in response to higher prices. The elasticity of supply determines whether a change in demand results in a large or small change in price.
This document discusses perfect competition in markets. It defines a perfectly competitive market as one with many potential buyers and sellers, homogeneous products, and prices determined by market forces alone. Firms in a perfectly competitive market are price takers and will enter or exit the market in response to profits and losses. The key characteristics of a perfectly competitive market include free entry and exit, perfect information, and mobility of resources.
Macroeconomics_Elasticity and its Applicationsdjalex035
This chapter discusses elasticity, which measures how responsive buyers and sellers are to changes in price. It defines price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. Factors that make demand more elastic include availability of substitutes, whether a good is a necessity or luxury, how broadly the market is defined, and the time period considered. Price elasticity of supply is defined similarly for quantity supplied. Factors that make supply more elastic include the ability to change production and longer time periods. The chapter examines how elasticity relates to total revenue and applies elasticity concepts to different markets.
The document discusses the characteristics and behavior of firms in a perfectly competitive market. It defines a competitive market as having many small firms and buyers, homogeneous products, and free entry and exit. In the short run, individual firms maximize profits by producing where marginal revenue equals marginal cost. In the long run, firms enter and exit the market until price equals minimum average total cost and profits are zero. The market supply curve is determined by the marginal cost curves of individual firms.
This document discusses different types of goods: private goods, public goods, common resources, and natural monopolies. It defines excludability and rivalry as characteristics used to classify goods. Public goods are non-excludable and non-rival, leading to free-rider problems where the market fails to provide them. Common resources are non-excludable but rival, prone to overuse in the tragedy of the commons. The document stresses the importance of well-defined property rights to avoid market failures.
El documento discute varios temas relacionados con la desigualdad de ingresos y la pobreza en los Estados Unidos. Explica cómo se mide la desigualdad, los factores que han contribuido a su aumento reciente, y los problemas asociados con medir adecuadamente el índice de pobreza. También analiza diferentes filosofías políticas sobre la redistribución del ingreso y políticas para reducir la pobreza.
The document discusses the market forces of supply and demand. It defines demand and supply, and explains how demand and supply curves are determined by various factors. The demand curve shows the relationship between price and quantity demanded, while the supply curve shows the relationship between price and quantity supplied. The market reaches equilibrium when quantity demanded equals quantity supplied at the market price.
This document discusses different types of goods: private goods, public goods, common resources, and natural monopolies. It explains that public goods are non-excludable and non-rival, so the free-rider problem prevents private markets from providing them. Common resources are rival but non-excludable, leading to overuse under open access and the "tragedy of the commons". The document also covers cost-benefit analysis and the role of property rights in addressing market failures for non-private goods.
The document discusses consumer preferences and how consumers make choices. It explains that consumers have preferences that can be represented by indifference curves, and that they face budget constraints determined by their income and prices. It then discusses how consumers will choose the bundle of goods that gives them the highest attainable level of utility or satisfaction, which is where their indifference curve is tangent to their budget constraint, meaning the marginal rate of substitution between goods equals the price ratio. This optimal point balances marginal benefits and costs. Changes in prices or income shift the budget constraint and can change the optimal choice.
This presentation basically tells how the firm makes decisions in a competitive market. To make concepts here more understable, I have prepared graphs and mathematical equations.
This chapter discusses how government policies like price controls and taxes can affect market outcomes. Price ceilings, which set a legal maximum price, typically cause shortages by creating a gap between the maximum price and the market equilibrium price. Price floors, which set a legal minimum price, typically cause surpluses by creating a gap between the minimum price and the market equilibrium price. Taxes can be levied on buyers or sellers, but they have similar effects by driving a wedge between the price buyers pay and sellers receive. The incidence of a tax, or how the burden is shared, depends on the elasticities of supply and demand.
The document outlines chapters from a PowerPoint presentation on principles of economics, including sections on profit-maximizing firms, production processes, costs, and technologies. It provides definitions of key economic concepts and examples to illustrate production functions and the relationship between marginal product, average product, and total product. Graphs and tables are included to demonstrate costs and inputs for different production methods.
This document provides an overview of externalities and how they can lead to inefficient market outcomes. It discusses:
1) What externalities are and how they can be negative or positive, depending on their impact on third parties. Negative externalities like pollution mean the market produces too much of a good, while positive externalities mean too little is produced.
2) How public policies like taxes or subsidies can "internalize" externalities by making producers and consumers consider these external impacts. A tax on pollution would align private and social costs, leading to the efficient level of production.
3) Examples of both negative externalities like air pollution and positive externalities like vaccination. The document analyzes these situations using demand
This document discusses supply and demand. It begins by asking questions about factors that affect demand and supply, and how supply and demand determine price and quantity. It then defines markets and competition. The rest of the document discusses the concepts of demand, including demand schedules and curves. It explains individual demand versus market demand. It also discusses factors that can shift the demand curve, like number of buyers, income, prices of related goods, tastes, and expectations. Similarly, it covers the concepts of supply, including supply schedules and curves, as well as factors that shift the supply curve, like input prices, technology, number of sellers, and expectations. In summary, it provides an overview of the key microeconomic concepts of supply, demand,
Economists use models like the circular flow diagram and production possibilities frontier (PPF) to study economic concepts. The circular flow diagram shows how resources and dollars flow between households and firms. The PPF illustrates production tradeoffs and opportunity costs given limited resources. Microeconomics analyzes individual markets, while macroeconomics examines economy-wide issues. Economists aim to explain the world scientifically and advise on policy normatively.
This document discusses the costs of taxation according to microeconomic principles. It explains that a tax reduces consumer surplus, producer surplus, and total surplus by creating a deadweight loss. The size of the deadweight loss depends on the price elasticities of supply and demand - more elastic demand or supply leads to a larger deadweight loss. Increasing the size of an existing tax causes the deadweight loss to rise more than proportionately and causes tax revenue to initially rise and then fall, following a Laffer curve pattern.
This chapter introduces some of the key principles of economics. It discusses that economics addresses questions about how societies manage scarce resources. It explores four main principles: how people make decisions, how people interact, how markets usually provide a good way to organize economic activity, and how governments can sometimes improve market outcomes. The chapter provides examples and discussion of opportunity costs, incentives, trade, and the role of prices in allocating resources. It also addresses how a country's standard of living depends on its ability to produce goods and services.
1. I. Ders Sunumu Öğr. Gör. Elşen BAĞIRZADE Azerbaycan Devlet İktisat Üniversitesi Türk Dünyası İşletme Fakültesi (N. Gregory Mankiw, Principles of Economics, III. Baskı)