Micro 21
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The document provides an overview of microeconomics concepts including: - Externalities and how they can lead to market failures when costs are socialized and benefits are privatized. - The optimal level of pollution which balances marginal costs and benefits. - Key economic concepts like supply and demand, elasticity, firm behavior under different market structures, and factors of production. - Environmental economics and how externalities relate to problems with lacking property rights.
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Micro 21
- 3. Questions?
- 6. Externalities $ Q $15 D S $10 $20 $25 50 1000 7525 Excluding Externalities Including Externalities
- 7. Optimal Pollution $ Q 100%0% Degree of Cleanliness Marginal Benefit Marginal Cost
- 9. Economics Minor Microeconomics Macroeconomics Economic Development Money & Banking International Economics
- 13. The Economic Way of Thinking Think Like an Economist
- 15. Utility subjective different for every person different for the same person over time
- 16. Marginal Thinkers What are the costs and the benefits of the next unit
- 17. Utility Marginal Utility Marginal Utility Per Dollar
- 18. Price System is a Knowledge System
- 19. Voluntary Exchange buyer and seller both win
- 21. Comparative Advantage my opportunity cost is lower than your opportunity cost
- 22. Market where buyers and sellers make trades
- 23. Law of Demand when price goes up quantity demand goes down when price goes down quantity demand goes up
- 24. Law of Supply when price goes up quantity supplied goes up when price goes down quantity supplied goes down
- 25. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Equilibrium where market price is at a level where Quantity Demanded = Quantity Supplied Supply Demand
- 26. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Surplus where market price is above equilibrium price Quantity Demanded < Quantity Supplied Supply Demand QD QS QS - QD = 7 - 3 = 4 Price is too high too many produced lower price
- 27. 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 7 8 9 10 Price Quantity Shortage where market price is below equilibrium price Quantity Demanded > Quantity Supplied Supply Demand QS QD QS - QD = 2 - 8 = -6 Price is too low not enough produced raise price
- 28. Complements goods or services that are used together
- 29. Substitutes goods or services that can be used for the same purpose
- 30. Normal Good Demand increases as income rises and decreases as income falls
- 31. Inferior Good Demand decreases as income rises and increases as income falls
- 32. Luxury Good Demand increases faster than income rises and decreases faster as income falls
- 34. ELASTICITY EQUATION BENCHMARK Price Demand Cross- Price Income Price Supply MPF Inelastic | Elastic 1 Compliments | Substitutes 0 Inferior | Normal | Luxury 0 1 Inelastic | Elastic 1 %∆QD %∆QD1 %∆P %∆P2 %∆QD %∆I %∆QS %∆P ∆Q ∆PQ Px
- 38. Foundation Finance Formula (1 + r ) n r = risk rate n = time periods
- 39. Finance Factor = (1+r)n Future Value = Amount x Factor Present Value = Amount ÷ Factor
- 40. Financial System Institutions that match people who save money with people who need money
- 41. Financial Markets Bonds - Borrow - Debt Stocks - Sell Ownerships Equity
- 43. Average Total Costs = ATC = TC ÷ Q Total Costs = TC = FC +VC Profit = TR - TC Total Revenue = TR = Price x Q Total Costs = TC = ATC x Q
- 44. Production Equations Total Costs = FC +VC Total Costs = $3,000 + $3Q $0 $1,750 $3,500 $5,250 $7,000 0 500 1000 Total Revenue = P•Q Total Revenue = $7Q
- 45. Four Market Types Perfect Competition Monopoly Monopolistic Competition Oligopoly
- 46. Perfect Competition Monopoly Monopolistic Competition Oligopoly Number of Firms Many One Many Few Type of Product Identical Unique Brands Similar Ease of Entry Easy Blocked Easy Hard Demand D = MR D > MR Dynamic Game Theory Examples Commodities Rice Apples Utilities Government Brands Coke Apple STC-Mobily HyperPanda Danube Pairs
- 47. Q P Perfect Competition Marginal Cost MC Average Cost ATC Total Cost $ Quantity Profit Demand=MR Total Revenue
- 48. Marginal Cost MC Q P Marginal Revenue MR Monopoly Average Cost ATC Cost $ Q Profit Demand Deadweight Loss Consumer Surplus 1. MR=MC? 2.TR= P x Q 3.TC=ATC x Q 4. Profit =TR-TC or (P-ATC) x Q
- 49. Q $ Short Run Long Run D MR MC ATCProfit Profits disappear in the long run due to competition High Price Large Quantity Lower Price Lower Quantity QSQ PPS L L Demand Flattens Profit Monopolistic Competition
- 50. Oligopoly Small number of interdependent firms compete Game Theory
- 51. Five Competitive Forces Existing Firms Potential Firms Substitutes Buyers Suppliers
- 52. moral hazard to act differently because someone else will pay the costs
- 54. adverse selection making a bad choice due to lack of information
- 55. Labor Markets Hire until the cost to hire one more employee is equal to the marginal revenue
- 56. Derived Demand Factor demand derived from product demand
- 57. Minimum Wage Laws Government sets a minimum wage that can legally be paid Price Floor
- 58. $0 $5 $10 $15 $20 0 10 20 30 40 50 60 Supply Demand Wage Workers Equilibrium Wage 30 workers 30 jobs no unemployment Minimum Wage 40 workers 20 jobs 20 unemployed workers Minimum Wage 20 workers get a raise 10 workers lose job 10 new unemployed workers Minimum Wage
- 59. Wage Gaps Why do men earn more than women?
- 66. What? Facts Why? Reason and Logic How? Way or Method
- 67. Yabut
- 68. Freedom Truth
- 70. True Speech People should say what they believe to be true
- 71. Right Obligation
- 72. True Speech Not possible without free speech
- 73. Not good at thinking Speaking allows us to see our mistakes
- 74. Start stumbling be wrong be biased be corrected
- 75. - Jordan Peterson The reason you think is so your thoughts can die instead of you
- 76. Learn to critique your thoughts We speak to know what we think
- 77. We cannot think unless we have the freedom to make mistakes
- 78. Why listen? Helps people learn to think as they speak
- 79. Thinking is very hard It’s why so few people think
- 80. Thoughts vs. Speech Speech allows us to test our thoughts
- 82. Why learn to Write? So you can learn to think, and you learn to think so you can make better decisions
- 84. And Nothing Shall Offend Them However, it ultimately is impossible for another person to offend you or to offend me. Indeed, believing that another person offended us is fundamentally false. To be offended is a choice we make; it is not a condition inflicted or imposed upon us by someone or something else. Elder David A. Bednar
- 85. Born to Choose Middle English chosen, from Old English ceosan; akin to Old High German kiosan to choose, Latin gustare to taste.
- 86. ThankYou