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Neo Classical Economics - Mindmap.pdf
- 1. LECTURE 2: NEOCLASSICAL MICROECONOMICS - PRODUCT MARKET APPROACH Market demand and supply Explaining PRICES and QUANTITIES of individual products DEMAND Market demand Sum of all individual demand Demand by individuals Determinants PRICE Link of price and quantity demanded gives DEMAND CURVE Diminishing MARGINAL UTILITY explains downward sloping curve OTHER Income Tastes Expected price Price of other products SUPPLY Market supply Sum of individual supply Individual firm supply Determinants Price Link of price and quantity supplied gives the supply curve explained by rising unit costs costs include a normal profit ....but not above-normal profits Prices are set on basis of MARGINAL costs supply curve = marginal cost curve Short-run supply curve Period when most factor inputs are fixed Diminishing MARGINAL PRODUCTIVITY explains upward sloping curve Explains rising unit costs over the short run Key is rising average VARIABLE unit costs Costs INCLUDE Profit Long-run Diminishing ECONOMIES of SCALE Explains rising costs All factor inputs variable Other Technology Work effort Management Taxes and subsidies Input prices CONTD. DEMAND AND SUPPLY EQUILIBRIUM or market clearing output and price Shift in demand and supply curves will result in a shift in equilibrium price and output Explains shift in supply curve Explains shift in demand curve LECTURE 2 Part 1.mmap - 12/09/2014 - Howard Nicholas