The Economic Perspective
How do we define economics?
Economics is the social science concerned with how individuals, institutions, and society make optimal (best) choices under conditions of scarcity.
Scarcity and Choice
How do we define the concept of opportunity cost? Provide an example.
Marginal Analysis
How do we use marginal analysis (comparison of marginal benefit to marginal cost) in making decisions? Provide an example.
Microeconomics and Macroeconomics
We study economics at two different levels: microeconomics and macroeconomics.
Microeconomics
Define microeconomics. Provide an example for a microeconomic issue.
Macroeconomics
Define macroeconomics. Provide an example for a macroeconomic issue.
Positive and Normative Economics
We may also distinguish between positive and normative economics.
Define positive economics. Make a positive economic statement.
Define normative economics. Make a normative economic statement.
Use this martials to answer these questions:
Start with the textbook to get familiar with the content and progression of the lecture. Then, go to videos and supplemental articles, if provided, for further clarification and additional examples.
Textbook
Video
Introduction to microeconomics
Economic perspective
http://www.youtube.com/watch?v=yoVc_S_gd_0&list=PL336C870BEAD3B58B
Opportunity cost
Microeconomics and macroeconomics
http://www.youtube.com/watch?v=w8tUIq7Blsg&index=3&list=PL336C870BEAD3B58B
Positive and normative economics
http://www.youtube.com/watch?v=AV_p_QntywA&list=PL336C870BEAD3B58B&index=4
For those interested, here is a short video on Adam Smith who is considered the founder of modern economics.
Demand
How do we define the demand for a commodity?
Demand is a schedule or a curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time.
Law of Demand
What is the law of demand? Provide an explanation for the law of demand.
The Demand Curve
The table accompanying Figure 3.1 presents data on the demand for corn. Based on the table, how do we obtain the demand curve for corn? Which way does the curve slope?
Changes in Demand
There are several demand shifters, factors that shift the demand curve when they change: tastes, number of buyers, income, prices of related goods, etc.
Tastes
How do changes in consumer tastes affect the demand for a commodity? Provide an example and report which way the demand curve shifts as a result.
Number of Buyers
How does the number of buyers affect the demand for a commodity? Provide an example and report which way the demand curve shifts as a result.
Income
In the case of income, we distinguish between normal goods and inferior goods.
How do changes in consumer income affect the demand for normal goods? Provide an example and report which way the demand curve shifts as a result.
How do changes in consumer income affect the demand for inferior goods? Provide an example and report which way the demand curve shifts as a result.
Prices of Related Goods
In the case of related goods, we distinguish between substitutes and complements.
What is a substitute? How does the price of a commodity affect the demand for its substitute? Provide an example and report which way the demand curve shifts as a result.
What is a complement? How does the price of a commodity affect the demand for its complement? Provide an example and report which way the demand curve shifts as a result.
Use this martials to answer these questions:
Start with the textbook to get familiar with the content and progression of the lecture. Then, go to videos and supplemental articles, if provided, for further clarification and additional examples.
Textbook
Video
Markets
http://www.youtube.com/watch?v=5tF6W4OR5yU&list=PL336C870BEAD3B58B&index=11
Demand
http://www.youtube.com/watch?v=uXlZIn6W7Ew&list=PL336C870BEAD3B58B&index=12
Changes in demand
http://www.youtube.com/watch?v=aTSwcXJ700c&list=PL336C870BEAD3B58B&index=13
Alternative series of lectures on demand
Article
Importance of consumer tastes in determining demand
Supply
How do we define the supply of a commodity?
Law of Supply
What is the law of supply? Provide an explanation for the law of supply.
The Supply Curve
The table accompanying Figure 3.4 presents data on the supply of corn. Based on the table, how do we obtain the supply curve for corn? Which way does the curve slope?
Changes in Supply
There are several supply shifters, factors that shift the supply curve when they change: resource prices, technology, taxes and subsidies, etc.
Resource Prices
How do resource prices affect the supply of a commodity? Provide an example and report which way the supply curve shifts as a result.
Technology
How does technological progress affect the supply of a commodity? Provide an example and report which way the supply curve shifts as a result.
Taxes and Subsidies
How do taxes paid by firms to the government affect supply of a commodity? Provide an example and report which way the supply curve shifts as a result.
How do subsidies received by firms from the government affect supply of a commodity? Provide an example and report which way the supply curve shifts as a result.
Use this martials to answer these questions:
Start with the textbook to get familiar with the content and progression of the lecture. Then, go to videos and supplemental articles, if provided, for further clarification and additional examples.
Textbook
Video
Markets
http://www.youtube.com/watch?v=5tF6W4OR5yU&list=PL336C870BEAD3B58B&index=11
Supply
http://www.youtube.com/watch?v=KccMcf_xOQU&index=14&list=PL336C870BEAD3B58B
Alternative series of lectures on supply
Article
Electricity costs in Brazil
Market Equilibrium
In Figure 3.6, how do we obtain the equilibrium in the market for corn?
What is the equilibrium price? What is the quantity transacted (demanded and supplied) at that price?
Changes in Supply, Demand, and Equilibrium
There are several factors that shift the demand curve (tastes, number of buyers, income, prices of related goods) and the supply curve (resource prices, technology, taxes and subsidies).
Changes in Demand
Panel (a) in Figure 3.7 illustrates the effect of rising demand on market equilibrium. Provide an example for an increase in demand, report the resulting shift of the demand curve, and state the impact on equilibrium levels of price and quantity.
Repeat the exercise for falling demand, which is illustrated in panel (b).
Changes in Supply
Panel (c) in Figure 3.7 illustrates the effect of rising supply on market equilibrium. Provide an example for an increase in supply, report the resulting shift of the supply curve, and state the impact on equilibrium levels of price and quantity.
Repeat the exercise for falling supply, which is illustrated in panel (d).
Complex Cases
Complex cases arise from simultaneous changes in demand and supply. For a few examples, consider the following cases.
Supply Increase; Demand Decrease
Suppose that rising supply is combined with falling demand. Report which way supply and demand curves shift. Then, state the impact on equilibrium levels of price and quantity.
Supply Increase; Demand Increase
Suppose that rising supply is combined with rising demand. Report which way supply and demand curves shift. Then, state the impact on equilibrium levels of price and quantity.
Application: Government-Set Prices
Although prices are often determined in free markets via the interaction of demand and supply, governments implement price restrictions in certain markets at times.
Price Ceilings
How do we define a price ceiling? Provide an example and discuss why the government would impose a ceiling on the price of the commodity.
Based on Figure 3.8, what is the effect of a price ceiling on the market: a shortage or a surplus? Discuss the two problems related to price ceilings: rationing and black markets.
Price Floors
How do we define a price floor? Provide an example and discuss why the government would impose a floor on the price of the commodity.
Based on Figure 3.9, what is the effect of a price floor on the market: a shortage or a surplus? Discuss the additional consequences of price floors.
Use this martials to answer these questions:
Start with the textbook to get familiar with the content and progression of the lecture. Then, go to videos and supplemental articles, if provided, for further clarification and additional examples.
Textbook
Video
Market equilibrium
http://www.youtube.com/watch?v=W5nHpAn6FvQ&list=PL336C870BEAD3B58B&index=15
Another take on market equilibrium
Government-set prices
http://www.youtube.com/watch?v=XgBPAucs-W4&index=16&list=PL336C870BEAD3B58B
Alternative series of lectures on market equilibrium
Article
Real estate market in Myanmar
Price Elasticity of Demand
What does the price elasticity of demand measure? Provide an example.
The Price Elasticity Coefficient and Formula
How do we measure the price elasticity of demand? What is in the numerator of the elasticity equation? What is in the denominator?
In elasticity calculations, we use the midpoint formula to determine percentage changes.
According to the midpoint formula, how do we measure the percentage change in quantity demanded? How do we measure the percentage change in price?
Interpretation
If the price elasticity of demand for a commodity is _____ 1, the demand is elastic. What does elastic demand mean in terms of how responsive consumers are to price changes?
If the price elasticity of demand for a commodity is _____ 1, the demand is unit-elastic.
If the price elasticity of demand for a commodity is _____ 1, the demand is inelastic. What does inelastic demand mean in terms of how responsive consumers are to price changes?
Price Elasticity along a Linear Demand Curve
The demand curve in Figure 6.3 is drawn based on data from Table 6.1 regarding movie tickets.
In the table, when the price of a movie ticket falls from $8 to $7, the quantity demanded rises from 1000 to 2000 (a movement from point a to point b). What is the price elasticity of demand in this region? Is demand elastic, unit-elastic, or inelastic?
When the price falls from $5 to $4, the quantity demanded rises from 4000 to 5000 (a movement from point d to point e). What is the price elasticity of demand in this second region? Is demand elastic, unit-elastic, or inelastic?
When the price falls from $2 to $1, the quantity demanded rises from 7000 to 8000 (a movement from point g to point h). What is the price elasticity of demand in this third region? Is demand elastic, unit-elastic, or inelastic?
Report the trend in elasticity (rising, constant, or falling) as we go from point a to point h on the demand curve.
Determinants of Price Elasticity of Demand
There are three factors that affect the price elasticity of demand: number of available substitutes for the commodity, proportion of household income spent on the commodity, and luxury versus necessity nature of the commodity.
Substitutability
All else constant, the larger the number of available substitutes for a commodity, the _____ (higher or lower) is the price elasticity of demand for that commodity.
Explain why with an example. You may refer to Table 6.3, which reports elasticity data for a wide range of products.
Proportion of Income
All else constant, the larger the price of a commodity relative to household income, the _____ (higher or lower) is the price elasticity of demand for that commodity.
Explain why with an example. You may refer to Table 6.3.
Luxuries versus Necessities
All else constant, the more a commodity is perceived as a luxury rather than a necessity, the _____ (higher or lower) is the price elasticity of demand for that commodity.
Explain why with an example. You may refer to Table 6.3.
Use this martials to answer these questions:
Start with the textbook to get familiar with the content and progression of the lecture. Then, go to videos and supplemental articles, if provided, for further clarification and additional examples.
Textbook
Video
Price elasticity of demand
http://www.youtube.com/watch?v=4oj_lnj6pXA&list=PL336C870BEAD3B58B&index=17
Two-part lecture on price elasticity of demand
Determinants of price elasticity of demand
Alternative series of lectures on price elasticity of demand
