Ch 1 Ten Principles of economic∙Scarcity: the limited nature of society’s resources∙Economics: the study of how society manages its scarce resources, e.g.∙There are 10 principle of economic which are needed to be remember throughout.∙People face trade-off1. Individual(time,money) and society(efficiency vs equality).∙Cost of something is what your give up to get it.\1. The opportunity cost of any item is whatever must be given up toobtain it.∙Rational people thinking at margin(effect of one additional item)1. This principle assume that everyone is rational people(made theirdecision base on their interests) this was addressed on Adam Smith'sWealth of Nation.∙People respond to incentives(诱惑物）1. This statement reveals that human psychology is a importantfeature in economic study.∙Trade can make everyone better-off1.Ex: trade of agricultural product and technology between Japan and America,it will break the law of PPF. It involved absolute advantages(low input) andcomparative advantage(low opportunity cost win)∙Markets are usually a good way to organize economy activity.1.Markets can balance the price.∙Government can sometime improve market outcome.∙ A country's standard of living depends on its ability to produce goods and services.∙Price rise when government print too much money.Society Faces a Short-run Tradeoff Between Inflation and UnemploymentCh2 Thinking like a economist2018年2月6日16:32Economists play two roles:1.Scientists: try to explain the world.2.Policy advisors: try to improve itBase on these two roles, they have two types of statement. Normative and positive. In my opinion, economists as a scientists tend to use positive statement, because positive statement is base on fact, and it is testable. Policy advisors use both positive and normative, because they need to give appropriate advice to improve overall standard of living. Therefore, they will come out with some normative statement to address their opinion, and use positive statement to prove their normative statement. Assumptions: because of the world is complex, there are two much variables, and its unlike to fit it in all one models. Therefore, economists need to make a simplify assumptions where most of the time only have two coordinates with two variables.Ex: Countries A and countries B are trading products X and Y.Ch3 Interdependence and the gains from trade 2018年2月6日16:28Absolute advantage:The ability to produce a good using fewer inputs than another producerMeasures the cost of a good in terms of the inputs required to produce itPrinciple of comparative advantageEach good should be produced by the individual that has the smaller opportunity cost of producing that goodComparative advantageThe ability to produce a good at a lower opportunity cost than another producer Principle of comparative advantageEach good should be produced by the individual that has the smaller opportunity cost of producing that goodnote：These idea were all following a principle that "trade" can make everyone better-off. Therefore, in a case of international trade, two countries are willing to produce product that has opportunity cost. Off course, in international market, the less opportuntiy cost, the more completitve of the prodcut or serivce.Ch 4 Supply and demand2018年2月10日19:35I.Markets and competitiona.What is a marketA market is a groups of buyers and sellers of a particular good or service.The buyers as a group determine the demand for the product, and the sellersas a group determine the supply of the product.Organized market: where has middle man set the price and time for exchangeof product. Such as agricultural commodities. Usually have fairly large valueof product being exchanged.Less organized market: Small town shops where sellers and buyers vary fromtime to time. The price usually decide by sellers but most of the time drivenby competition.II.What is competitionCompetitive market: a market in which there are so many buyers and somany sellers that each has a negligible impact on the market price.There are conditions must be satisfy to be a perfect competition market.(1) Thegoods offered for sale are all exactly the same, and (2) the buyers andsellers areso numerous that no single buyer or seller has any influence over themarketpriceII.Demanda.The demand curve: the relationship bet. Price and quantity demandedQuantity demanded: any good is the amount of the good tat buyers arewilling and able to purchase.Law of demand: the claim that, other things being equal, the quantitydemanded of a good falls when the price of the good rises.II.Market demand VS individual demandMarket demand = sum(individual demand)c.Shifts in the demand curveThe market demand curve holds other things constant, but it was not alwaysthe case. There may be something happened that will change the demandcurve. Either increase demand that will shift to the right or decrease demandthat will make curve shift to the left. Variables that will affect demand curveare. such as1)IncomeNormal good vs inferior good: demand for a good falls when incomefalls, this is called normal good. Demand for a good rises when incomefalls, this good called inferior good. Example of inferior good may be abus rides. When people's income decrease they may less likely to buy aride or take cab, they tend to ride bus, because its cheap.2)prices of related goodsComplements: when a fall in the price of one good raises the demandfor another goodSubstitutes: two goods for which anincrease in the price ofone leads toan increasein the demand for theother3)TastesWhether your like or not.4)expectationsExpectations about future may alter what you do now. if peoplethinking that in the future, their income will raise, then they tend to buymore. Therefore demand increase; in my opinion, stock market is allabout expectations, when buyer thinking stock price will go up, theywill buy more, therefore stock price may be overpriced. Other case mayhave low expectations.5)number of buyers.III.Supplya.The supply curve: The relationship bet. Price and quantity suppliedQuantity supplied: the amount of a good that sellers are willing and able tosell.Law of supply: the claim that, other things being equal, the quantity suppliedof a good rises when the price of the good rises.II.Market supply VS individual supplyMarket supply = sum(individuals supply)c.Shifts in the supply curve1.Raises quantity supplied at every price, such as a fall in the price of sugar,shifts they supply curve to the right called increase in supply.2.Change that reduces the quantity supplied at every price shifts the supplycurve to the left called decrease in supplyThere are some variables that will change supply curve.1.Input prices: This in other word, cost of production, when price of productiondecrease, producer tend to produce more product, because it become moreprofitable, if price of production increase, the producer tend to produce lessproduct, because it wasn't as much as profitable.2.Technology: Better technology can help produce more product with less cost.It follow idea of input prices.3.Expectations: 4) number of sellers\5.Supply and demand Togethera.Equilibrium: a situation in which the market price has reached the level atwhich quantity supplied equals quantity demand.Surplus: A situation in which quantity supplied >QdShortage: A situation in which Quantity supplied <Qd2.Three steps to analyzing changes in equilibrium1.We decide whether the event shifts the supply curve,the demand curve, or, in some cases, both curves.2.Second, we decide whether the curve shifts to the right or to the left.3.Third, we use the supply-and-demand diagram to compare the initial and thenew equilibrium, which shows how the shift affects the equilibrium price andquantityVI.Conclusion: How prices allocate Resource1.This chapter has analyzed supply and demand in a single market.2.One of the Ten Principles of Economics discussed in Chapter 1 is that markets areusually a good way to organize economic activity3.Similarly, prices determine who produces each good and how much is produced.I.SummaryCh5 Elasticity and its application2018年2月10日19:40i.The elasticity of demanda.The price elasticity of demand and its determinatesElasticity: a measure of the responsiveness of quantity demanded orquantity supplied to a change in one of its determinates.Price elasticity of demand: how much the quantity demanded of a goodor services responds to a change in the price of that good or services.Some factories that can effect elasticity of demandi.Availability of close substitutesii.Necessities versus luxuriesiii.Definition of the market: narrowly defined markets tend to havemore elastic demand than broadly defined market.iv.Time horizon: goods tend to have more elastic demand over longertime horizons.puting price elasticity of demandPrice elasticity of demand = percentage change in quantitydemand/ percentage change in pricec.The midpoint method: a better way to calculate percentage changesand elasticities.d.The variety of demand curvesi.Demand is elastic if price elasticity of demand is >1ii.Demand is inelastic if elasticity of demand is < 1iii.Demand has unit elasticity if price elasticity is = 1e.Total revenue and the price elasticity of demandi.For a price increase, if demand is elastic/result in decrease of totalrevenue.∙ E > 1: %change in Q > %change in P∙TR decreases: the fall in revenue from lower Q > the increasein revenue from higher Pii.For a price increase, if demand is inelastic/result in increase oftotal revenue.∙ E < 1: % change in Q < % change in P∙TR increase: the fall in revenue from lower Q < the increase inrevenue from higher P.b.Elasticity and total revenue along a linear demand curvec.Other demand elasticitiesb.The elasticity of supply∙The price elasticity of supply and its determinatesPrice elasticity of supply: How much the quantity supplied of a goodresponds to a change in the price of that goodCalculation is same as elasticity in demand.Greater price elasticity of supply if producer can easily change thequantity they can be produce.Elasticity of supply is greater in the long run than in the short run.puting the price elasticity of supplyc.The variety of supply curvesiii.Three applications of supply, demand, and elasticitya.Can good news for farming be bad news for farmers?b.Why did OPEC fail to keep the price of Oil high?c.Does drug interdiction increase or decrease drug-related crime?iv.Conclusionv.SummaryCh6 Supply,Demand,and government policies 2018年2月10日19:46i.Controls on pricesPrice ceiling: a legal maximum on the price at which a good can be soldPrice floor: A legal minimum on the price at which a good can be soldi.How price ceilings affect market outcomesThe price ceiling will either have not effect on the equilibrium or causeshortage. The shortage will led to even less supply and become moreunfair toward people who want the house to live most. Because supplymay rent to those who pay more, or who is relate to him/her. It maypotentially decrease the price of house.ii.How price floors affect market outcomesEx: minimum wage.The price floors will either have not affect on the equilibrium or causessurplus. In the case of labor market, the surplus of supply will rise theunemployment rate and threat people who needs work most.c.Evaluating price controlsii.TaxesTax incidence: the manner in which the burden of a tax is shared amongparticipants in a market.a.How taxes on sellers affect market outcomesIn a short-run, tax put on seller will decrease supply. Because the inputof the production has been increase.b.How taxes on buyers affect market outcomesIn short-run, tax put on buyers will decrease demand. In long-runc.Elasticity and tax incidenceElasticity play important role in whether consumer pay for increase intaxes or buyer pay for increase in taxes.For example, if a product is a elastic, the change in price will largelyeffect the quantity. In this case, producer pay more money for increasein tax, because they won't increase that much of money if they pay moretaxes.For a inelastic product, the change in price will have small effect on thequantity. In this case, the consumer pay more money for increase in tax,because producer will increase price on the product due to increase intax, and it only have little affect on their total revenue.iii.ConclusionCh7 consumers, producers and the efficiency of market2018年2月10日19:48In this chapter, we take up the topic of welfare economics, thestudy of how the allocation of resources affects economic well-being. We begin by examining the benefits that buyers and sellers receive from engaging in market transactions. We then examine how society can make these benefits as large as possible. Thisanalysis leads to a profound conclusion: In any market, theequilibrium of supply and demand maximizes the total benefitsreceived by all buyers and sellers combined.i.Consumer surplusa.Willingness to payWillingness to pay: The maximum amount that a buyer willpay for a good.Consumer surplus: the amount a buyer is willing to pay fora good minus the amount the buyer actually pays for it. Thismeasure benefit that consumer gain from the trading.ing the demand curve to measure consumersurplus(downward curve)Consumer surplus is the area above the price and below thedemand curve.c.How a lower price raises consumer surplusThis question is simply, let's assume that your willing tospend 100 dollars on a Broadway ticket. Compare pricebetween 50 and 25, what is ur consumer surplus according tothese price that your actually get the ticket. For a price of 50,your consumer surplus is 50, and for 25, your consumersurplus is 75. Therefore, the lower the price that your gets aproduct or service, that higher consumer surplus that youhave for that product or service.d.What does consumer surplus measure?The consumer surplus helps us judge the desirability of themarket outcome. The higher the consumer surplus = moredesire for that product or service.Overall the consumer surplus is a good tools to measure wellbeing of the society. The higher consumer surplus, the happier consumer does. But, there are one gray area for the consumer surplus, addict drug. From the standpoint of society, willingness to pay in thisinstance is not a good measure of t he buyers’ benefit, and。