EC1000 Microeconomics Tutor: Jarir Ajluni jnja1@le.ac.uk Tutorial Slideshows Semester one 2005

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

EC1000 Microeconomics

Tutor: Jarir Ajlunijnja1@le.ac.uk

Tutorial SlideshowsSemester one 2005

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

EC1000 Microeconomics Class 1 Week 3

PPF & Circular Flow

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

EC1000 Microeconomics Class 1 week 3

Markets for Goods & Services

Markets for Factors of Production

Firms Sell and Households Buy

Firms Buy and Households Sell

HouseholdsFirmsThey Consume Goods &

Own Factors of productionFirms Produce Goods &

Hire Factors of production

Goods and Services Bought

Spending

Goods and Services Sold

Revenue

Labour & Capital Supplied

Income

Inputs of production needed

Wages, Rents & Profits

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

EC1000 Microeconomics Class 2 Week 5

Supply & Demand

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

S

p

Q

S1

Supply and Quantity Supplied

0

P

Q

S

p

Qq q

a b a

b

Increase in Supply: Shift in the Supply curve

Increase in Quantity Supplied: A move along the curve

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

S

D

Pe

Qe

S``

S`

qaqb

Pa

Pb

e

a

b

Changes in Supply No Change in Demand

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

S

D

D`

Pe

Qe

D``

qcqd

Pd

Pc

e

c

d

Changes in Demand No Change in Supply

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

S

D

D`

Pe

Qe

S``S`

qf qg

Ph

pg

e

Increase in Supply & Demand

f

hD``

qh

g

?

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

Increase in Demand and a Decrease in Supply

0

P

Q

S

D

D`

Pe

Qe

Pj k

Pi

eD``

?

i

S`

j

qf

S``

k

qk

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

Pe

Pn,m

PL

Increase in Supply & Decrease in Demand

0

P

Q

S

DD`

Qe

D``

S``S`

qmqn

e

L

n

m

?

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

Decrease in Supply & Demand

Pe

Pq

0

P

Q

S

DD`

Qe

D``

qpqq

ep

0

P

Q

S

D

Qe

Po

q

S`

O

S``

?

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

F.Y.I

Price Rise if :

• Demand > Supply

• Increase in Demand > Increase in Supply

• Decrease in Demand < Decrease in Supply

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

EC1000 Microeconomics Class 3 Week 7

Costs of Taxation

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

D

S

e

Consumer / Producer Surplus

Consumer Surplus

Producer Surplus

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

D

S

e

Consumer / Producer Surplus

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

D

S

e

Consumer / Producer Surplus

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

D

S

e

Consumer / Producer Surplus

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

D

S

e

Consumer / Producer Surplus

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

D

S

e

Consumer / Producer Surplus

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

D

S

e

Consumer / Producer Surplus

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

D

Se

Consumer / Producer Surplus

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

Pa

Pb

D

S

e

b

Tax & Deadweight Loss

a

Deadweight Loss

Tax

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

Pa

Pb

D

S

e

b

Deadweight Loss: Elastic Supply & Demand

a

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

D

S

e

Deadweight Loss: Inelastic supply

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

D

S

e

Deadweight Loss: Elastic supply

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

Pa

D

S

e

Deadweight Loss: Inelastic Demand

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

0

P

Q

Pe

Qe

PaD

S

e

Deadweight Loss: Elastic Demand

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

EC1000 Microeconomics Class 4 week 9

Notes in Costing

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

£

Quantity of Output

ATC

Qa

MC

AVC

FCa

Efficient Scale

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

P= C

Quantity of OutputQmax

MC = Supply

P = AR= MRa

Competitive market (price taker firm)

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

Quantity of Output

ATC

Qmax

MC

a D

MR

P= C

Pm

Profit

12.Oct.2004 EC1000 Microeconomics Class 1 week 3

F.Y.I

• MC > ATC : ATC is rising

• MC intercepts ATC at its lowest point.

• Diminishing Marginal Product causes MC to rise.