1 / 79

ECN 3101 : MIKROEKONOMI

ECN 3101 : MIKROEKONOMI. Dr Normaz Wana Ismail Bilik E231 Jabatan Ekonomi Fakulti Ekonomi & Pengurusan UPM, 43400 Serdang Email:-nwi@econ.upm.edu.my Tel:-03-89467708. Virtual class. FEP’s website http://www.econ.upm.edu.my/2007/wmv/ click ‘ Kelas maya ’. TOPICS.

mead
Download Presentation

ECN 3101 : MIKROEKONOMI

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. ECN 3101 : MIKROEKONOMI Dr NormazWana Ismail Bilik E231 JabatanEkonomi FakultiEkonomi & Pengurusan UPM, 43400 Serdang Email:-nwi@econ.upm.edu.my Tel:-03-89467708 Chapter 1

  2. Virtual class • FEP’s website http://www.econ.upm.edu.my/2007/wmv/ • click ‘Kelasmaya’ Chapter 1

  3. Chapter 1

  4. TOPICS • Introduction: demand and Supply • Consumer Behavior • Individual demand and Market • Production and Cost • Perfect Competition • Monopoly • Monopolistic Competition • Ologopoly Chapter 1

  5. Chapter 1 Preliminaries

  6. Themes of Microeconomics • Microeconomics deals with limits • Limited budgets • Limited time • Limited ability to produce • How do we make the most of limits? • How do we allocate scarce resources? Chapter 1

  7. Themes of Microeconomics • Workers, firms and consumers must make trade-offs • Do I work or go on vacation? • Do I purchase a new car or save my money? • Do we hire more workers or buy new machinery? • How are these trade-offs best made? Chapter 1

  8. Themes of Microeconomics • Consumers • Limited incomes • Consumer theory – describes how consumers maximize their well-being, using their preferences, to make decisions about trade-offs. • How do consumers make decisions about consumption and savings? Chapter 1

  9. Themes of Microeconomics • Workers • Individuals decide when and if to enter the work-force • Trade-offs of working now or obtaining more education/training • What choices do individuals make in terms of jobs or work places? • How many hours do individuals choose to work? • Trade-off of labor and leisure Chapter 1

  10. Themes of Microeconomics • Firms • What types of products do firms produce? • Constraints on production capacity & financial resources create needs for trade-offs. • Theory of the Firm – describes how these trade-offs are best made Chapter 1

  11. Themes of Microeconomics • Prices • Trade-offs are often based on prices faced by consumers and producers • Workers made decisions based on prices for labor – wages • Firms make decisions based on wages and prices for inputs and on prices for the goods they produce-firm decide to hire more workers or purchase more machines Chapter 1

  12. Themes of Microeconomics • Prices • How are prices determined? • Centrally planned economies -governments control prices • Market economies – prices determined by interaction of market participants • Markets – collection of buyers and sellers whose interaction determines the prices of goods. Chapter 1

  13. Theories and Models • Economics is concerned with explanation of observed phenomena • Theories are used to explain observed phenomena in terms of a set of basic rules and assumptions. • The Theory of the Firm – firms max profits ( the theory that explains how firm chooses the amounts of L,K,E that they use for production and the amount of output they produce) • The Theory of Consumer Behavior Chapter 1

  14. Theories and Models • Theories are used to make predictions • Economic models are created from theories • Models are mathematical representations used to make quantitative predictions Chapter 1

  15. Theories and Models • Validating a Theory • The validity of a theory is determined by the quality of its prediction, given the assumptions. • Theories must be tested and refined • Theories are invariably imperfect – but gives much insight into observed phenomena Chapter 1

  16. Positive & Normative Analysis • Positive Analysis – statements that describe the relationship of cause and effect • Questions that deal with explanation and prediction • What will be the impact of an import quota on foreign cars? • What will be the impact of an increase in the gasoline excise tax? Chapter 1

  17. Positive & Normative Analysis • Normative Analysis – analysis examining questions of what ought to be • Often supplemented by value judgments • Should the government impose a larger gasoline tax? • Should the government decrease the tariffs on imported cars? Chapter 1

  18. Market • Collection of buyers and sellers, through their actual or potential interaction, determine the prices of products • What is Markets • Type of Market • Market Price • Why Market is important Chapter 1

  19. SUPPLY AND DEMAND • What are supply and demand? • What is the market mechanism? • What are the effects of changes in market equilibrium? • What are elasticity of supply and demand? Chapter 1

  20. Supply • If a firm supplies a good or service, then the firm • 1. Has the resources and the technology to produce it, • 2. Can profit from producing it, and • 3. Has made a definite plan to produce and sell it. • Resources and technology determine what it is possible to produce. Supply reflects a decision about which technologically feasible items to produce. • The quantity supplied of a good or service is the amount that producers plan to sell during a given time period at a particular price.

  21. S P2 P1 Q1 Q2 The Supply Curve Price ($ per unit) The Supply Curve Graphically The supply curve slopes upward demonstrating that at higher prices firms will increase output Quantity Chapter 2

  22. S S’ P1 P2 Q0 Q1 Q2 Change in Supply P • The cost of raw materials falls • Produced Q1 at P1 and Q0 at P2 • Now produce Q2 at P1 and Q1 at P2 • Supply curve shifts right to S’ Q Chapter 2

  23. The Supply Curve-summary • Change in Quantity Supplied • Movement along the curve caused by a change in price • Change in Supply • Shift of the curve caused by a change in something other than price • Change in costs of production Chapter 2

  24. Demand • If you demand something, then you • 1. Want it, • 2. Can afford it, and • 3. Have made a definite plan to buy it. • Wants are the unlimited desires or wishes people have for goods and services. Demand reflects a decision about which wants to satisfy. • The quantity demanded of a good or service is the amount that consumers plan to buy during a particular time period, and at a particular price.

  25. P2 P1 D Q2 Q1 The Demand Curve Price ($ per unit) The demand curve slopes downward demonstrating that consumers are willing to buy more at a lower price as the product becomes relatively cheaper. Quantity Chapter 2

  26. Demand • A Shift of the Demand Curve • If the price remains the same but one of the other influences on buyers’ plans changes, • demand changes and the demand curve shifts.

  27. Demand • Six main factors that change demand are • The prices of related goods • Expected future prices • Income • Expected future income • Population • Preferences

  28. The Market Mechanism • The market mechanism is the tendency in a free market for price to change until the market clears • Markets clear when quantity demanded equals quantity supplied at the prevailing price • Market Clearing price – price at which markets clear Chapter 2

  29. S Price ($ per unit) P0 D Quantity Q0 The Market Mechanism The curves intersect at equilibrium, or market- clearing, price. Quantity demanded equals quantity supplied at P0 Chapter 2

  30. ELASTICITY OF DEMAND AND SUPPLY

  31. Price Elasticity of Demand • Measures the sensitivity of quantity demanded to price changes. • It measures the percentage change in the quantity demanded of a good that results from a one percent change in price. Chapter 2

  32. Elasticities for Linear Demand Curves • For linear demand curves re-write the price elasticity of demand formula as: • Notice that the first term is related to the slope of the demand curve • The second term is the initial price divided by the initial quantity 2-32

  33. Other Demand Elasticities • Income Elasticity of Demand • Measures how much quantity demanded changes with a change in income. Chapter 2

  34. Other Demand Elasticities • Cross-Price Elasticity of Demand • Measures the percentage change in the quantity demanded of one good that results from a one percent change in the price of another good. Chapter 2

  35. Chapter 3 Consumer Behavior

  36. Introduction • How are consumer preferences used to determine demand? • How do consumers allocate income to the purchase of different goods? • How do consumers with limited income decide what to buy? Chapter 3

  37. Consumer Behavior • There are three steps involved in the study of consumer behavior • Consumer Preferences • To describe how and why people prefer one good to another • Budget Constraints • People have limited incomes Chapter 3

  38. Consumer Behavior • Given preference sand limited incomes, what amount and type of goods will be purchased? • What combination of goods will consumers buy to maximize their satisfaction? Chapter 3

  39. B 50 Clothing H E 40 A 30 D 20 G U1 10 Food 10 20 30 40 Indifference Curves: An Example • Indifferent between B, A, & D • E is preferred to U1 • U1is preferred to H & G Chapter 3

  40. Indifference Curves • We measure how a person trades one good for another using the marginal rate of substitution (MRS) • It quantifies the amount of one good a consumer will give up to obtain more of another good. • It is measured by the slope of the indifference curve. Chapter 3

  41. A Clothing 16 14 -6 12 B 10 1 -4 8 D 1 6 E -2 G 4 1 -1 1 2 Food 1 2 3 4 5 Marginal Rate of Substitution MRS = 6 MRS = 2 Chapter 3

  42. Budget Constraints • Preferences do not explain all of consumer behavior. • Budget constraints also limit an individual’s ability to consume in light of the prices they must pay for various goods and services. Chapter 3

  43. Budget Constraints • The Budget Line • Indicates all combinations of two commodities for which total money spent equals total income. • We assume only 2 goods are consumed, so we do not consider savings Chapter 3

  44. Clothing (I/PC) = 40 A B 30 10 D 20 20 E 10 G Food 0 20 40 60 80 = (I/PF) The Budget Line Chapter 3

  45. Clothing (units per week) 40 L2 L1 L3 (PF = 1/2) (PF = 1) Food (units per week) (PF = 2) 80 160 120 40 The Budget Line - Changes A decrease in the price of food to $.50 changes the slope of the budget line and rotates it outward. An increase in the price of food to $2.00 changes the slope of the budget line and rotates it inward. Chapter 3

  46. Consumer Choice • A corner solution exists if a consumer buys in extremes, and buys all of one category of good and none of another. • MRS is not necessarily equal to PA/PB Chapter 3

  47. Frozen Yogurt (cups monthly) A U1 U2 U3 B Ice Cream (cup/month) A Corner Solution A corner solution exists at point B. Chapter 3

  48. Frozen Yogurt (cups monthly) A U1 U2 U3 B Ice Cream (cup/month) A Corner Solution • if the consumer could give up more frozen yogurt for ice cream he would do so. • However, there is no more frozen yogurt to give up • At point B, the MRS of ice cream for frozen yogurt is greater than the slope of the budget line. Chapter 3

  49. Chapter 4 Individual and Market Demand

  50. Individual Demand • Price Changes • Using the figures developed in the previous chapter, the impact of a change in the price of food can be illustrated using indifference curves. • For each price change, we can determine how much of the good the individual would purchase given their budget lines and indifference curves Chapter 4

More Related