微观经济学英文版.ppt

1、Microeconomics,Yan YAN,Chapter 1: The Fundamentals of Economics（A. Introduction）,You want to buy a clock in the grocery near the campus. The price is $20. A friend tells you that it is $10 in the supermarket in downtown. Would you buy the clock in the supermarket？ You want to buy a computer which is

2、 $2510. while it is $2500 in the supermarket in downtown. Wherever you buy the computer, it would return to the producer if there is any problem. Where would you buy it？,Chapter 1: The Fundamentals of Economics（A. Introduction）,1.1 Scarcity and Efficiency What is economics ? Economics is the study o

3、f how societies use scarce resources to produce valuable commodities and distribute them among different people. What is efficiency ? Efficiency denotes the most effective use of a societys resource in satisfying peoples wants and needs. In economics, we say that an economy is producing efficiently

4、when it cannot make anyone economically better off without making someone else worse off.,Chapter 1: The Fundamentals of Economics（A. Introduction）,1.2 Microeconomics and Macroeconomics What is Microeconomics ? It is concerned with the behavior of individual entities such as markets, firms and house

5、holds. Founder: Adam smith, What is Macroeconomics ? It is concerned with the overall performance of the economy. Funder: John Maynard, ,Chapter 1: The Fundamentals of Economics（A. Introduction）,1.3 The logic of economics The post hoc fallacy It involves the inference of causality. It occurs when we

6、 assume that, because one event occurs another event, the first event caused the second event. 广东省的人口死亡率为5.4，是全国最低的省份，由此我们就推定生活在广东一定有利于身体健康。 Failure to hold other things constant It refers to the failure to hold other things constant when thinking about an issue. 税率对收入的影响 Fallacy of composition When

7、 you assume that what is true for the part is also true for the whole, you are committing the fallacy of composition. 一个农场主丰收 VS. 所有农场主都丰收,Chapter 1: The Fundamentals of Economics(B. The Three problems of economic organization),There are three problems of economic organization: What commodities are

8、produced and in what quantities? How are goods produced? For whom are goods produced? There are three types of economies: Market economy Command economy Mixed economy,Chapter 1: The Fundamentals of Economics(C. Societys technological possibilities),1.4 inputs and outputs Inputs are commodities or se

9、rvices that are used to produce goods and services. Outputs are the various useful goods or services that result from the production process and are either consumed or employed in further production. 饺子的投入与产出： 投入：面粉、肉、蔬菜、调味品、包饺子的技术、擀面杖 产出：饺子,Chapter 1: The Fundamentals of Economics(C. Societys techn

10、ological possibilities),Factors of production: Another name for inputs It can be classified into three board categories: land, labor and capital Land( natural resource): represents the gift of nature to our productive process. Labor: consists of the human time spent in productionworking in automobil

11、e factories, tiling the land, teaching school, or baking pizzas. Capital resource from the durable goods of an economy, produced in order to produce yet other goods. 建造房子需要什么生产要素？,Chapter 1: The Fundamentals of Economics(C. Societys technological possibilities),1.5 The Production-Possibility Frontie

12、r Suppose the income is fixed, we can choose to produce gun or butter.(shown in the chart),Chapter 1: The Fundamentals of Economics(C. Societys technological possibilities),Chapter 1: The Fundamentals of Economics(C. Societys technological possibilities),Chapter 1: The Fundamentals of Economics(C. S

13、ocietys technological possibilities),Chapter 1: The Fundamentals of Economics(C. Societys technological possibilities),1.6 Opportunity cost The cost of the forgone alternative is the opportunity cost of the decision. How to calculate opportunity cost? Suppose the country decide to increase its gun p

14、urchase from 9000 guns at D to 12000 units at C, what is the opportunity cost of the decision? 1 million butter.,Chapter 1: The Fundamentals of Economics,Exercise the projected growth rate of the population is 20% per decade; per capita annual water consumption in 2000 was 1000gallons; per capita in

15、comes are projected to grow by 25% over the next decade; and the income elasticity of water use per capita is 0.5. you then estimate the water needs for 2010 as,Chapter 4 Application of Supply and Demand,4.4 Impact of a tax on price and quantity EXAMPLE Suppose that the government decides to discour

16、age oil consumption by levying a gasoline tax of $ 1 per gallon. Who will pay for this tax? It could be that the burden of the tax is shifted forward to the consumers, if the retail price of gasoline goes up by the fuel $ 1 of the tax. Or perhaps consumers cut back so sharply on gasoline purchase th

17、at the burden of the tax is shifted back completely onto the oil companies.,Chapter 4 Application of Supply and Demand,Chapter 5 Demand and Consumer Behavior,5.1 Choice and utility theory Utility It denotes satisfaction. More precisely, it refers to how consumers rank different goods and services. I

18、n theory of demand, we say that people maximize their utility, which means that they choose the bundle of consumption goods that they most prefer. Marginal utility The increment to your utility Law of diminishing marginal utility: It states that the amount of extra or marginal utility declines as a

19、person consumes more and more of a good.,Chapter 5 Demand and Consumer Behavior,Chapter 5 Demand and Consumer Behavior,Chapter 5 Demand and Consumer Behavior,Please assume each customer maximizes his or her utility, which means that the customer chooses the most preferred bundles of goods from what

20、is available. Is the last unit of egg have the same marginal utility with the last unit of shoes? If Good A costs twice as much as Good B, then buy Good A only when its marginal utility is at least twice as great as Good Bs marginal utility. Equimarginal priciple The fundamental condition of maximum

21、 satisfaction or utility is the equimarginal priciple. It states that a consumer having a fixed income and facing given market prices of goods will achieve maximum satisfaction or utility when the marginal utility of the last dollar spent on each good is exactly the same as the marginal utility of t

22、he last dollar spent on any other good.,Chapter 5 Demand and Consumer Behavior,Chapter 5 Demand and Consumer Behavior,Please note the price is $10 per unit,Chapter 5 Demand and Consumer Behavior,Exercise 1 Assume Income and Price of Good Y are not changed, if the price of Good X is raised, ( ) A. th

23、e utility from consuming last unit of good X will decrease. B. The marginal utility of spending the last unit of Good Y is raised. C. The marginal utility of spending the last unit of Good X is decreased. D. the interest and preference for Good X is decreased.,Chapter 5 Demand and Consumer Behavior,

24、Substitution effect It says that when the price of a good rises, consumers will tend to substitute other goods for the more expensive good in order to satisfy their desires more inexpensively. The substitution effect occurs when a higher price leads to substitution of other goods for the good whose

25、price has risen. Income effect It denotes the impact of a price change on a goods quantity demanded due to the effect of the price change on real income. High income elasticity, such as those for airline travel, indicate that the demand for these goods rises rapidly as income increases. Low income e

26、lasticity, such as for good or cigarettes, denotes a weak response of demand as income rises.,Chapter 5 Demand and Consumer Behavior,Exercise 2 When the price of a certain good is raised and this accounts a large part of the total income. That means income effect will make consumers poorer, because

27、the increasing of price ( ) A. lowered the individual buying power B. increased the individual buying power,Appendix 5: geometrical analysis of consumer equilibrium,The indifference curve,Appendix 5: geometrical analysis of consumer equilibrium,Appendix 5: geometrical analysis of consumer equilibriu

28、m,The law of substitution The scarcer a good, the greater its relative substitution value; its marginal utility rises relative to the marginal utility of the good that has become plentiful.,Appendix 5: geometrical analysis of consumer equilibrium,Appendix 5: geometrical analysis of consumer equilibr

29、ium,Appendix 5: geometrical analysis of consumer equilibrium,When income decreases by half,When price of food changes from $ 1.5 to $ 3,Appendix 5: geometrical analysis of consumer equilibrium,Exercise 3 Assume Mary has the income of $400 per month and according to the following chart please answer

30、the questions. 1) What is the price of food and entertainment per unit? 2) Which option could maximize the total utility? 3)If Mary choose option A, how can she increase the total utility? ( ) A. Consume more units of entertainment and less units of food B. consume more units of food and less units

31、of entertainment 4) If Mary choose option C, how can she increase the total utility? ( ) A. Consume more units of entertainment and less units of food B. consume more units of food and less units of entertainment,Chapter 5 Demand and Consumer Behavior,As you add together the identical demand curve o

32、f more and more people, the market demand curve becomes flatter and flatter on the same scale. Does this fact indicate that the elasticity of demand is becoming larger and larger?,Chapter 5 Demand and Consumer Behavior,5.2 Consumer surplus The gap between the total utility of a good and its total ma

33、rket value,Chapter 5 Demand and Consumer Behavior,Because consumers pay the price of the last unit for all units consumed, they enjoy a surplus of utility value that consumers receive above what they pay for a commodity. If the price is lowered, holding other things constant, the customer surplus wi

34、ll increase. If the price will raised, holding other things constant, the customer surplus will decrease.,Chapter 5 Demand and Consumer Behavior,Exercise 4: The form shows the price that different people are willing to pay for dinner in Fast Eddys Grill. 1）if the dinner is priced at $10, the consume

35、r surplus for Donovan is ( ) 2) if the dinner is priced at $9, the total consumer surplus is ( ) 3) ) if the dinner is priced at $11, who will not go to have this dinner? 4) ) if the dinner is priced at $4, the total consumer surplus is ( ) 5) the five people want to have dinner together and each on

36、e pay for his or her own dinner. What is the best price for Fast Eddys Grill ?,Chapter 5 Demand and Consumer Behavior,Producer surplus It denotes the net profit that supplier could get at a certain price. If the price falls, holding other things constant, the producer surplus will decrease. If the p

37、rice is raised, holding other things constant, the producer surplus will increase. Total surplus=Producer surplus + Customer surplus,Chapter 5 Demand and Consumer Behavior,Exercise 5: The form shows different prices for different quantity of dinner prepared in Fast Eddys Grill. 1) if he price is $10

38、, the producer surplus is ( ) 2) if the price is $13, the producer surplus is ( ) 3) if the price is $9, how many dinner could be sold out? 4) which one is the best price for Fast Eddys Grill?,Chapter 6: Production and Organization,6.1 Theory of production and marginal products Inputs: Land Labor Ca

39、pital Outputs: Product Production function: It specifies the maximum output that can be produced with a given quantity of inputs. It is defined for a given state of engineering and technical knowledge.,Chapter 6: Production and Organization,Total product Total physical product，which designates the t

40、otal amount of output produced. Marginal product The marginal product of an input is the extra output produced by 1 additional unit of that input while other inputs are held constant. Average product It equals total output divided by total units of input.,Chapter 6: Production and Organization,Chapt

41、er 6: Production and Organization,Chapter 6: Production and Organization,Law of diminishing returns It holds that we will get less and less extra output when we add additional doses of an input while holding other inputs fixed. In other words, the marginal product of each unit of input will decline

42、as the amount of that input increase, holding all other inputs constant. Returns to scale It refers to the effect of the scale increases of inputs on the quantity produced. Three important cases should be distinguished:,Chapter 6: Production and Organization,Constant returns to scale: it denotes a c

43、ase where a change in all inputs leads to a proportional change in outputs. For example, if labor, land capital and other inputs are doubled, then under constant returns to scale output would also double. Many handicraft industries (such as haircuting ) show constant returns. Increasing returns to s

44、cale (also called economies scale): arises when an increase in all inputs leads to a more-than-proportional increase in the level of output. For example, an engineering planning a small-scale chemical plant will generally find that increasing the inputs of ;labor, and materials by 10% will increase

45、the total output by more than 10%. Engneering studies have determined that many manufacturing processes enjoy modestly increasing returns to scale for plats up to the largest size used today.,Chapter 6: Production and Organization,Decreasing returns to scale: it occurs when a balanced increase of al

46、l inputs leads to a less-than-proportional increase in total output. In many processes, scaling up may eventually reach a point beyond which inefficiencies set in. these might arise because the cost of management or control become large. One case has occurred in electricity generation, where firms f

47、ound that when plants grow too large, risk of plant failure grew too large. Many productive activities involving natural resource, such as growing wine grapes or providing clean drinking water to a city, show decreasing returns to scale.,Chapter 6: Production and Organization,Short run and long run

48、Short run It is a period in which firms can adjust production by changing variable factors such as materials and labor but can not change fixed factors such as capital. Long run It is a period sufficient long that all factors including capital can be adjusted.,Chapter 6: Production and Organization,

49、Variable factors The factors which are increased in the short run. Fixed factors The factors that can not be changed in the short run because of physical condition or legal contract. Technological change Process innovation, which occurs when new engineering knowledge improves production techniques f

50、or existing products. Product innovation, whereby new or improved products are introduced in the marketplace.,Chapter 6: Production and Organization,Chapter 6: Production and Organization,6.2 Business organizations Why business organizations exist? Reason 1: business firms are specialized organizati

51、ons devoted to managing the process of production. Reason 2: raising resources for large-scale production Reason 3: to manage the production process Business firms are specialized organizations devoted to managing the process of production. Production is organized in firms because efficiency general

52、ly financial resource, and careful management and monitoring of ongoing activities.,Chapter 6: Production and Organization,The individual proprietorship These business are large in number but small in total scale. The partnership These partnership account for only a small fraction of total economic

53、activity. The reason is that partnership pose certain disadvantages that make them impractical for large business.,Chapter 6: Production and Organization,The corporation It account for a large number. They have following characteristics: The ownership is determined by the ownership of the companys c

54、ommon stock. In principle. The shareholders control the companies they own. The corporations managers and directions have the legal power to make decisions for the corporation.,Chapter 7: Analysis of Cost,7.1 Total cost: fixed and variable Fixed cost: These must be paid even if the firm produces no

55、output, and they do not change if output changes. It consist of items such as rent for factory or office space, contractual payments for equipment, interest payments on debts, salaries of tenured faculty. Variable cost: when q is zero, VC is zero. VC is part of TC that grows with output. VC are thos

56、e which vary as output changes. It includes materials required to produce output ( such as steel to produce automobiles), production workers to staff the assembly lines, power to operate factories.,Chapter 7: Analysis of Cost,Chapter 7: Analysis of Cost,Total cost: it represents the lowest total dol

57、lar expenses needed to produce each level of output q. TC rises as q rises. Fixed cost: it represents the total dollar expense that is paid out even when no output is produced; fixed cost is unaffected by any variation in the quantity output. Variable cost: it represents expense that vary with the l

58、evel of outputsuch as raw materials, wages, and fueland includes all costs that are not fixed. So, by definition TC=FC+VC,Chapter 7: Analysis of Cost,Chapter 7: Analysis of Cost,7.2 Marginal cost It denotes the extra or additional cost of producing 1 extra unit of output.,Chapter 7: Analysis of Cost

59、,Chapter 7: Analysis of Cost,7.3 Average cost Average cost: It is the total cost divided by the total number of units produced. AC=TC/q Average fixed cost: it is the fixed cost divided by q. AFC=FC/q Average variable cost: it is the variable cost divided by q. AVC=VC/q,Chapter 7: Analysis of Cost,Chapter 7: Analysis of Cost,Chapter 7: Analysis of Cost,Questions: 1. Is MC Curve the same as AC Curve ? 2. When the MC of an added unit of output is below its AC, will the AC decline or raise? 3. when MC is above AC, will the AC be increasing or decreasing? 4. at the point where MC equals AC, what i