econ curves

• production frontier

  • MRT

  • transforming 2 inputs

• indifference curves

  • MRS

    • tradeoffs willing to make

    • preference/ utility

• optimal choice

  • where MRS=MRT

    • (output= utility)

• suboptimal choices and institutional effects

• where MRS =/ MRT

• reservation indifference curves → legal rights

• supply and demand curve

• gains from trade

• supplier and consumer shares

• DWL

  • caused by price increases, production cuts

  • by companies with market power (non competitive)

• demand shocks

• increased demand moves curve to the right

  • further up the supplu curve → increase in prices.

• decreased demand= reverse.

• supply shocks

• reduced supply moves to curve to the left.

• and further to the demand curve (prices rise)

  • increase supply = reverse.

• wage setting & price-setting curves

• WS= what companies want to pay (minimum possible)

• PS= cost of labour in final product (real prices)

  • impact on unemployement

  • impact company profits

• WS & PS curves

  • productivity effect on curves → higher real wages and lower unemployement

  • requires coordination institutions.

• trading pollution permits between 2 companies

• trading choices

• consumption frontiers change under trade.

• borrowing choices

• consumption today vs. later

• based on interest rate and IC

• Aggregate demand (C+I)

• moves up as economy improves, down with deterioriation.

• fiscal policy and interest rate changes have similar effects moving AD line.