microeconomics -jmu

-        Economics: social science, a study of choice under scarcity competitive market

-        Buyers’ reservation price: $ max a consumer is willing to pay

-        Substitute: alternative good that consumer may use instead of another good

-        Dead weight loss: people are losing that value, no one is gaining any value.

-        Allocative efficiency: an economic state where production meets consumer demand and maximizes social welfare.

-        Total surplus: bonus value from the market

-        Unit of resources: given amount of natural resources, labor and capital

-        Resource cost: amount of resource used up in producing a unit of some good or service-doesn’t determine comparative advantage

-        Opportunity cost = determines comparative advantage (value of choice you give up)

-        PPB: a curve representing all the possible combinations of good that could be produced using the available resources fully and efficiently.

o   Shows what’s possible w/o trade, of possible goods produced

-        CPB: a curve representing all the possible consumption goods that could be consumed when a nation specializes in their comparative advantage food and engages in some given terms of trade w/ another nation

o   # of possible goods consumed

-        Tariff: a tax on goods imported into a country

-        Monopsony: single buyer

-        Worker surplus: $ paid to workers more than their reservation wage

-        Employer surplus: total $ value of workers to employees more than $ paid to workers

-        Price ceiling: prevents rising any higher than “it”

-        Price floor: ensures producers receive a fair income

Chapter 2- supply and demand curves

SHIFTS IN DEMAND CURVE

1. Prices of related goods

2. income of buyers

3. tastes and preferences

4. population of potential buyers

5. Expectation of future price changes

SHIFTS IN SUPPLY CURVE:

1.      # of suppliers

2.      Prices of inputs used in production

3.      Expectations of different prices in future

Chapter 4- labor markets

EFFECTS LABOR SUPPLY:

1.      Medicare

2.      Taxes

3.      Population

EFFECTS LABOR DEMAND:

1.      Capital production

2.      Price

E^dp (elasticity)

-        Edp < 1(means that price drop causes market rev to fall)

-        Edp > 1 (means that price drop causes market rev to rise)

-        Edp <1 (means that price hike causes rev to rise)

-        Edp > 1 (means that price hike causes rev to fall)

EQUATION:

(Q1-Q0)/1/2(Qd1+Qd2)

(P1-P2)/1/2(P1+P2)

CHANGES IN TOTAL MARKET REVENUE FROM A LOWER PRICE:

1.      Reduced revenue per unit sold from change in price

2.      Higher revenue from more units sold from change in price

CHANGES IN TOTAL MARKET REVENUE FROM A HIGHER PLACE:

1.      Higher revenue per unit sold from change price

2.      Lower revenue from less units sold from change price

MONOPSONY
When labor increases, you must pay higher wages on units of labor that could have been paid less. Factor cost rises for two reasons

1.      Additional cost from paying new units of labor

2.      Paying higher wages to workers that you were already employing

When labor decreases, you can lower wage on units of Labor that had been paid more. You cut more costs than just those from labor you let go

Monopsonists cut wage, lose revenue from less output but costs savings exceed from employing fewer workers and paying lower wages