briefly describes the Learning Objectives (NOT Appendix part) for Chapter 5. Externalities, Environmental Policy, and Public Goods; Chapter 6. Elasticity: The Responsiveness of Demand and Supply and the lecture notes for Supply/Demand and Elasticity located below:
Supply/Demand and Elastic
Externalities, Environmental Policy, and Public Goods
ElasticityThe Responsiveness of Demand and Supply
Chapter 3/6 Notes
A Supply/Demand Review and Elasticity
Production Possibilities Curve
the PPC curve
What makes it move in or out?
An increase in the economy’s resource base would expand our ability to produce goods and services
Advancements in technology
An improvement in the rules under which the economy can increase output; like changes in taxes or tariffs.
By working harder and giving up current leisure we could increase our production of goods and services
Change in Income
Remember opportunity costs.
What is profit/loss?
Demand curve slopes down to the right; price declines-more purchased and vice versa.
the demand curve
Movement along the curve is change in quantity demanded.
Change in demand is movement in/out of the entire curve:
changes in consumer income
change in number of consumers in the market
change in price of related good
change in expectation
changes in taste/preferences.
Supply curve slopes up to the right;price declines-less produced and vice versa.
the supply curve
Movement along the curve is change in quantity supplied.
Change in supply is movement in/out of the entire curve:
change in resource prices
changes in technology
elements of nature and political disruptions
changes in taxes.
Equilibrium is where supply and demand meet.
Elasticity is how much demand/supply change given price increases/decreases. Meth is highly inelastic-very steep. Big price jump-almost same amount purchased. Something very elastic-very flat curve. Small price increase is big drop in demand.
an elastic curve
an inelastic curve
Invisible hand says we engage in activities promoting well-being of society.
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