Employment discrimination and the earnings of women Manta status and the earnings of women.
Key Points
Critical Analysis Questions
StFSiRtS
Key Points
Critical Ana lysis Questions
Full-Length Micro Macro Text
Part 1 Part 1 The Economic Way of Thinking
Part 1
Part 2 Part 2 Part 2 Markets and Governments
Part 3
Core Macroeconomics
Part 4
International Economics
Core Microeconomics
Micro Part 4
Full-Length Macro Text
Part 5 Part 6
Applying the Basics: Special Topics in Economics Government Spending and Taxation
The higher value alternative that must be sacrificed is the cost of the chosen option. Economists describe this process as magical decision-making, or "thinking on the margin." The last time you went out to eat fast food, you were probably faced with a decision that highlights this type of thinking.
THE FAMILY CIRCUS,
Business firms should not worry about profits." "We should have fewer parking lots and more green space on campus." "The price of petrol is too high." These normative statements cannot be scientifically tested because their validity rests on value judgments. Ceteris ~ a r i ~ ~ § A Latin term meaning "other things constant" is used when describing the effect of one change, recognizing that if other things have changed. the) can also affect the result.
- By channeling goods and resources to those who value them most, trade creates value and increases the wealth created by a society’s resources
- Private owners can gain by employing their resources in ways that are beneficial to others, and they bear the opportunity cost of ignoring the wishes of
- Private owners have a strong incentive to care for and properly manage what they own. Will Ed regularly change the oil in his car? Will he see to it that the seats
- Private owners have an incentive to conserve for the future-particularly if the property is expected to increase in value. People have a much stronger
- Private owners have an incentive to lower the chance that their property will cause damage to the property of others. Private ownership links responsibility with
- An improvement in the rules under which the economy functions can also increase output. The legal system of a country influences the ability of people to
From this example, you can clearly see that the monetary cost of college (tuition, books, and so on) is not the only factor influencing your decision. 6Daniel L. Alban and E. Frank Stephenson, "The 'Berry Bikes' A Lesson in Private Pioperty," Idear on Ltbeft).
Gains from Trade
Economic growth is one of the most important topics in modern economics for good reason. When trading partners can spend more of their time and resources on producing the things that each is best at, they will be able to produce more together than would otherwise be possible. If someone else is willing to supply you with a good at a lower price than you can produce yourself, doesn't it make sense to trade for it and spend your time and resources producing more of the things you can produce most efficiently.
Each group will be able to produce more output with the available resources when each good or service is produced by the person with the lowest opportunity cost.
EALTH
For example, Nebraska and Florida residents can produce greater aggregate output and achieve higher income levels if Nebraska residents specialize in the production of wheat and other grain products, and Florida residents specialize in the production of oranges and other citrus products. Like the people of Nebraska and Florida, people in different countries will be better off if they specialize in the goods and services they can produce at low cost and exchange them for goods they produce at high cost. In an economy like this, self-sufficiency and small-scale production would be the norm.
However, without trade, the benefits that flow from discovering better ways of doing things will be stifled.
Human Ingenuity
An increase in the price of one will cause an increase in the demand for the other (examples are hamburgers and tacos, butter and margarine, Microsoft Xbox and Sony Play-Station, Chevrolets and Fords). The height of the demand curve measures how much buyers in the market value each unit of the good. A decrease in the price of one will cause an increase in the demand for the other.
Note that although a change in the price of butter shifts the demand curve for margarine (a change in demand), it will only cause a shift along the demand curve for butter (a change in quantity demanded).
Profits and Losses
Prices coordinate the actions of market participants. Market prices also coordinate the choices of buyers and sellers, bringing their decisions into line with each
A change in quantity demanded is caused by a change in the price of a good (usually in response to a shift in the supply curve). A change in quantity supplied is caused by a change in the price of a good (usually in response to a shift in the demand curve). Which of the following do you think would cause the current demand for beef to increase.
Demand will not only reduce the price of the product, but also the demand for and prices of the resources used to produce it.
Shortages and black markets will develop. Because the quantity of housing demanded will exceed the quantity supplied, some people who value rental housing highly
Or second, they can keep the money price constant while the quality of the good decreases. At the time, more than 200 cities, covering about 20 percent of the country's population, imposed rent controls. Because rent controls push the price of rental housing below the equilibrium level, the quantity of rental housing demanded by consumers will exceed the quantity that landlords will make available.
Initially, if the asking price is only slightly below the equilibrium value, the effect of rent control may be barely noticeable.
The quality of rental housing will deteriorate. When apart-
Nonprice methods of rationing will become more
When a tax is imposed on the seller, it shifts the supply curve up by exactly the amount of the tax-. The deadweight loss imposes a burden on both buyers and sellers over and above the actual payment of the tax. When demand is relatively inelastic, or supply is relatively elastic, buyers will bear most of the tax burden.
They also affect the magnitude of the deadweight loss caused by the tax because they determine the overall reduction in the quantity exchanged.
ENUES, A
In 1980, 19 percent of income tax was collected from the top one percent of earners. A subsidy of $20 per book paid to buyers will increase demand by the amount of the subsidy (a shift from D to D2). The benefit of the subsidy will always be diverted to the more inelastic side of the market.
One reason for this is the increase in the quantity of goods purchased as a result of the subsidy.
G IMPERF
Competitive behavior is present in both the market and public sectors. The nature of the competition and the criteria for success differ between the two sectors,
Bureau heads and agency heads compete for taxpayer dollars and the power to regulate others to achieve their bureau or agency goals. - employees in the sector compete for promotions, higher incomes and additional power, just like in the private sector. Lobbyists compete for program funding, for favorable bureaucratic decisions, and for legislation that favors the interest groups they represent—including private and government parties.
The nature of competition may vary between the two sectors, but it is present in both.
Public-sector organization can break the individual consumption-payment link
Sometimes people receive very large benefits from the government even though they don't pay much of the cost to cover them. In other cases, individuals are expected to pay dearly for a government program, even though they receive few, if any, benefits.
Scarcity imposes the aggregate consumption-payment link in both sectors
None of this is inconsistent with the economic view of the political process that we have just described. The total costs of each of the three projects exceed the benefits (as shown by the negative number in the total row at the bottom of the table), and therefore each project is counterproductive. Once again, politicians will have an incentive to respond to the positions of concentrated interests.
The distribution of benefits and costs among voters influences how the political process works.
The law of diminishing marginal utility applies: as the rate of consumption increases, the marginal utility derived from consuming additional units of a good
Price of ~ a s ~ i c i ~ y demand The percentage change in the quantity of a product demanded divided by the percentage change in price that caused the change in quantity. Price elasticity of demand shows how responsive consumers are to a change in the price of a product. The ~ l a s t i ~ i t y price of supply is the percentage change in quantity supplied divided by the percentage change in price that causes the supply response.
The price elasticity of demand measures the extent to which the quantity of a purchased product responds to a change in its price.
A consumer is currently purchasing three pairs of jeans and five T-shirts per year. The price of jeans is
Typically, the price elasticity of a product will increase as consumers have had more time to adjust to a change in its price. A 10% decrease in price that leads to a 15% increase in quantity purchased indicates a price elasticity greater than 1. A percent increase in total expenditure indicates a price elasticity greater than 1. Is the price elasticity of demand between $9 and c. Will Bobby's total revenue increase if he increases d. Calculate the price elasticity of demand between e.
Is the price elasticity of demand between $1 I and f Will Bobby's total revenue increase if he increases
More goods are preferable to fewer goods- thus, bundles on indifference curves lying farthest
Robinson Crusoe's Indifference Curve The curve generated by connecting Crusoe's "I don't care" responses separates the combinations of fish and breadfruit that he prefers to bundle A, from the combinations that he considers inferior to A. The the trade-offs he makes are only willing to ignore those that would make him neither better nor worse along the indifference curve. Crusoe's "I don't care" responses indicate that the original bundle (point A) and any alternative marked with an i are valued equally by Crusoe.
A new indifference curve for an individual can be established by starting from any point not on the original curve and following the same procedure.
Suppose Crusoe remains on the same indifference curve while continuing to increase his fish consumption relative to breadfruit. As his fish consumption increases (and his breadfruit consumption decreases), his rating of fish relative to breadfruit will decrease. The indifference curve will flatten, due to the decrease in the marginal rate of substitution of fish for breadfruit, as Crusoe consumes more fish than breadfruit.
Of course, the opposite will happen if Krusoe's consumption of breadfruit increases relative to that of fish—if he moves northwest along the same indifference curve.
Indifference curves are everywhere. We can construct an indifference curve starting from any point on
The reduction in fish consumption solely due to the substitution (price) effect, holding Crusoe's real income (utility level) constant, can be found by constructing a line tangent to Crusoe's original indifference curve (i,), and finding a slope which indicates the higher fish price. The wealth of these remaining claimants is directly affected by the success or failure of the business. The company can reduce much of the transaction costs associated with contracting by using team production.
Likewise, consumers have an incentive to monitor the quality and price of the firm's output.
Compensation and management incentives. The compensation of managers can be structured to bring the interests of managers more into harmony with those of
When a significant number of shareholders follow this course of action, the market value of the firm's stock will decline. Therefore, a firm's inputs are generally greater than the firm's economic profits (see the feature in Economics on accounting costs). Accounting earnings usually make allowances for changes in the firm's inventories and depreciation of its assets.
However, it does not take into account the opportunity cost of the firm's owners' equity, or other implicit costs.
