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Berkeley ECON 100A - Applying the Supply-and-Demand Model

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Chapter 3Slide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedChapter 3Applying the Supply-and-Demand ModelJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.01a How the Effect of a Supply Shock Depends on the Shape of the Demand Curvep, $ per kg(a)215 2201760Q, Million kg of pork per year3.553.30S1D1S2e1e2Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.01b How the Effect of a Supply Shock Depends on the Shape of the Demand Curve(b)p, $ per kg2201760Q, Million kg of pork per year3.6753.30S1S2D2e1e2Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.01c How the Effect of a Supply Shock Depends on the Shape of the Demand Curve(c)p, $ per kg2202051760Q, Million kg of pork per year3.30S1S2D3e1e2Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.02 Elasticity Along the Pork Demand Curvep, $ per kga/2 = 143a/5 = 57.2Da = 286220Q, Million kg of pork per year011.44a/b = 14.303.30a/(2b) = 7.15Elastic:  < –1 = –4Unitary:  = –1 = – 0.3Inelastic: 0 >  > –1PerfectlyinelasticPerfectly elasticJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.03a Vertical and Horizontal Demand Curvesp, Price per unit(a) Perfectly Elastic DemandQ, Units pertime periodp*Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.03b Vertical and Horizontal Demand Curves(b) Perfectly Inelastic Demandp, Price per unitQ * Q, Units pertime periodJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.03c Vertical and Horizontal Demand Curves(c) Individual’s Demand for Insulin*p, Price ofinsulin dose* Q, Insulindoses per daypQJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.04 Elasticity Along the Pork Supply Curvep, $ per kg220 260176S ≈ 0.71 ≈ 0.66 ≈ 0.6 ≈ 0.5300Q, Million kg of pork per year03.302.204.305.30Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.05 Effect of a $1.05 Specific Tax on the Pork Market Collected from Producersp, $ per kgQ2 = 206 Q1 = 220176T = $216.3 millionQ, Million kg of pork per year0p2 = 4.00p1 = 3.30p2 –  = 2.95 = $1.05S1e1e2S2DJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedSolved Problem 3.1p, Price per unitQ, Quantity per time periodQ1Q2p1p2 = p1 + 1S1S2e1e2D = $1Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights Reserved = $1.05 = 2.95Figure 3.06 Effect of a $1.05 Specific Tax on Pork Collected from Consumersp, $ per kgQ2 = 206 Q1 = 220176 = $216.3 millionQ, Million kg of pork per year0p2 = 4.00p1 = 3.30p2 –  = $1.05Wedge, D1D2e1e2STJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.07 A Comparison of an Ad Valorem and a Specific Tax on Porkp, $ per kgQ2 = 206 Q1 = 220176T = $216.3 millionQ, Million kg of pork per year0p2 = 4.00p1 = 3.30p2 –  = 2.95e1e2DaDsSDJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedProblem Solved 3.2p, Price per unitQ* Q, Quantity per time period(1 –


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Berkeley ECON 100A - Applying the Supply-and-Demand Model

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