ECON 201 1st Edition Lecture 5** 1/30 Lab is Mandatory – there will be a quiz! ** 2/3 is the Midterm!** How to prepare for the exam = use the study plan option on myeconlab.com I. Elasticity Cont. A.) Graphing Elasticity - Perfect elastic demand looks like a straight line across- Inelastic demand curve is straight up and down (kind of looks like an i)B.) Application - Labor market- Wages = price- As the wages for college educated workers goesup so does a college education - Equilibrium wage - Surplus = there’s more supplied than demanded - The Quantity demanded is the amount ofworkers that will get hired- For all workers the wages went up- As wages go up they will higher less workers - By increasing the wage, demand is reduced - As the wages go up how much does demand fall? = Labor demand elasticity C.) Price Floor - A situation when the price charged is more than orless than the equilibrium price determined by marketforces of demand and supply. - At a higher price the Qd is much lower- At a higher price the Qs is much higher D.) Price Ceiling - A situation when the price charged is more than or less than the equilibrium price determined by market forces of demand and supply.These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.-II. Surplus and WelfareA.) Consumer Surplus - Reveal Preferences - The demand curve by definition is the maximum that consumers are willing to pay at anygiven price - If you know the maximum that consumers are willing and able to pay in a market place =you know the marginal benefit of consumption - How well off are consumers participating in this market place?- If you want to go buy a bottle of water they don’t adjust the prices based on how thirsty you are - Consumer Surplus = the difference between the maximum the consumers are willing and able to pay and what they actually have to pay for every unit purchased o The difference between the demand curve (willing and able to pay) and the price (actually have to pay) between everything transacted o Want an objective way to say good! How good is that price? o What they are willing to pay and what they actually have to pay o Willing to pay a high price but only have to pay the actual
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