Econ 201 1st Edition Lecture 17Tuesday 3/10I. How to Study for this Final- Zero in on the context- How much or how big? Not talking about supply or demand curves. How much has to dowith elasticity- Economic problem = how to allocate resources - When talking about competitive market analysis = supply and demand shift - Sections on the final: Perfect competition, firms with perfect competition, monopoly, and externalities II. Overview A.) Perfect Competition-- Price takers: Every unit that they sell the price that they are going to receive is the market price - Will always produce where MR=MCB.) Monopolies 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.-- Downward sloping demand curve in a firm = monopoly C.) Externality -- Perfect and social marginal benefits- Consumption externality and production externality- Consumption externality = Demand shift moves - Positive because demand shifts up - Difference between the benefits that improve society and the benefits that improve the individual - How much would society like to buy or allocate in this market? - How would the private market work if it just acted on its own? - Ex: Roommates putting in communal funds for internet access- Ask about relative amount of output. - If the price were to go up and we want to know how much demand will go down = elasticity D.) Price Floor in Perfectly Competitive Markets-- If a binging price floor is imposed what is the amount of transactions that would actuallytake place in the market place? = Qd- Can’t force another party to engage in a transaction - Sellers would like to sell Qs but they can only sell at QdE.) Monopoly-- Left alone how much will this monopoly charge - Comparing consumer surplus - Do analysis of the monopoly market- Compare the monopoly output to the socially optimal level of outputF.) Difference Between Demand and Quantity Demanded-- Demand = at any give price what would consumers be willing and able to buy- Quantity Demanded = at a specific price consumers are willing and able to buy a specificamountG.) Buyers Burden and Sellers Burden -- Tax shifts supply curve back - Buyers price went up- How much is the tax? Vertical distance between the supply and demand curve- BB = Es/Es – Ed- SB = -Ed/Es –
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