Results 1 to 15 of 15

Thread: Micro-economic Lessons

  1. #1

    Join Date
    Dec 2004
    Location
    Florida
    TIM
    ILE 8w9
    Posts
    3,249
    Mentioned
    8 Post(s)
    Tagged
    0 Thread(s)

    Default Micro-economic Lessons

    There is little debate with concern with micro-economics. Nevertheless it is foundational to know this part of economics.

    This is part 00

    I will post lessons later on.
    "Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows not victory nor defeat."
    --Theodore Roosevelt

    "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover."
    -- Mark Twain

    "Man who stand on hill with mouth open will wait long time for roast duck to drop in."
    -- Confucius

  2. #2
    Hot Message FDG's Avatar
    Join Date
    Nov 2005
    Location
    Freiburg im Breisgau
    TIM
    ENTj
    Posts
    15,632
    Mentioned
    157 Post(s)
    Tagged
    0 Thread(s)

    Default

    Lol. No thank you. Most microeconomics is common sense, complicated by a large amount of equations.
    Last edited by FDG; 07-02-2010 at 07:58 AM.
    Obsequium amicos, veritas odium parit

  3. #3

    Join Date
    Dec 2004
    Location
    Florida
    TIM
    ILE 8w9
    Posts
    3,249
    Mentioned
    8 Post(s)
    Tagged
    0 Thread(s)

    Default

    Quote Originally Posted by FDG View Post
    Most microeconomics is common sense, complicated by a large amount of equations.
    Yes, this is true.

    I am going to do it anyway.
    "Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows not victory nor defeat."
    --Theodore Roosevelt

    "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover."
    -- Mark Twain

    "Man who stand on hill with mouth open will wait long time for roast duck to drop in."
    -- Confucius

  4. #4

    Join Date
    Dec 2004
    Location
    Florida
    TIM
    ILE 8w9
    Posts
    3,249
    Mentioned
    8 Post(s)
    Tagged
    0 Thread(s)

    Default

    Microeconomics lessons


    Part 1 section 1 subsection 1

    -prices determine allocations

    Law of Demand: Consumers demand more of a good the lower the price, holding everything else constant.

    The law of demand is considered the most empirical finding in economics.

    Demand curves generally slope downward. A mathematical relationship can be shown in a demand function.

    It can be shown like this:
    Q=D(abc,Y)

    Whereas abc is the variants determining demand, Y is income, Q is quantity, and D is demand.
    "Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows not victory nor defeat."
    --Theodore Roosevelt

    "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover."
    -- Mark Twain

    "Man who stand on hill with mouth open will wait long time for roast duck to drop in."
    -- Confucius

  5. #5
    Executor MatthewZ's Avatar
    Join Date
    Nov 2009
    TIM
    Ne-LII
    Posts
    800
    Mentioned
    3 Post(s)
    Tagged
    0 Thread(s)

    Default

    And, by consequence, consumers demand less of a good the higher the price.

  6. #6

    Join Date
    Dec 2004
    Location
    Florida
    TIM
    ILE 8w9
    Posts
    3,249
    Mentioned
    8 Post(s)
    Tagged
    0 Thread(s)

    Default

    Part 1 section 1 subsection 2

    The supply curve generally slopes upward.

    Mathematically the supply curve can be expressed like this:

    Q=S(Sa, Sb)

    Where as Q is quantity, S is supply, and Sa and Sb are variants (such as prices) determining supply.

    Subsection 3

    Market equilibrium is a situation where no consumer wants to change his or her behavior.

    We can use algebra to determine equilibrium. Once the determents of the supply equation and demand equation are broken down, we set both of them equal to get the equilibrium point. So:

    Supply equation:

    Q=S(Sa, Sb)

    Q=178+40P-60Ph

    If Ph represents a price of a substitute, say, $1.50, then we get:

    Q=88+40P


    Demand equation:

    Q=D(abc,Y)

    With prices algebraically factored:

    Q=286-20P


    To find equilibrium, we set the demand and supply equations equal:

    286-(20P)=88+(40P)

    If the price is $3.30, then our equilibrium quantity is 220.
    "Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows not victory nor defeat."
    --Theodore Roosevelt

    "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover."
    -- Mark Twain

    "Man who stand on hill with mouth open will wait long time for roast duck to drop in."
    -- Confucius

  7. #7
    norph's Avatar
    Join Date
    Mar 2010
    TIM
    NotINotNNotFNotj
    Posts
    186
    Mentioned
    1 Post(s)
    Tagged
    0 Thread(s)

    Default

    I don't like equations and your post is hard to read and very boring so I challenge you to a duel.

  8. #8

    Join Date
    Dec 2004
    Location
    Florida
    TIM
    ILE 8w9
    Posts
    3,249
    Mentioned
    8 Post(s)
    Tagged
    0 Thread(s)

    Default

    What I have demonstrated so far is very simple economics. I am showing it in algebraic form, that's all. Most of the time, in the real world, you will not use this.
    "Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows not victory nor defeat."
    --Theodore Roosevelt

    "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover."
    -- Mark Twain

    "Man who stand on hill with mouth open will wait long time for roast duck to drop in."
    -- Confucius

  9. #9
    norph's Avatar
    Join Date
    Mar 2010
    TIM
    NotINotNNotFNotj
    Posts
    186
    Mentioned
    1 Post(s)
    Tagged
    0 Thread(s)

    Default

    Quote Originally Posted by Jimbean View Post
    What I have demonstrated so far is very simple economics. I am showing it in algebraic form, that's all. Most of the time, in the real world, you will not use this.
    It is not real economics. Real economics involves the distribution of goods and services.

  10. #10

    Join Date
    Dec 2004
    Location
    Florida
    TIM
    ILE 8w9
    Posts
    3,249
    Mentioned
    8 Post(s)
    Tagged
    0 Thread(s)

    Default

    Quote Originally Posted by norph View Post
    It is not real economics. Real economics involves the distribution of goods and services.
    Which can be demonstrated by doing what I am doing.
    "Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows not victory nor defeat."
    --Theodore Roosevelt

    "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover."
    -- Mark Twain

    "Man who stand on hill with mouth open will wait long time for roast duck to drop in."
    -- Confucius

  11. #11
    the flying pig Capitalist Pig's Avatar
    Join Date
    Jul 2006
    Location
    Colorado, USA
    Posts
    5,935
    Mentioned
    122 Post(s)
    Tagged
    7 Thread(s)

    Default

    i vote for a jimbean youtube channel

    i'd subscribe to you

  12. #12

    Join Date
    Dec 2004
    Location
    Florida
    TIM
    ILE 8w9
    Posts
    3,249
    Mentioned
    8 Post(s)
    Tagged
    0 Thread(s)

    Default

    Part 1 section 1 subsection 4

    An event can cause a shift in what equilibrium is, such as a price change of a substitute. Governments or those who act like government (i.e. mafia) can also cause chances in equilibrium. Taxes cause a decrease in economic activity, but if the tax is then used to subsidize, the subsidy will increase economic activity in that certain area that it is used. Any government-like institution can change the free market dynamic in this way.

    Governments can also set by law price controls. When a price control sets a price that is below the market equilibrium, the result is a shortage. The shortage is due to the excess demand that consumers have because they would otherwise be willing to pay a higher price and a supply shortage because the supplier wants to produce less at the set price.

    Let’s look at it graphically:

    http://economics.fundamentalfinance....ce-ceiling.JPG

    This to me is self explanatory, but if anyone wants me to explain this I will.

    There are also price floors (i.e. minimum wage laws) that by law forces what an employer must pay for labor. As a result an employer is less willing to hire extra workers or give them more hours.

    Shown graphically here:

    http://img.sparknotes.com/figures/0/...073a/floor.gif

    Where Qd is quantity demanded and Qs is quantity supplied.
    "Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows not victory nor defeat."
    --Theodore Roosevelt

    "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover."
    -- Mark Twain

    "Man who stand on hill with mouth open will wait long time for roast duck to drop in."
    -- Confucius

  13. #13
    Hot Message FDG's Avatar
    Join Date
    Nov 2005
    Location
    Freiburg im Breisgau
    TIM
    ENTj
    Posts
    15,632
    Mentioned
    157 Post(s)
    Tagged
    0 Thread(s)

    Default

    Okay, that's a bit simplicistic imho. Price caps affect the market with a large net loss of welfare as long as:

    - the market is perfectly competitive (unrealistic assumption)
    - the elasticity of demand is equal to 1

    whenever the market is, say, an oligopoly (esp. with a leader-follower setting) or a monopoly, price caps can lead to a more efficient equilibrium, because firms aren't price-takers, thus they will set the price which will maximize their own revenues largely irrespective of consumer preferences. Let's also notice how monopolies and oligopolies are often found in markets with extremely inelastic demand, which means that a carefully tailored policy of price control might increase total welfare. Basically, elasticity of demand measures the slope of the demand curve, thus the higher its absolute value, the smaller the area of the triangle DWL will be (for slope -> infinity, area -> 0).

    (more precisely: suppose a perfectly competitive market as "ideal world", the loss of welfare might be lower in a government-intervention equilibrium compared to the loss of welfare in an oligopolist or monopolist equilibrium)
    Obsequium amicos, veritas odium parit

  14. #14

    Join Date
    Dec 2004
    Location
    Florida
    TIM
    ILE 8w9
    Posts
    3,249
    Mentioned
    8 Post(s)
    Tagged
    0 Thread(s)

    Default

    Quote Originally Posted by FDG View Post
    Okay, that's a bit simplicistic imho. Price caps affect the market with a large net loss of welfare as long as:

    - the market is perfectly competitive (unrealistic assumption)
    - the elasticity of demand is equal to 1

    whenever the market is, say, an oligopoly (esp. with a leader-follower setting) or a monopoly, price caps can lead to a more efficient equilibrium, because firms aren't price-takers, thus they will set the price which will maximize their own revenues largely irrespective of consumer preferences. Let's also notice how monopolies and oligopolies are often found in markets with extremely inelastic demand, which means that a carefully tailored policy of price control might increase total welfare. Basically, elasticity of demand measures the slope of the demand curve, thus the higher its absolute value, the smaller the area of the triangle DWL will be (for slope -> infinity, area -> 0).

    (more precisely: suppose a perfectly competitive market as "ideal world", the loss of welfare might be lower in a government-intervention equilibrium compared to the loss of welfare in an oligopolist or monopolist equilibrium)

    Yeah, I was going to get to that later. I wanted to start with this concept for now.
    Last edited by Jimbean; 07-06-2010 at 03:00 PM.
    "Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows not victory nor defeat."
    --Theodore Roosevelt

    "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover."
    -- Mark Twain

    "Man who stand on hill with mouth open will wait long time for roast duck to drop in."
    -- Confucius

  15. #15

    Join Date
    Dec 2004
    Location
    Florida
    TIM
    ILE 8w9
    Posts
    3,249
    Mentioned
    8 Post(s)
    Tagged
    0 Thread(s)

    Default

    Part 1 section 2 subsection 1


    Elasticity: The percentage change in a variable in response to a given percentage change in another variable.

    A good can be inelastic, elastic, or unit elastic. Basically, an inelastic good means that your consumption of that good is not as responsive to the change in price (1>ε) (such as internet access, gasoline, etc.). Consumption of an elastic good however is more responsive then the price (1<ε) (such as something you will only buy “on sale,” such as green vegetables, good beef, etc.) A unit Elastic (1) good is equal response in demand and price.

    Price elasticity of demand (ε):

    ε=%change in quantity demanded/% change in price. Or: (ΔQ/Q) / (Δp/p) = ε

    (this is like finding a slope of a line in basic algebra)

    A common misconception of demonstrating elasticity on a graph is often taught that the slope of the demand line (or curve) is the determining factor, which it is not. It is which side of the demand line or curve is relative to the center determines the elasticity of the good

    This graph demonstrates the point:
    http://www2.hawaii.edu/~rpeterso/graph_r.gif


    This might be a choppy explanation to you folks. If it is, post your question(s) on this thread, and I will answer.
    "Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows not victory nor defeat."
    --Theodore Roosevelt

    "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover."
    -- Mark Twain

    "Man who stand on hill with mouth open will wait long time for roast duck to drop in."
    -- Confucius

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •