Scribd
Upload
14 views5 pages

Microeconomics Chp2

Uploaded by

Rafaella Heredia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
14 views5 pages

Microeconomics Chp2

Uploaded by

Rafaella Heredia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 5

Positive and Normative Analysis

Positive analysis: attempts to explain how an economic system works or to predict how it will
change over time -> predictive questions.
• What will happened?
• What it is.
Normative analysis: typically focuses on issues of social welfare, examining what will enhance or
detract from the common good -> prescriptive questions.
• What should be done?
• What it should be.

* Usually, positive analysis comes before normative.

Chp. 2 Demand and Supply Analysis


In perfectly competitive markets that have a model of price-taking behavior

A market can be characterized along three dimensions.


1. Commodity: product being bought or sold
2. Geography: where the product is being sold
3. Time: how long the transactions take

La existencia de un mercado no implica transacciones -> tiene que haber un acuerdo entre las
dos partes
Demand Curves…
Market demand curve: shows the quantity of goods that consumers are willing to buy at
different prices. Only focuses only the price-quantity relationship.
• Derived demand: Demand for a good that is derived from the production and sale of
other goods.
Ex: Sugar used to make cookies. The demand for sugar is in part due to the
demand for the cookies.
• Direct demand: Demand for a good that comes from the desire of buyers to directly
consume the good itself.
Ex: The demand for sugar itself – when it’s bought as sugar in a supermarket.
• Tells us the highest price that the “market will bear” for a given quantity or supply of
output.
• All other factors that could affect the quantity demanded are fixed besides price.

LAW OF DEMAND
Inverse relationship between quantity demanded and price.
Quantity ↑ Price ↓
*Luxury goods don’t violate this law because perception & price change, not just price.
Supply Curves…
Market supply curve: shows the total quantity of goods that suppliers are willing to sell at
different prices. Only focuses only the price-quantity relationship.
• Is constructed from the ∑ of supply curves of all individual suppliers.
• All other factors that could affect the quantity supplied are fixed besides price.
Factors of production like labor, raw materials used to produce the good are
fixed.
The prices of other goods that sellers produce could also affect the quantity
supplied. (For example, the supply of natural gas goes up when the price of oil
goes up, because higher oil prices spur more oil production, and natural gas is a
by-product of oil)

LAW OF SUPPLY
Positive relationship between quantity supplied and price.
Quantity ↑ Price ↑

En la vida real, los que ese observa no es la curva de demand ni oferta porque en una
investigación de mercado solo se ve un punto.
Market Equilibrium
Quantity demanded = Quantity supplied
• Equilibrium A point at which there is no tendency for the market price to change as long as
exogenous variables remain unchanged. (No hay incentivos para cambiar de
precios/cantidad)
• Excess supply A situation in which the quantity supplied at a given price exceeds the
quantity demanded.
• Excess demand A situation in which the quantity demanded at a given price exceeds the
quantity supplied.
Shifts in Supply & Demand
Exploring how a change in an exogenous variable changes the equilibrium values of the
endogenous variables.
One Changes, One Stays the Same:
1. ↑ demand + unchanged supply curve = ↑ equilibrium price and ↑ equilibrium quantity.
2. ↓ in supply + unchanged demand curve = ↑equilibrium price and ↓ equilibrium quantity.
3. ↓ in demand + unchanged supply curve = ↓ equilibrium price and ↓ equilibrium quantity.
4. ↑in supply + unchanged demand curve = ↓ equilibrium price and ↑equilibrium quantity.

In both:

Supply and Demand for Computers, 1975–2018


The pattern of prices in Figure 2.13, as well as rapid growth in quantities over the same
period, can be explained by rightward shifts over time in both the demand and supply curves
for computers. The supply curve shifted from S1975 to S2018, while the demand curve shifted from
D1975 to D2018.
Price Elasticity of Demand (Cambios relativos)
A measure of the rate of percentage change of quantity demanded with respect to price,
holding all other determinants of demand constant. Sensitivity of quantity (demanded) to price.
• Can be seen on market level or product/ brand level.
• Generally (-) because inverse relationship in the demand curve & NO ES LA PENDIENTE
∆𝑄
o Pendiente (cambios absolutos) = 𝑃
• Al medir en %, permite no tener unidades, solo #’s, permite comparar elasticidad precio
de la demanda con otros productos
• La sensabilidad de los consumidores, cuyo comportamiento se refleja en la demanda, se
mide con la elasticidad.
∆𝑄
%∆ 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑄 × 100 ∆𝑄 𝑃
∈𝑄,𝑃 = → → ∙
%∆ 𝑃𝑟𝑖𝑐𝑒 ∆𝑃 ∆𝑃 𝑄
× 100
𝑝
P = $10
Q = 50 units −5 10
∙ = −0.5
∆P = 2 2 50
∆Q = -5
Determinants
• Availability of substitutes
• Necessity v. luxury
• Market definition (Product A is not the same as product b)
• Time (short or long term is more elastic)
• How much of a product is usually bought (Larger products are more elastic (higher price =
higher attention to detail)
• Importancia del presupeusto del consumidor

Elástico Elasticidad unitaria Inelástico

∞ -1 0
𝑄𝑃 ∆𝑃
= −
𝑄 𝑝

Perfectly Inelastic Demand (0) Inelastic Demand (-1 to 0)


Quantity demanded is completely insensitive Quantity demanded is relatively insensitive to
to price. La cantidad demandada no cambia. price.

Unitary Elastic Demand (-1) Elastic Demand (-1 to ∞)


Percentage increase in quantity demanded is Quantity demanded is relatively sensitive to
equal to percentage decrease in price. price.

Perfectly Elastic Demand (∞)


Any increase in price results in quantity demanded decreasing to zero, and any decrease in
price results in quantity demanded increasing to infinity.
Linear Demand Curve: 𝑄 = 𝑎 − 𝑏𝑃 a & b son constantes (+)
b es la pendiente

𝑎 1
Inverse Demand Curve: 𝑃 = −𝑏𝑄 a/b is the choke price → price where QD = 0
𝑏
𝑃
∈𝑄,𝑃 = −𝑏 ∙
𝑄
Constant Elasticity Demand Curve: 𝑄 = 𝑎𝑃−𝑏 b = price elasticity

• El calculo es local porque se neceseita una P y una Q


Income Elasticity of Demand
¿De qué depende la demanda? Para entender que nomas se puede calcular.
The ratio of the percentage change of quantity demanded to the percentage change of income,
holding price and all other determinants of demand constant.
∆𝑄
∆ 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑄 × 100 ∆𝑄 𝐼
∈𝑄,𝐼 = → → ∙
∆ 𝐼𝑛𝑐𝑜𝑚𝑒 ∆𝐼 ∆𝐼 𝑄
× 100
𝐼
Positive (≥ 0) = QD ↑ when Income ↑ (bienes normales)
Negative (≤ 0) = QD ↓ when Income ↑ (bienes inferiores)

• Mientras mayor es el valor (absoluto), mayor sensibilidad de la cantidad demandada


Cross-Price Elasticity of Demand
The ratio of the percentage change of the quantity of one good demanded with respect to the
percentage change in the price of another good.
• QD product I v. Price Change of product J
∆𝑄𝑖
∆ 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑝𝑟𝑜𝑑𝑢𝑐𝑡 𝐼 𝑄𝑖 × 100 ∆𝑄𝑖 𝑃𝑗
∈𝑄𝑖 ,𝑃𝑗 = → → ∙
∆ 𝑃𝑟𝑖𝑐𝑒 𝑝𝑟𝑜𝑑𝑢𝑐𝑡 𝐽 ∆𝑃𝑗 ∆𝑃𝑗 𝑄𝑖
𝑃𝑗 × 100
Positive (≥ 0) = Qi ↑ when PJ ↑ and are called demand substitutes
Negative (≤ 0) = QD ↓ when PJ ↑are called demand complements
Price Elasticity of Supply
The percentage change in quantity supplied for each percent change in price, holding all other
determinants of supply constant.
• Same logic as demand
• Generally (+)
• La oferta en el corto plazo es menos sensible por la capacidad de producción. A largo
plazo es más sensibe.
-------------------------------------------------------------------------------------------------------------------------------
 Both can be seen in long-run and short-run terms.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy