Determinants
What is the difference between quantity demand and a change in demand? How does they impact the demand curve?
*be able to apply these on a graph
Quantity Demanded (QD)- change in price of good causes a change in QD
§Change in QD= movement from one point to another point along/on the curve
Demand (D)- Change in a non-price determinant (something other than price of good) causes a change in demand
§Change in Demand=entire curve shifts right or left
What is autarky?
•Country is not open to international trade
•Self-sufficient
•Closed economy
What is the definition of Utility?
If fixed costs are 100$, and variable costs are $2.50 for each unit, what is our total cost of producing 100 units?
TC=FC+VC
=100+(2.50*100)
=350
Where do we find our profit maximizing quantity?
Where MR=MC
*or where MR>=MC... never where MC>MR
§Quantity Supplied (QS)- how much made available for sale at one specific price
§QS is a point on curve, change in QS is move along supply curve
§Supply (S)- how much made available for sale at all possible prices
§S is entire curve, entire curve shifts
§shift left= decrease, shift right= increase
What is absolute advantage?
Ability to produce more, the most, or in less time
What is the equation for marginal utility?
change in total utility/change in quantity
We are selling 200 units. If our fixed costs are $100, and variable costs are $3.00 per unit, what is our AVERAGE TOTAL COST?
Method 1: ATC=AFC+AVC
AFC=FC/Q =100/200=.5
AVC=VC/Q =(3.00*200)/200=3
ATC=.5+3 =3.5
Method 2: ATC=TC/Q TC=FC+VC
FC=100 VC=3.00*200=600
TC=100+600=700
ATC=700/200=3.5
How do we know if we are making a profit?
How do we know if we are taking a loss?
*make sure you can find this information from a graph
Profit= Price>Average TOTAL cost
Loss= Price < Average TOTAL cost
the price of chocolate increased 12%. What happened to the supply and demand curves for chocolate milk?
*be able to recognize which determinant being used, and how this works on a graph
supply curve shifts to the left (decreases). Demand curve stays constant.
Determinant=input prices
Who has the comparative advantage in catching catfish?
Who has the comparative advantage in catching bass?
If quantity changes by 1 and total utility increases from 20 to 36, what is the marginal utility?
MU= change in TU/change in Q
(36-20)/1=16
If the marginal cost of producing at quantity 2 is $20, and the total cost at quantity 2 is $50, what is the total cost at quantity 1?
MC=change in TC/change in Q
MC2=TC2-TC1/Q2-Q1
50-20=30
What are the characteristics of the four market structures?
Hint:
1. Number of firms in industry/market
2. Homogenous or Differentiated product?
3. Price setting ability
4. Ease of entry into and exit out of the industry
Perfect Competition:Very many producers, Homogenous product, Price taker- individual firm has no price setting ability, the market sets the price, Easy to enter and exit
Monopolistic Competition:Many producers, Differentiated product, Price Maker- firm has ability to set the price, Fairly easy to enter and exit
Oligopoly: Few producers(tend to be large), Differentiated product depends on industry, Homogenous- copper, aluminum, Price Maker- firm has ability to set the price, Difficult to enter and exit
Monopoly: Single producer, Unique product,Price Maker- firm has ability to set the price, Barriers to entry- entry is blocked
the price of microwave popcorn decreases from $3.00 for a box of 12, to $2.50 for a box of 12. What happens to demand?
*know how to show this on a graph
Since we are dealing with only price here, the QUANTITY DEMANDED would increase with the decrease in price (law of demand). That is a movement down, along the curve.
Which country should specialize in coffee bean production?
Which country should specialize in banana production?
If marginal utility at quantity 2 is 18, and the total utility at quantity 1 is 20, what is the total utility at quantity 2?
*draw a chart if that helps!
MU2= TU2-TU1/Q2-Q1
20+18=38
When output is 50, average variable cost is 15, average fixed costs are 4, what is the total cost of production?
ATC= AFC+AVC
4+15=19 (ATC)
ATC=TC/Q
TC=ATC*Q
19*50=950
In perfect competition, how do we find the price?
*be able to find this on a graph
MR=DARP
soon, car companies will start advertising about their year-end sales events. How does that impact my demand for a new car now?
the expectation for the future price is that car prices will soon decrease. Demand right now will decrease for new cars, in order for the consumer to receive a lower price later
Who has the comparative advantage in producing potatoes?
Who has the comparative advantage in producing cabbage?
Does either producer have absolute advantage in production?
Potatoes - Barry
Cabbage - Anna
Each producer has the absolute advantage in producing one item. Barry in potatoes and Anna in cabbage.
what is the marginal utility per dollar at quantity 2 if we have 10$ to spend?
MU= change in TU/change in Q
20-15=5
MU/$=MU/price or income
5/10=.5
If the total cost of producing 90 units is $2005, and the marginal cost of the 91st unit is $15, what is the average total cost of producing 91 units?
MC=change in TC/Change in Q
TC91=TC90+MC
2005+15=2020 (total cost for producing 91 units)
2020/91= 22
In imperfect competition (monopolistic competition, monopolies, oligopolies) how do we find the price?
step 1= find the profit maximizing quantity of output
*how do we find this?
step 2= see what the price is where the demand curve intersects with the profit maximizing quantity of output