Acceptable logotypeECO 2030. Principles of Economics-Price Theory

The Market Mechanism

Markets

  1. What is a market?
  2. Competitive markets

Demand

  1. Utility, marginal utility
  2. Law of demand - diminishing marginal returns and different reservation prices
  3. Demand schedule
  4. Demand curve
  5. Market Demand

Changes in Demand

  1. Income - normal and inferior goods
  2. Prices of related goods - substitutes and complements
  3. Tastes and preferences
  4. Expectations
  5. Number of buyers

Supply

  1. Law of supply
  2. Supply schedule
  3. Supply curve*
  4. Market supply

Theory (Chapter 13: 276-278)

  1. Profit: Π = TR - TC
  2. Production function
  3. Marginal product of labor: MPL = ΔQ/ΔL
  4. MC = ΔTC/ΔQ = ΔVC/ΔQ = W ΔL/ΔQ = W/MPL

Changes in Supply

  1. Input prices
  2. Technology
  3. Expectations
  4. Number of sellers

Market Equilibrium

  1. Surplus and shortage
  2. Equilibrium price and quantity
  3. Demand shifts
  4. Supply shifts

Labor Markets (Chapter 18: 393-406)

  1. Derived demand (p, MPL)
  2. Labor-leisure tradeoff
  3. Demand shifts
  4. Supply shifts