Transcript BU204 - Unit 2 Seminar

BU204 - Unit 3 Seminar
Welcome!
Instructions for Assignment:
Define key terms (worth a maximum of 35 points).
• a. Define key terms listed below as they are defined in the
textbook.
• b. Explain what those definitions mean to you in your own words.
• c. If graphs will help clarify your explanation, place the
appropriate graphs in your word document.
• d. Explanations that accurately reflects the learning of the Unit,
that are logical, and clearly presented with correct spelling, word
usage and grammar.
• e. Correct APA format, including Header information with your
name, course number, Section number, unit number and date,
double spaced test in 12 point Times New Roman black font
• f. References are listed at the end of your answer to the
question.
Key Terms for Unit 3:
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Demand
Supply
Cause of a Movement along a curve
Causes of a Shift of both the demand and supply curves
Equilibrium
Cause of a Surplus
Cause of a Shortage
Floor price
Ceiling price
Chapter 3 - Supply and Demand
• Demand
– Demand schedule: Table of data showing how
much of a g/s consumers will want to buy at
different prices.
– Demand curve: Graphical representation of
demand schedule.
– Quantity demanded: Actual amount consumers
are willing to buy at some specific price.
– Law of Demand: Other things equal, the higher
the price for a good, the lower the quantity
demanded.
• Movement along demand curve:
– A change in quantity demanded (due to change
in the price of the g/s).
• Shift in demand curve:
– A change in quantity demanded at any given
price (entire curve shifts).
– Shifts are caused by “non-price factors”
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Change in the price of related goods
Change in income
Change in tastes
Change in expectations
Supply
• Supply schedule: Table of data showing how
much g/s would be supplied at different
prices.
• Supply curve: Graphical representation of
supply schedule.
• Quantity supplied: Actual amount of g/s
people are willing to sell at some specific
price.
• Law of supply: Other things equal, the higher
the price for a good, the higher the quantity
supplied.
• Movement along supply curve:
– A change in quantity supplied (due to
change in the price of the g/s).
• Shift in supply curve:
– A change in quantity supplied at any given
price (entire curve shifts).
– Shifts are caused by “non-price factors”
• Change in input prices
• Change in technology
• Change in expectations
Equilibrium
• Equilibrium occurs at the unique point
where the two curves cross
– Equilibrium price
– Equilibrium quantity
Shifts in demand
Shifts in supply
• Price ceiling: A maximum price sellers are
allowed to charge for a good or service.
– Result: Shortage
• Quantity demanded is greater than quantity supplied.
• Price floor: Minimum price buyers are
required to pay for a good or service.
– Result: Surplus
• Quantity supplied is greater than quantity demanded.
Midterm Assignment:
• Question 3: As
noted in the text, European governments tend
to make greater use of price controls than does the
American government. For example, the French
government sets minimum starting yearly wages for new
hires who have completed le bac, certification roughly
equivalent to a high school diploma. The demand schedule
for new hires with le bac and the supply schedule for
similarly credentialed new job seekers are given in the
accompanying table. The price here—given in euros, the
currency used in France—is the same as the yearly wage.
• b1. In the absence of government interference, what is
the equilibrium wage and number of graduates hired per
year? (Also see the diagram) Will there be anyone
seeking a job at the equilibrium wage who will be
unable to find one— that is, will there be anyone who is
involuntarily unemployed?
• b2. What if the minimum wage is set at 40,000? (Also
see the diagram) Is there any involuntary
unemployment at this wage? If so, how much? Explain
why. (5 points)
• c. Given your answer to part b and the
information in the table, what do you think
is the relationship between the level of
involuntary unemployment and the level of
the minimum wage? Who benefits from
such a policy and who loses? What is the
missed opportunity here?
• Question 4: For the last 70 years the U.S. government
has used price supports to provide income assistance to
American farmers. At times the government has used
price floors, which it maintains by buying up the
surplus farm products. At other times, it has used target
prices, a policy by which the government gives the
farmer an amount equal to the difference between the
market price and the target price for each unit sold.
Consider the market for corn depicted in the
accompanying figure.
• a. If the government sets a price floor of $5 per bushel,
what does that mean and how will it affect supply and
demand (illustrated on the supply and demand curve)?
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How many bushels of corn are produced by the farmer?
• How many bushels of corn are purchased by consumers
and at what price?
• How many bushels of corn are purchased by the
government and at what price?
• How much does the program cost the government?
• How much revenue do corn farmers receive? (10 points)
• b. Suppose the government sets a target price of $5 per
bushel for any quantity supplied up to 1,000 bushels.
• What does that mean and how will it affect supply and
demand (illustrate on the supply and demand curve?
• How many bushels of corn are purchased by consumers
and at what price?
• How many bushels of corn are purchased by the
government, if any?
• How much does the government pay the farmer and at
what price?
• How much revenue do corn farmers receive? (10 points)
• c. Which of these programs (in parts a and
b) costs corn consumers more? Explain.
• Which program costs the government more?
Explain. What are the inefficiencies that
arise in each of these cases (parts a and b)?
(20 points)
• b1. Suppose the French government sets a
minimum yearly wage of 35,000. (Also see
the diagram) Is there any involuntary
unemployment at this wage? If so, how
much? Explain why. (5 points)