Transcript Document
Welcome to BU-204 Macro Economics – Week 3 Seminar Overview Welcome Review of Week 2 Material Questions Unit 3 Material Questions Preview of Unit 4 End Unit 2 Material Economic Model Production Possibilities Frontier Comparative vs. Absolute Advantage Circular Flow Diagram Economic Model Questions Overview Welcome Review of Week 2 Material Questions Unit 3 Material Questions Preview of Unit 4 End Unit 3 Material Supply & Demand Curves Shifts in Supply and Demand Curves Price Ceiling and Price Floor Effect of Taxes Supply and Demand • Fundamental concepts behind economic theory • Firms supply goods • Consumers demand good • Government can influence S&D Supply • Costs constrain producers • Offer desirable goods • Number & variety of goods • Price is a key factor Supply Movement Along Supply Shift in Supply • Supply is less time reactive than demand • Suppliers face certain fixed costs (i.e. land, labor, capital etc.) • Cost of inputs • Entry or Exit of Supplier • Natural Disasters (i.e. Katrina, famine etc.) Shift in Supply Excess Supply (Surplus) Demand • Consumers search for goods • Needs vs. wants • Budget constraint • Try to maximize utility or happiness • Price is important Demand Movement Along Demand Shift in Demand • Change in consumer preferences • Change in income • Change in expectations of consumers • Price of related goods (substitutes or compliments) Shift in Demand Excess Demand (Shortage) Equilibrium Supply and Demand Exercise # 1 • Event – New auto company opens in Detroit • Market – Automobile • Supply/Demand ? • Equilibrium Price and Quantity? Supply and Demand Exercise # 2 • Event – Price of sugar increases • Market – Candy • Supply/Demand ? • Equilibrium Price and Quantity? Supply and Demand Exercise # 3 • Event – War in the Middle East • Market – Gasoline • Supply/Demand ? • Equilibrium Price and Quantity? Supply and Demand Exercise # 4 • Event – Cost of cotton increases • Market – Textile Manufacturing • Supply/Demand? • Equilibrium Price and Quantity? Supply and Demand Exercise # 5 • Event – Very trendy designer handbag manufacturer enters the market • Market – Handbags • Supply/Demand? • Equilibrium Price and Quantity? Supply and Demand Exercise # 6 • Event – Technology improves efficiency in pasta manufacturing • Market – Pasta • Supply/Demand ? • Equilibrium Price and Quantity? Supply and Demand Exercise # 7 • Event – Frozen orange crops in California • Market – Orange Juice • Supply/Demand ? • Equilibrium Price and Quantity? Unit 3 Material Supply & Demand Curves Shifts in Supply and Demand Curves Price Ceiling and Price Floor Effect of Taxes Price Ceiling Price Ceiling Price Floor Price Floor Effect of Excise Tax - Sales Effect of Excise Tax - Purchases Effect of Excise Tax - Purchases Discussion • Choose one of the following events and using the steps outlined in the document in Doc Sharing entitled “How to analyze a supply and demand problem” as a guide and the graphs provided in Doc Sharing for the Unit 3 Discussion Question, discuss the economic impact on the market for surfboards in Southern California. a. Southern California experiences unusually high temperatures, sending an unusually large number of people to its beaches. Discussion • b. Due to the large profits earned by surfboard producers, there is a significant increase in the number of producers of surfboards. c. Large sharks are reported feeding near the beaches of Southern California. d. There is a significant increase in the price of epoxy paint used to coat surfboards. • Thinking of the recreational activity that you most enjoy, can you describe some similar economic event that has resulted in a supply and demand impact on the recreation you most enjoy? Assignment • What is the effect on the market for an hour of babysitting services in Middling today, during this increased birthrate? Explain the change, if any in the price of babysitting, and in both the amount of babysitting demanded and supplied, giving your reasons for these changes Assignment Assignment • What is the effect on the market for an hour of babysitting services 14 years into the future, after the birth rate has returned to normal, by which time children born today, during this increased birthrate, will be old enough to work as babysitters? Explain the change, if any in the price of babysitting, and in both the amount of babysitting demanded and supplied, giving your reasons for these changes. Assignment Thank you for attending. I look forward to seeing you next week!