Transcript Review Class One

Review Class One
Key points of Chapter 0
• Marginal analysis:
•Relations between
•Total magnitudes,
•Average magnitudes, and
•Marginal magnitudes.
Key points of Chapter 0
1, MM is the slope of the TM curve;
2, AM is the slope of the ray starting from
the origin to the point at the TM curve;
(These two points are the geometrical
definition.)
Key points of Chapter 0
3, TM increases (decreases)
if and only if
MM > 0 ( MM < 0 );
4, If TM is at maximum or
minimum,
then MM = 0;
Key points of Chapter 0
5, AM increases (decreases)
if and only if
MM > AM ( MM < AM );
6, If AM is at maximum or minimum,
then MM = AM,
or
MM cuts AM at the later’s
maximum or minimum.
Key points of Chapter 0
• Warning:
• 3 and 5 represent the sufficient
and necessary conditions.
• 4 and 6 represent only the
sufficient conditions.
• Analysis of your home work
Key points of Chapter 1
• Welfare economics:
• the study of how the allocation
of resources affects economic
well-being
• Two very important definitions
about the welfare economics:
Key points of Chapter 1
A Pareto improvement is a change to make some
people better off without hurting anybody else.
•Pareto efficiency or
Pareto optimal :
• if there is already no way to make any
more Pareto improvement.
Key points of Chapter 1
• Pareto efficiency or Pareto
optimal
• Requires:
exchange efficiency,
production efficiency and
product mix efficiency.
Key points of Chapter 1
• Case One: Partial Equilibrium
• Tool: Surplus, which measures
the welfare of the actors.
• Consumer surplus:
• a buyer’s willingness to pay minus
the amount the buyer actually pays.
Key points of Chapter 1
• Geometrically, the area below the
demand curve and above the price
measures the consumer surplus in a
market.
• Producer surplus
• the amount a seller is paid for a
product minus the seller’s variable
cost.
Key points of Chapter 1
• Geometrically, The area below
the price and above the supply
curve measures the producer
surplus in a market.
• Total surplus=consumer surplus
+producer surplus+(….)
• Central rule: the market reaches the
Pareto Efficiency if the total surplus
reaches its maximum.
注意
• 前页的的核心法则已经改动，原来的表述是一
个充要条件，但是并不成立。
• 从排队的问题可以发现，一个状态是帕累托最
优，然而它的福利可以不是最大值
• 但是反过来，如果这个状态已经达到福利的最
大值，则可以推导出这个状态是帕累托最优。
• 总结来说，判断帕累托最优还是要从定义下手，
看是否有帕累托改进的可能。
Key points of Chapter 1
• Competitive market
• Monopoly
• Rent control
Key points of Chapter 1
• Case Two: Production
• Tool: Production Possibility Frontier,
which symbolizes the maximum level of
productivity.
• Central rule: the economy reaches the
production efficiency if and only if it is
on the PPF.
Key points of Chapter 1
• Fundamental theorems of welfare
economics:
• Every competitive economy is Pareto
efficiency.
• Every Pareto efficient resource
allocation can be attained through a
competitive market mechanism, with
the appropriate initial redistributions.
Key points of Chapter 1
• Warning:
• The above two definitions describe
the Property of allocation of
resources, but they are not
concerned explicitly with inequality.
• There are many possible states of
Pareto Efficiency.
Key points of Chapter 2
• Two important definitions:
• The budget set consists of all
bundles that are affordable at
the given prices and income.
• The budget line consists of all
bundles that just exhaust the
consumer’s income.
Key points of Chapter 2
• Slope of the budget line
measures the opportunity cost.
• Graph of the lump sum
tax.( Remember the lump sum tax is imposed on the
behavior of the consumption.)
• Subsidies
The end
Thank you