【正文】 ers should be included in a given market? ?This depends on the extent of the market – boundaries, geographical and by range of products, to be included in it ? Market for housing in New York or Indianapolis ? Market for all cameras or digital cameras 169。2020 Pearson Education, Inc. Chapter 1 22 Market Definition ?Importance of market definition ?In order to set price, make budgeting decisions, etc., panies must know ? Their petitors ? Productcharacteristic and geographic boundaries of the market ?Important for public policy decisions ? Should government allow a merger between panies in same market? 169。2020 Pearson Education, Inc. Chapter 1 23 Real Versus Nominal Prices ?Comparing prices across time requires measuring prices relative to some overall price level ?Nominal price is the absolute or current dollar price of a good or service when it is sold ?Real price is the price relative to an aggregate measure of prices or constant dollar price 169。2020 Pearson Education, Inc. Chapter 1 24 Real Versus Nominal Prices ?Consumer Price Index (CPI) is often used as a measure of aggregate prices ?Records the prices of a large market basket of goods purchased by a “typical” consumer over time ?Percent changes in CPI measure the rate of inflation 169。2020 Pearson Education, Inc. Chapter 1 25 Real Versus Nominal Prices ?Calculating Real Prices ye a rcu r r e n t ye a rcu r r e n t ye a rb a se Pr i ce N o mi n a l x C PIC PI R e a l Pr i ce ?ba s e y e a r169。2020 Pearson Education, Inc. Chapter 1 26 Real Price of College Year Nom. Price CPI Real Price 1970 $2,530 1990 $12,018 2020 $18,273 $ 3 , 5 6 9$ 1 2 , 0 1 8*1 3 0 . 73 8 . 8 ??$ 3 , 9 1 7$ 1 8 , 2 7 3*1 8 1 . 03 8 . 8 ??$ 2 ,5 3 0$ 2 ,5 3 0*3 8 .83 8 .8 ??169。2020 Pearson Education, Inc. Chapter 1 27 Real Price of Wages ?Observations ?The minimum wage has been increasing in nominal terms since 1940 ? From 1930 at $ to 2020 at $ ?The 1999 real minimum wage was no higher in 1999 than 1950 169。2020 Pearson Education, Inc. Chapter 1 28 The Minimum Wage: Figure 169。2020 Pearson Education, Inc. Chapter 1 29 Why Study Microeconomics? ?Microeconomic concepts are used by everyone to assist them in making choices as consumers and producers ?Examples show the numerous levels of microeconomic questions necessary in many decisions 169。2020 Pearson Education, Inc. Chapter 1 30 Ford SUV’s ?Built Ford Explorer in 1991, Ford Expedition in 1997 and Ford Excursion in 1999 ?In each of these cases, Ford had to consider many aspects of the economy to ensure their introduction was a sound investment 169。2020 Pearson Education, Inc. Chapter 1 31 Ford SUV’s ?Questions ?How strong is demand and how quickly will it grow? ? Must understand consumer preferences and tradeoffs ?What are the costs of manufacturing? ? Given all costs of production, how many should be produced each year? 169。2020 Pearson Education, Inc. Chapter 1 32 Ford SUV’s ?Questions (cont.) ?Ford had to develop pricing strategy and determine petitors’ reactions ?Risk analysis ? Uncertainty of future prices: gas, wages ?Organizational decisions ? Integration of all divisions of production ?Government regulation ? Emissions standards 169。2020 Pearson Education, Inc. Chapter 1 33 Emission Standards ?1970 Clean Air Act imposed emissions standards and have bee increasingly stringent ?Questions: ? What are the impacts on consumers? ? What are the impacts on producers? ? How should the standards be enforced? ? What are the benefits and costs? Chapter 2 The Basics of Supply and Demand 169。2020 Pearson Education, Inc. Chapter 1 35 Introduction ?What are supply and demand? ?What is the market mechanism? ?What are the effects of changes in market equilibrium? ?What are elasticities of supply and demand? 169。2020 Pearson Education, Inc. Chapter 1 36 Topics to Be Discussed ?How do shortrun and longrun elasticities differ? ?How do we understand and predict the effects of changing market conditions? ?What are the effects of government intervention – price controls? 169。2020 Pearson Education, Inc. Chapter 1 37 Supply and Demand ? Supply and demand analysis can: 1. Help us understand and predict how real world economic conditions affect market price and production 2. Analyze the impact of government price controls, minimum wages, price supports, and production incentives on the economy 3. Determine how taxes, subsidies, tariffs and import quotas affect consumers and producers 169。2020 Pearson Education, Inc. Chapter 1 38 Supply and Demand ?The Supply Curve ?The relationship between the quantity of a good that producers are willing to sell and the price of the good ?Measures quantity on the xaxis and price on the yaxis (P ) SS ?169。2020 Pearson Education, Inc. Chapter 1 39 The Supply Curve S The supply curve slopes upward, demonstrating that at higher prices firms will increase output The Supply Curve, Graphically Depicted Quantity Price ($ per unit) P1 Q1 P2 Q2 169。2020 Pearson Education, Inc. Chapter 1 40 The Supply Curve ?Other Variables Affecting Supply ?Costs of Production ? Labor ? Capital ? Raw Materials ?Lower costs of production allow a firm to produce more at each price and vice versa 169。2020 Pearson Education, Inc. Chapter 1 41 Change in Supply ? The cost of raw materials falls ?Produced Q1 at P1 and Q0 at P2 ?Now produce Q2 at P1 and Q1 at P2 ?Supply curve shifts right to S’ P S Q P1 P2 Q1 Q0 S’ Q2 169。2020 Pearson Education, Inc. Chapter 1 42 The Supply Curve ?Change in Quantity Supplied ?Movement along the curve caused by a change in price ?Change in Supply ?Shift of the curve caused by a change in something other than the price of the go