【正文】 s ?Perfectly petitive markets ?Because of the large number of buyers and sellers, no individual buyer or seller can influence the price ? Example: Most agricultural markets ?Fierce petition among firms can create a petitive market 169。 Normative Analysis ?Normative Analysis – analysis examining questions of what ought to be ?Often supplemented by value judgments ? Should the government impose a larger gasoline tax? ? Should the government decrease the tariffs on imported cars? 169。2020 Pearson Education, Inc. Chapter 1 12 Theories and Models ?Validating a Theory ?The validity of a theory is determined by the quality of its prediction, given the assumptions ?Theories must be tested and refined ?Theories are invariably imperfect – but gives much insight into observed phenomena 169。2020 Pearson Education, Inc. Chapter 1 8 Themes of Microeconomics ?Prices ?Tradeoffs are often based on prices faced by consumers and producers ?Workers make decisions based on prices for labor – wages ?Firms make decisions based on wages and prices for inputs and on prices for the goods they produce 169。2020 Pearson Education, Inc. Chapter 1 4 Themes of Microeconomics ?Workers, firms and consumers must make tradeoffs ?Do I work or go on vacation? ?Do I purchase a new car or save my money? ?Do we hire more workers or buy new machinery? ?How are these tradeoffs best made? 169。Chapter 1 Preliminaries 169。2020 Pearson Education, Inc. Chapter 1 5 Themes of Microeconomics ?Consumers ?Limited ines ?Consumer theory – describes how consumers maximize their wellbeing, using their preferences, to make decisions about tradeoffs ?How do consumers make decisions about consumption and savings? 169。2020 Pearson Education, Inc. Chapter 1 9 Themes of Microeconomics ?Prices ?How are prices determined? ? Centrally planned economies – governments control prices ? Market economies – prices determined by interaction of market participants ?Markets – collection of buyers and sellers whose interaction determines the prices of goods 169。2020 Pearson Education, Inc. Chapter 1 13 Positive amp。2020 Pearson Education, Inc. Chapter 1 15 What is a Market? ?Markets ?Collection of buyers and sellers, through their actual or potential interaction, determine the prices of products ? Buyers: consumers purchase goods, panies purchase labor and inputs ? Sellers: consumers sell labor, resource owners sell inputs, firms sell goods 169。2020 Pearson Education, Inc. Chapter 1 19 Types of Markets ?Nonpetitive Markets ?Markets where individual producers can influence the price ? Cartels – groups of producers who act collectively ? Example: OPEC dominates with world oil 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 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 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 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 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 44 The Demand Curve D The demand curve slopes downward, demonstrating that consumers are willing to buy more at a lower price as the product bees relatively cheaper. Quantity Price ($ per unit) P2 Q1 P1 Q2 169。2020 Pearson Education, Inc. Chapter 1 48 The Market Mechanism ?The market mechanism is the tendency in a free market for price to change until the market clears ?Markets clear when quantity demanded equals quantity supplied at the prevailing price ?Market clearing price – price at which markets clear 169。2020 Pearson Education, Inc. Chapter 1 52 The Market Mechanism D S P0 Q0 1. At P1, price is above the market clearing price 2. Qs QD 3. Price falls to the marketclearing price 4. Market adjusts to equilibrium P1 Surplus Quantity Price ($ per unit) QS QD 169。2020 Pearson Education, Inc. Chapter 1 56 Changes in Market Equilibrium ?Equilibrium prices are determined by the relative level of supply and demand ?Changes in supply and/or demand will cause change in the equilibrium price and/or quantity in a free market 169。2020 Pearson Education, Inc. Chapter 1 60 Shifts in Supply and Demand ? When supply and demand change simultaneously, the impact on the equilibrium price and quantity is determined by: 1. The relative size and direction of the change 2. The shape of the supply and demand models 169。2020 Pearson Education, Inc. Chapter 1 64 S2020 D2020 D1900 S1900 S1950 D1950 LongRun Path of Price and Consumption Resource Market Equilibrium Quantity Price 169。2020 Pearson Education, Inc. Chapter 1 68 Price Elasticity of Demand