【正文】 quota on foreign cars? ? What will be the impact of an increase in the gasoline excise tax? 169。2020 Pearson Education, Inc. Chapter 1 16 What is a Market? ?Market Definition ?Determination of the buyers, sellers, and range of products that should be included in a particular market ?Arbitrage ?The practice of buying a product at a low price in one location and selling it for more in another location 169。2020 Pearson Education, Inc. Chapter 1 20 Market Price ?Transactions between buyers and sellers are exchanges of goods for a certain price ?Market price – price prevailing in a petitive market ? Some markets have one price: price of gold ? Some markets have more than one price: price of Tide versus Wisk 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 28 The Minimum Wage: Figure 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 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 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 45 The Demand Curve ?Other Variables Affecting Demand ?Ine ? Increases in ine allow consumers to purchase more at all prices ?Consumer Tastes ?Price of Related Goods ? Substitutes ? Complements 169。2020 Pearson Education, Inc. Chapter 1 49 The Market Mechanism D S The curves intersect at equilibrium, or market clearing, price. Quantity demanded equals quantity supplied at P0 P0 Q0 Quantity Price ($ per unit) 169。2020 Pearson Education, Inc. Chapter 1 53 The Market Mechanism ?The market price is below equilibrium: ?There is excess demand shortage ?Upward pressure on prices ?Quantity demanded decreases and quantity supplied increases ?The market adjusts until the new equilibrium is reached 169。2020 Pearson Education, Inc. Chapter 1 57 S’ Changes in Market Equilibrium ? Raw material prices fall ?S shifts to S’ ?Surplus at P1 between Q1, Q2 ?Price adjusts to equilibrium at P3, Q3 P Q S D P3 Q3 Q1 P1 Q2 169。2020 Pearson Education, Inc. Chapter 1 61 The Price of a College Education ?The real price of a college education rose 55 percent from 1970 to 2020 ?Increases in costs of modern classrooms and wages increased costs of production – decrease in supply ?Due to a larger percentage of high school graduates attending college, demand increased 169。2020 Pearson Education, Inc. Chapter 1 65 Resource Market ?Conclusion ?Decreases in the costs of production have increased the supply by more than enough to offset the increase in demand 169。2020 Pearson Education, Inc. Chapter 1 69 Price Elasticity of Demand ?Usually a negative number ?As price increases, quantity decreases ?As price decreases, quantity increases ?When |EP| 1, the good is price elastic ?|%?Q| |%?P| ?When |EP| 1, the good is price inelastic ?|%?Q| |% ?P| 169。2020 Pearson Education, Inc. Chapter 1 73 Price Elasticity of Demand Q Price 4 8 2 4 Ep = 1 Ep = 0 EP = ? Elastic Inelastic Demand Curve Q = 8 – 2P 169。2020 Pearson Education, Inc. Chapter 1 77 Other Demand Elasticities ?Ine Elasticity of Demand ?Measures how much quantity demanded changes with a change in ine I??????II/ IQ / Q E I 169。2020 Pearson Education, Inc. Chapter 1 81 Point vs. Arc Elasticities ?Point elasticity of demand ?Price elasticity of demand at a particular point on the demand curve ?Arc elasticity of demand ?Price elasticity of demand calculated over a range of prices ? ? ???????QPPQE DP ΔΔ169。2020 Pearson Education, Inc. Chapter 1 85 Elasticity: An Application ?We can find the elasticities of demand and supply at these points 035.)(630,2ΔΔ ?????PPE DDP032.)(630,2ΔΔ ???PPE SSP169。2020 Pearson Education, Inc. Chapter 1 89 ShortRun Versus LongRun Elasticity ?Price elasticity varies with the amount of time consumers have to respond to a price ?Shortrun demand and supply curves often look very different from their longrun counterparts 169。2020 Pearson Education, Inc. Chapter 1 93 DSR DLR ? Initially, people may put off immediate car purchase ? In long run, older cars must be replaced Cars: ShortRun and LongRun Demand Curves Quantity of Cars Price 169。2020 Pearson Education, Inc. Chapter 1 97 Demand for Automobiles 169。2020 Pearson Education, Inc. Chapter 1 101 Supply of Copper 169。2020 Pearson Education, Inc. Chapter 1 105 D P0 S Q0 Quantity Price A freeze or drought decreases the supply of coffee S’ Q1 An Application Coffee Price increases significantly due to inelastic supply and demand P1 169。2020 Pearson Education,