Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out

MICROECONOMICS

VIEWS: 11 PAGES: 24

									MICROECONOMICS
        The study of small
 events/decisions and their effect
         on the economy.


      Ex: Consumer decisions
 (buying/selling goods & services),
   Producer decisions (Prices of
        goods & services)
            LAW OF DEMAND

   As price increases, the number of people
    demanding that product decreases.
                   A
PRICE




                   B
        QUANTITY
CHANGE IN QUANTITY DEMANDED

WHEN: PRICE CHANGE=
          QUANTITY DEMANDED CHANGE

WHY: 1. Income Effect

      2. Substitution Effect
 6
PRICE




2
                           B
        2   QUANTITY   6
  CHANGE IN TOTAL DEMAND
WHEN: CHANGE IN QUANTITY DEMANDED
        AT EVERY PRICE LEVEL

WHY: 1. Consumer Income.

     2. Consumer Tastes.

     3. Price of related products.
     (Substitutes & complements)
 6
PRICE




                       B
        2   QUANTITY
CONSUMER INCOME/TASTE
TOTAL DEMAND
    FOR
 “PREMIUM”
               PRICE


  COFFEE?


                                      A

                                  B
                       QUANTITY
PRICE OF RELATED PRODUCTS


               versus
TOTAL DEMAND
    FOR
   SUVS?
               PRICE




                                      A

                                  B
                       QUANTITY
TOTAL DEMAND
    FOR
  HYBRID
               PRICE

 VEHICLES?


                                      A

                                  B
                       QUANTITY
COCA-COLA

      SUBSTITUTES???

    Pepsi, Jolt
    Generic Brands
COCA-COLA

     COMPLEMENTS???

    Ice
    Straws, cups
    Rum?
PIZZA

    SUBSTITUTES???

  Calzones, subs, etc.
  Frozen pizza
  Homemade pizza
PIZZA

   COMPLEMENTS???

  Soda
  Wings, bread sticks
CDs (PRERECORDED)

          SUBSTITUTES???

        Downloads
        Burned CDs
        Records, tapes, 8 tracks
CDs (PRERECORDED)

         COMPLEMENTS???

        CD player
        CD case
        Ear buds, headphones
NIKE AIR JORDANS

         SUBSTITUTES???

       Adidas
       Converse
       Pay-Less
NIKE AIR JORDANS

        COMPLEMENTS???

       Laces
       Socks
       Odor-Eaters
HUMMER H2

      SUBSTITUTES???

    Cadillac Escalade
    Ford Explorer
    Bicycle
HUMMER H2

     COMPLEMENTS???

    Gas (LOTS OF IT)
    Rims
    Sound System
            LAW OF DIMINISHING
             MARGINAL UTILITY
   Does the second slice of pizza taste as good as
    the first?

   Does it still taste good? Are you still adding to
    your total satisfaction?

    The more you consume of certain product, the
     less additional satisfaction you get from each
     additional unit of that product.

								
To top