ECON 211 FINAL

Adam Smth 1776

I make 8 dollars an hour

The minimum wage should be $8 an hour

indirect negative inverse relationship between price and Qd

• Price of other Goods
• Tastes/ Preferences
• Income/Wealth
• Quality
• Expectation of price change
• Number of buyers

sensitivity of Qd to P

(Q2-Q1)/Q1 (P2-P1)/P1

Inverse of D-curve

Constant slope elasticity not constant. High p low Qs-- Elastic Low p High Qd-- inelastic

Percent change in Qd= Change in Qd/.5(Q1+Q2)

• pt. method normalizes through bu initial point
• Midpt. is less biased equal-- weigh equally-> P1and P2 and Q1Q2
• Reversing method doesnt change Ed

• Availabillity of Subtitutes
• Habit formation
• Income-- Small portion(gum) v large portion
• Time (longer or sorter time horizon)
• Necessity v Luxury
• Def. of Mkt. Broad v narrow Toyota v Red Toyota Prius

%change in Qd/ %change in Y(income) Inferiors are negatively elastic

%change of Q of good 1/ % change in price of good 2 In the example above, the two goods, fuel and cars(consists of fuel consumption), are complements; that is, one is used with the other. In these cases the cross elasticity of demand will be negative, as shown by the decrease in demand for cars when the price of fuel increased. In the case of perfect complements, the cross elasticity of demand is negative infinity.Where the two goods are substitutes the cross elasticity of demand will be positive, so that as the price of one goes up the demand of the other will increase. For example, in response to an increase in the price of carbonated soft drinks, the demand for non-carbonated soft drinks will rise. In the case of perfect substitutes, the cross elasticity of demand is equal to infinity.

Direct relationship between P and Qs

• Price of inputs
• Price of Substitutes
• Technology
• Expecations
• Government policies
• Number of Sellers

• Shortages lead to non-market sanctioned ways to distribute goods
• black market discrimination other fees 1st come 1st serve

What to do with the surplus

• Economic- TR-explicit-implicit
• Accounting-TR-Explicit

Mathematical r graphical relationship between inputs and outputs

Relationship between Q and inputs (K,L)

If equal amounts of an input (labor) is added and the quanitity of other iputs resulting increase in output will decrease at some point

TR-TC or Q(P-ATC)

TR<TVC OR P<AVC

TR<TC OR P<ATC

Actual division of the burden of a tax between buyers and sellers

D-t=s

inelastic

tax that is a percentage of the value

Tax rev vs t size

MC/(1-(1/Ed))