ch01 Preliminaris

7/26/2019 ch01 Preliminaris

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Fernando & YvonnQuijano

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Preliminaries

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Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.


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CHAPTER 1 OUTL!E

(.( The The#es o& "icroecono#ics

(.2 )hat Is a "ar$et*

(.+ Rea ersus -o#ina Prices

(. )hy /tudy "icroecono#ics*


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Preliminaries

mi#roe#onomi#s ranch o& econo#ics that deas 1ith

the behaior o& indiidua econo#ic unitsconsu#ers,

&ir#s, 1or$ers, and inestorsas 1e as the #ar$ets that

these units co#prise.

ma#roe#onomi#s ranch o& econo#ics that deas 1ith

aggregate econo#ic ariabes, such as the ee and

gro1th rate o& nationa output, interest rates,

une#poy#ent, and in&ation.


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THE THE"E/ 34 "ICR3EC3-3"IC/(.(

Trade Offs

Cons%mers

&or'ers

(irms

Consu#ers hae i#ited inco#es, 1hich can be spent on a1ide ariety o& goods and serices, or saed &or the &uture.

)or$ers aso &ace constraints and #a$e trade5o&&s. 4irst,peope #ust decide 1hether and 1hen to enter the1or$&orce. /econd, 1or$ers &ace trade5o&&s in their choice o&e#poy#ent. 4inay, 1or$ers #ust so#eti#es decide ho1#any hours per 1ee$ they 1ish to 1or$, thereby trading o&&

abor &or eisure.

4ir#s aso &ace i#its in ter#s o& the $inds o& products thatthey can produce, and the resources aaiabe to producethe#.


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(.(

Pri#es and *ar'ets

"icroecono#ics describes ho1 prices aredeter#ined.

In a centray panned econo#y, prices are set by

the goern#ent.

In a #ar$et econo#y, prices are deter#ined by theinteractions o& consu#ers, 1or$ers, and &ir#s.These interactions occur in marketscoections o&buyers and seers that together deter#ine the price

o& a good.

THE THE"E/ 34 "ICR3EC3-3"IC/


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(.(

Theories and *odels

In econo#ics, e6panation and prediction are based ontheories. Theories are deeoped to e6pain obseredpheno#ena in ter#s o& a set o& basic rues and assu#ptions.

A modelis a #athe#atica representation, based onecono#ic theory, o& a &ir#, a #ar$et, or so#e other entity.

Positi,e ,ers%s !ormati,e Analysis

positi,e analysis Anaysis describing reationships o&cause and e&&ect.

normati,e analysis Anaysis e6a#ining 7uestions o&1hat ought to be.

THE THE"E/ 34 "ICR3EC3-3"IC/


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)HAT I/ A "AR8ET*(.2

mar'et Coection o& buyers and seers that, throughtheir actua or potentia interactions, deter#ine the price o&a product or set o& products.

mar'et definition eter#ination o& the buyers, seers,and range o& products that shoud be incuded in aparticuar #ar$et.

arbitra-e Practice o& buying at a o1 price at oneocation and seing at a higher price in another.


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(.2

Competiti,e ,ers%s !on#ompetiti,e *ar'ets

*ar'et Pri#e

perfe#tly #ompetiti,e mar'et "ar$et 1ith #any buyersand seers, so that no singe buyer or seer has asigni&icant i#pact on price.

mar'et pri#e Price preaiing in a co#petitie #ar$et.

)HAT I/ A "AR8ET*


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(.2

*ar'et 0efinitionThe Etent of a *ar'et

etent of a mar'et oundaries o& a #ar$et, bothgeographica and in ter#s o& range o& products producedand sod 1ithin it.

"ar$et de&inition is i#portant &or t1o reasons:

! A co#pany #ust understand 1ho its actua and potentiaco#petitors are &or the arious products that it ses or#ight se in the &uture.

! "ar$et de&inition can be i#portant &or pubic poicydecisions.

)HAT I/ A "AR8ET*


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(.2

"ar$ets are usuay de&ined inter#s o& therapeutic classeso&drugs.

4or e6a#pe, there is a #ar$et&or antiulcer drugs that is eryceary de&ined.

Sometimes, however, pharmaceutical marketboundaries are more ambiguous, likepainkillers.

There are many types of painkillers, and some workbetter than others for certain types of pain

)HAT I/ A "AR8ET*


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(.2

!n "##$, the %rcher'aniels(idland )ompany *%'(+acuired the )linton )orn -rocessing )ompany*))-+

The .S 'epartment of /ustice *'0/+ challenged the

acuisition on the grounds that it would lead to adominant producer of corn syrup with the power topush prices above competitive levels

%'( fought the '0/ decision, and the case went tocourt The basic issue was whether corn syrup

represented a distinct market

%'( argued that sugar and corn syrup should beconsidered part of the same market because theyare used interchangeably to sweeten a vast array offood products

)HAT I/ A "AR8ET*


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REA;


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38.8$0.84 $0.40

82.4= =

Table 141 The Real Pri#es of E--s and of a Colle-e Ed%#ation

1/73 1/7) 1/.3 1/.) 1//3 1//.

Consu#er Price Inde6 +'.' @+.' '2. (0.B (+0. (B+.0

Nominal Prices

rade A arge eggs D0.B( D0. D0.' D0.'0 D(.0( D(.0

Coege education 2@+0 +0+ 9(2 '(@B (2,'00 (9,2(+

Real Prices ($1970)

rade A arge eggs D0.B( D0.@B D0.0 D0.29 D0.+0 D0.2@

Coege education 2@+0 2@ 2+(+ 29( +'00 @+

(.+

1970

1975

Re al price of eggs in 1975 nominal price in 1975CPI

CPI=

1970

1980


CPI=

38.8$0.77 $0.56

53.8= =

The realprice o& eggs in (90doarsis cacuated as &oo1s:

)hie the nominalprice o& eggs rose during these years, the realprice o& eggs actuay &e.

REA;


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1$ of 17Copyright 2009 Pearson Education, Inc. Pubishing as Prentice Ha ! "icroecono#ics ! Pindyc$%Rubin&ed, 'e.

82.4$0.80 $0.61

107.6= =

Table 141 The Real Pri#es of E--s and of a Colle-e Ed%#ation

1/73 1/7) 1/.3 1/.) 1//3 1//.Consu#er Price Inde6 +'.' @+.' '2. (0.B (+0. (B+.0

Nominal Prices

rade A arge eggs D0.B( D0. D0.' D0.'0 D(.0( D(.0

Coege education 2@+0 +0+ 9(2 '(@B (2,'00 (9,2(+

Real Prices ($1980)

rade A arge eggs D(.+0 D(.(' D0.' D0.B( D0.B D0.@+

Real ,ers%s !ominal Pri#es(.+

1980

1975


CPI

=

1980

1985


CPI=

82.4$0.77 $1.18

53.8

= =

!The realprice o& eggs in (9'0doarsis cacuated as &oo1s:


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REA;


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)H /T= "ICR3EC3-3"IC/*(.

Corporate 0e#ision *a'in-: (ord5s 6port Utility ehi#les

The design and e&&icient production o& 4ordFs /=


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)H /T= "ICR3EC3-3"IC/*(.

P%bli# Poli#y 0esi-n: A%tomobile Emission 6tandards for

the T8enty9(irst Cent%ry

The design o& a progra# i$e the Cean Air Act inoes agood dea o& econo#ics.

4irst, the goern#ent #ust eauate the #onetary i#pact o&

the progra# on consu#ers.

The goern#ent #ust deter#ine ho1 ne1 standards 1ia&&ect the cost o& producing cars.

4inay, the goern#ent #ust as$ 1hy the probe#s reated to

air poution are not soed by our #ar$et5oriented econo#y.

ch01 Preliminaris

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