Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-1...

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.1-1

Microeconomics

Supply and Demand

● Review– Factors affecting demand curve– Factors affecting supply curve

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Changes in Supply and DemandChanges in Supply and Demand

● When factors change, analyze in 3 steps

1. Which curve is affected?

2. Which way does the curve move?

3. What happens to P and Q?

● Important – There is a difference between “demand” and the “demand curve”. – Can think of “demand” as quantity Q– The demand curve shows the demand at every

price

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Changes in Demand CurveChanges in Demand Curve

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Demand Curve Shifts Left


Changes in Supply CurveChanges in Supply Curve

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Supply Curve Shifts Left


Economics - 2

Macroeconomics


MacroeconomicsMacroeconomics Issues for the Entire Economy Issues for the Entire Economy

● Capitalism: The Private Enterprise System ● Private enterprise system—economic system in which

business success or failure depends on how well firms match and counter the offerings of competitors.

● Adam Smith’s “Invisible hand”● Our economic system assumes that everyone will act in

their own best interest– This benefits themselves– This benefits society – How?


Types of CompetitionTypes of Competition

– Pure competition Commodities

– Monopolistic competition Differentiated products

– Oligopoly Small number of suppliers

– Monopoly One dominant supplier

– Monopsony One dominant customer


Planned Economies: Planned Economies: Communism and SocialismCommunism and Socialism

● Communism: planned economic system in which private property is eliminated, goods are owned in common, and factors of production and production decisions are controlled by the state

● Socialism: planned economic system characterized by government ownership and operation of all major industries


Economic FormsEconomic Forms

● What are some government owned businesses in the U.S.? Other countries?

● Privatization– Examples of companies going private?– What about the reverse direction?


Planned Economies vs. CapitalismPlanned Economies vs. Capitalism

● The major issue:

Who knows what’s best – the government or the people?

● With Adam Smith’s “invisible hand,” people and businesses “vote” with their dollars.– The ‘best’ survive, the ‘poor’ fail– Allocation is done by voting with dollars– Have even used this to predict elections


DiscussionDiscussion

● Will increased government regulation of vaccines, help or hurt flu vaccine shortages?


Government Economic DecisionsGovernment Economic Decisions

What is the economic impact of each of What is the economic impact of each of these?these?

● Government lowering the price for surgeries?● Minimum wage law● Limiting prices on flu vaccines● A tax on medical equipment?● Lowering interest rates● Raising interest rates

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-1...

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