ECON 101 Tutorial: Week 1

Shane Murphys.murphy5@lancaster.ac.uk

Office Hours: Monday 3:00-4:00 – LUMS C86

Outline

• Introduction• Roll Call• Problems• Discussion

Exercise 10Chocolate Bar demand and supply can be described:Qd = 1600 – 300pQs = 1400 + 700pCalculate the equilibrium price and quantity.

Exercise 10Qd = 1600 – 300pQs = 1400 + 700pEqulibrium in supply and demand is where the supply and demand curves intersect.

Set Qs = Qd 1400 + 700p = 1600 – 300p -1400 + 300p = -1400 + 300p

1000p = 200 p = 0.2

Qs = 1400 + 700p = 1400 + 700(0.2) = 1400 + 140 = 1540Check Qd = 1600 – 300p

Calculus: first derivative of polynomial

The slope of a function can be calculated at any point y taking its first derivative and evaluating at that point.Remember the rule for taking the first derivative of a polynomial:y = xn => dy/dx = nxn-1

y = w + z => dy/dx = dw/dx + dz/dx

So for example:y = 3x2 + 5x + 2dy/dx = 6x + 5

Exercise 10Graph: Qd = 1600 – 300p Qs = 1400 + 700p

Exercise 10Slope: Qd = 1600 – 300p Qs = 1400 + 700pQd:Δy = Δp = 1 Δx = ΔQd = -300So slope is Δy/Δx = -1/300

Using calculus, rewrite demand as:p = f(Q) = 1600/300 – Qd/300dy/dx = dp/dQ = -1/300

Exercise 10Slope: Qd = 1600 – 300p Qs = 1400 + 700pQs:Δy = Δp = 1 Δx = ΔQd = 700So slope is Δy/Δx = 1/700

Using calculus, rewrite demand as:p = f(Q) = 1400/700 + Qd/700dy/dx = dp/dQ = 1/700

Exercise 9Draw the Demand and Supply Curve:

What is the equilibriumquantity and price?

Q = 30,000P = 30

Exercise 9Your team plans to increase total capacity in its stadium by 5,000 seats. What admission price should it charge?

Between 20 and 30 (probably 25)

Discussion PointsWhat is economics?

Is scarcity more important in today than in 1950?

Give an example of an economic model?