《西方经济学》（英文版） Chap 4 Thinking Like an Economist

Lecture10(2005.10.18 Class today: Chapter 3 review question and choices Recap Part 1 Preview Part 2 Chapter 4: p91+100 Chapter 4: Elasticity Slide 1

MB MC Chapter 4: Elasticity Slide 1 Lecture 10 (2005.10.18) Class today: ◼ Chapter 3 :review question and choices ◼ Recap Part 1 ◼ Preview Part 2 ◼ Chapter 4 : p91~100

Review Part 1 Introduction Chapter 1 Thinking Like an Economist a Chapter 2 Comparative Advantage a Chapter 3 Supply and Demand: An Introduction Chapter 4: Elasticity Slide 2

MB MC Chapter 4: Elasticity Slide 2 Review Part 1 Introduction ◼ Chapter 1 Thinking Like an Economist ◼ Chapter 2 Comparative Advantage ◼ Chapter 3 Supply and Demand: An Introduction

Part 2 Competition and the Invisible Hand Chapter 4 Elasticity Chapter 5 Demand: The benefit side of the market a Chapter 6 Perfectly Competitive Supply The cost side of the market Chapter 7 Efficiency and Exchange a Chapter 8 The Quest for Profit and the Invisible hand Chapter 4: Elasticity Slide 3

MB MC Chapter 4: Elasticity Slide 3 Part 2 Competition and the Invisible Hand ◼ Chapter 4 Elasticity ◼ Chapter 5 Demand: The benefit side of the market ◼ Chapter 6 Perfectly Competitive Supply: The cost side of the market ◼ Chapter 7 Efficiency and Exchange ◼ Chapter 8 The Quest for Profit and the Invisible Hand

Part 2 Competition and the Invisible Hand Part Ii uses an extended treatment of markets to present the ideas of competition and the invisible hand. The chapters go into greater detail as to what lies behind the demand and supply curves introduced in Chapter 3. The demand curve is used to introduce important concepts including elasticity, utility, and consumer surplus. Chapter 6 presents costs and producer surplus so that efficiency and the invisible hand process can be considered in Chapters 7 and 8 Chapter 4: Elasticity Slide 4

MB MC Chapter 4: Elasticity Slide 4 Part 2: Competition and the Invisible Hand ◼ Part II uses an extended treatment of markets to present the ideas of competition and the invisible hand. The chapters go into greater detail as to what lies behind the demand and supply curves introduced in Chapter 3. The demand curve is used to introduce important concepts including elasticity, utility, and consumer surplus. Chapter 6 presents costs and producer surplus so that efficiency and the invisible hand process can be considered in Chapters 7 and 8

Elasticity MB MC 匚 CHAPTER

MB MC Elasticity

Overview 1 Chapter 4 introduces the concept of elasticity (including price elasticity of demand, income elasticity, cross-price elasticity, and price elasticity of supply). It presents elasticity as an extension of the supply and demand model presented in Chapter 3. The effects of price elasticity of demand on total revenue and total expenditures is discussed and explored graphically Chapter 4: Elasticity Slide 6

MB MC Chapter 4: Elasticity Slide 6 Overview 1 ◼ Chapter 4 introduces the concept of elasticity (including price elasticity of demand, income elasticity, cross-price elasticity, and price elasticity of supply). It presents elasticity as an extension of the supply and demand model presented in Chapter 3. The effects of price elasticity of demand on total revenue and total expenditures is discussed and explored graphically

Overview 2 The chapter discusses the interpretation of croSs-price elasticity and Income elasticity in terms of what they tell us about people's preferences for various goods. Finally, the chapter investigates price elasticity of supply and how it can be used to investigate firms production processes Chapter 4: Elasticity Slide 7

MB MC Chapter 4: Elasticity Slide 7 Overview 2 ◼ The chapter discusses the interpretation of cross-price elasticity and income elasticity in terms of what they tell us about people’s preferences for various goods. Finally, the chapter investigates price elasticity of supply and how it can be used to investigate firms’ production processes

Elasticity a What do you think? Could reducing the supply of illegal drugs cause an increase in drug related burglaries? Chapter 4: Elasticity Slide 8

MB MC Chapter 4: Elasticity Slide 8 Elasticity ◼ What do you think? ⚫ Could reducing the supply of illegal drugs cause an increase in drug￾related burglaries?

The Effect of Extra Border Patrols on the Market for Illicit Drugs Total Expenditure= PXQ S$2500 $50X50 $3200 $80x40 80 50 D 50 Q(1, 000s of ounces/day) Chapter 4: Elasticity Slide 9

MB MC Chapter 4: Elasticity Slide 9 The Effect of Extra Border Patrols on the Market for Illicit Drugs Q(1,000s of ounces/day) P($/ounce) 50 50 S D 80 40 S’ Total Expenditure = P x Q S $2500 = $50 x 50 S’ $3200 = $80 x 40

Elasticity a Elasticity A measure of the extent to which quantity demanded and quantity supplied respond to variations in price, income, and other factors Chapter 4: Elasticity Slide 10

MB MC Chapter 4: Elasticity Slide 10 Elasticity ◼ Elasticity ⚫ A measure of the extent to which quantity demanded and quantity supplied respond to variations in price, income, and other factors