Please enable JavaScript.
Coggle requires JavaScript to display documents.
MICROECONOMICS (Principles (Interaction of Choices (Market (Markets move…
MICROECONOMICS
Principles
The Invisible Hand Principle
People usually exploit opportunities to make themselves better off
Interaction of Choices
Trade
Market
Markets move toward equilibrium
Resources should be used as efficiently as possible to achieve society's goals
Markets usually lead to efficiency
When markets don't achieve efficiency, government intervention can improve society's welfare
Net Marginal Benefit Principle
"How much?" A decision made at the margin
Opportunity Costs
Free ticket of Zayn concert $40 cost to Taylor concert, but willing to pay up to $50 OC of 1=$50-$40=$10
Individual Choice
Scarcity
Labor
Capital
Land
Market
Influenced by sellers and buyers
Demand
The determinants of Demand
Price of substitutes
Income
Price of related products
Preference
Price
The demand function、schedule、curve
Qx=f(Px,Py,I,T)
Change in price：Move along the curve
Change in income：I↑，Ordinary Curve→，Inferior Curve←
Change in complementary：Py↑，Qx↓，Curve←
Change in substitute：Py↑，Qx↑，Curve→
Supply
The determinants of Supply
Technology
Price of inputs
Price
The supply function、schedule、curve
Change in price：Move along the curve
Qx=f(Px,PriceInputs,Technology)
Change in price of inputs：Py↑，Cost↑，Curve←
Change in technology：Cost↓，Curve→
Change in income：I↑，Ordinary Curve→，Inferior Curve←
Price is too high→
Supply Surplus
Price is too low→
Supply Shortage
Equilibrium
Changes in Demand
Price of related goods
Consumer preference
Changes in Supply
Simultaneous Change
QD=QS
Government Intervention
Price Floor>Equilibrium，Demand↓，Supply↑
Price Ceiling<Equilibrium，Demand↑，Supply↓
Economics Problem
Normative Statement
Subjective
Value
Positive Statement
Evidence
Objective
Elasticity
PED
Price Elasticity=%ΔQx/%ΔPx
│E│>1，Elastic If Px↑，Total Revenue ↓
│E│<1，Inelastic IF Px↑，Total Revenue ↑
Influencing Factor
How many substitute Substitutes less，inelastic
How expensive a good Higher price，higher elastic
YED
Income Elasticity=%ΔQx/%ΔI
Normal goods（+）：%ΔI=-10%，-%ΔQx；%ΔI=+10%，+%ΔQx
Inferior goods（-）：%ΔI=-10%，+%ΔQx；%ΔI=+10%，-%ΔQx
XED
x、y are complements（-）：%ΔPy=+10%，%Qx=-10%
x、y are substitutes（+）：%ΔPy=+10%，%Qx=+10%
Cross Price=%ΔQx/%ΔPy
PES
Elastic in long run
Cost of increasing supply
Ineleastic in short run
