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Lecture 1 (Demand (elasticity (influenced by (time horizon, number of…
Lecture 1
Demand
price goes down, demand goes up
demand is usually hard to measure
demand curve hard to observe in reality
demand curve : demand and price (is a line)
substitute: line shifts to the left (decrease)
compliment: curve moves to the right (increase)
normal good / inferior good
inferior good less demand if more money
law of demand
elasticity
responsiveness of demand (to price)
influenced by
time horizon
number of substitutes
definition of the market
determines how much loss price reduction and how much gain for higher demand
measure by: vouchers / special offers
unitary elasticity: where total revenue is at max.
consumer surplus: What is left on the table if the price is too low
price discrimination
first degree: auction
Second degree: two part tariff
third degree: different prices for different market segments
cost curves
SFC: Short run fixed costs
SVC : Short run variable costs
STC: Short run total costs
SMC: Shot run marginal costs
Production Possibility Frontier
what an economy can produce
decrease one to increase another
opportunity costs
Scarcity
infinite wants / finite resources
Social planner equilibrium: perfect outcome
Beer and Pizza production: Microeconomics
opportunity cost needs to be taken in account
long vs short term for productivity and cost