Please enable JavaScript.

Coggle requires JavaScript to display documents.

NEC - Coggle Diagram

- - - - Labor (L)
      - Physical capital (K)
      - Human capital (H)
      - Natural resources (N)
    - - Market (private prop.)
      - Command (public prop.)
      - Mixed
  - - - p⬆️ Qd⬇️ (proportional)
      - Income effect (p⬆️purchasing power⬇️ )
      - Substitution effect (p⬆️ buy more subs)
    - - Income
        
        Normal (⬆️⬆️)
        
        Inferior(⬆️⬇️)
      - Price of related goods
        
        Complements (⬆️⬇️)
        
        Substitutes (⬆️⬆️)
      - Preference
      - Number of buyers
      - Expectation
        
        Price & income)
  - - - P⬆️ Qs⬆️ (inverse)
    - - Production cost
      - Technology
      - Number of seller
      - Expectation
  - - - Calculation
        
        Midpoint (change in % = (new-old)/midpoint) 更准确
        
        Regular (change in %=(new-old)/old)
      - demand对价格的敏感度
      - Perfectly elastic (PED=∞; 横线)
      - Elastic (PED > 1; 比较平的线)
      - Unit elastic (PED=1; 斜线)
        
        上半elastic；下半inelastic
      - Inelastic (PED <1; 比较立的线）
      - Perfectly inelastic (PED=0; 竖线）
      - Total revenue (TR) & PED
        
        TR=P*Q
        
        Elastic (P⬆️TR⬇️)
        
        Inelastic (P⬆️TR⬆️)
      - Determinants
        
        Availability of close subs
        
        Proportion in income
        
        Time horizon (long-elastic)
        
        Necessity
        
        Definition of the market(narrow-elastic)
      - % change in Qd / % change in P
    - - Calculation
        
        YED = %change in Qd / %change in income
      - Normal: YED >0
        
        1 luxury<1 necessity
      - Inferior : YED<0
    - - XED = %change in Qd1 / % change in P2
      - Substitue: XED >0
        Complement: XED<0
    - - Calculation
        
        PES = %change in Qs / %change in P
      - Perfectly elastic, elastic, unit elastic, inelastic, perfectly inelastic (和PED部分一样）
      - Determinants
        
        Time horizon(long-elastic)
        
        Availability of inputs
        
        Ability to be stored
  - - - More CS, less PS, DWL
    - - Less CS, more PS, DWL
    - - TS = CS +PS+ tex rev.
      - Tax rev. takes up CS and PS
      - Creates DWL
      - Tax burden
        
        Inelastic-pay more tax (D inelas. consumers pay more; S inelas. producers pay more)
  - - - Lump-sum - same amount
      - Proportional - same %
      - Regressive - Income⬆️ tax%⬇️
      - Progressive - Income⬆️ tax%⬆️
  - - - Explicit + implicit
      - Fixed (FC) + Variable (VC)
    - - Average product (AP) = total product / input
      - Increasing&Diminishing marginal return (增加output, input会先快速增加，然后慢速增加，最后加少）
      - Marginal product (MP)
    - - ATC = TC/output
      - AVC = total VC/output
      - AFC = total FC/output
      - MC=S
        
        passes through min ATC and min AVC
    - - SR - yes fixed cost
      - LR - no fixed cost
        
        LRATC
        
        Economies of scale (Q⬆️ATC⬇️) –– increasing return to scale
        
        Constant return to scale(Q⬆️ATC---) ––constant ...
        
        Diseconomies of scale(Q⬆️ATC⬆️) –– decreasing ...
  - - - price takers
        -infinitely buyers and sellers
        -identical goods
        -no barriers to entry
      - Total profit = TR-TC
        Profit maximization: MR=MC
        
        MR=D; MC=S
      - SR: P<AVC shut down
        
        SR supply above min AVC
      - LR: P<ATC exit
        
        LR supply above min ATC
      - Profit = (P-ATC) * Q
      - LR equilibrium: P=ATC=MC=MR
      - Efficiency
        
        Allocative efficiency: D=S; D=MC; P=MC
        
        Productive efficiency: min ATC
        
        Perfectly competitive market operates at both efficiency points
    - - price makers
        -single seller
        -no close subs
        -high barrier
      - MR cuts the midpoint of 0 and the intersection of D with Q
      - Monopoly 决策
        
        MR=MC 找到Q
        
        向上在demand上找到P
      - not productive efficiency; not allocative efficiency
        产生DWL
      - Sources of market power
        
        government created
        
        monopoly resources
        
        natural monopoly
        
        Q⬆️ATC⬇️;ATC⬇️Q⬆️VC➡️0
      - Price discrimination
        
        differentiate WTP (elasticity)
        
        prevent resale/arbitrage
        
        WTP=P; CS=WTP-P=0
        
        Inelastic, higher price
        
        Produce until MC=D
    - - -many sellers
        -similar but not the same products
        -no barrier LR profit=0
      - LR: P=ATC
      - Advertisement & branding
        
        low elasticity, increase demand
    - - -a few firms
        -similar or identical
        -high barrier
      - 为了防止变成monopoly：price-fixing, quantity agreement, anti-trust "sherman act"
      - Game theory - payoff matrix
        
        Nash Equilibrium - each player in the game chooses and stays with their optimal strategy
        
        Dominant strategy - best for the player, regardless of what the strategy other players follow
      - Kinked demand curve
        
        Market graph: 折断的，上半elastic，下半inelastic
        
        firms match price decrease, not increase
  - - - -many firms & household
        -identical skills
        wage taker
      - S=MFC, D=MRP; MFC=wage
      - Supply 是横线
    - - MFC > S; MFC>wage
      - -only one buyer/household
        wage maker
      - 决策方式
        
        MFC=MRP 找到Q
        
        向下在Supply上找到wage
    - - MP by labor/P by labor(wage) = MP by capital/P of capital
  - - - 2 goods comparison
      - Problem: pay goods but have limited incomes
      - X2=-P1/P2 X1 + m/P2
      - Budget set (能买的范围）：triangle between m/P2 and m/P1
      - Price change➡️BS twist; income change ➡️ BC shift
      - If there is a decrease in price, 在轴上的的点回向外移动，代表可以买更多的这个good。Increase会让点向内移动。
    - - Marginal rate of substitution (MRS) - how many unit of good 2 is the consumer willing to give up for +1 unit of good 1.
        diminishing; slope of IC
      - Optimal combination
        
        Tangent to budget set(BS) and indifference curve(IC)
      - IC slope calculation: MRS
        
        Mu1/P1 = Mu2/P2
        (Mu - marginal utility)
      - 很多条bowed inward 的线。越向右上，整体willingness 更多
      - The 2 goods
        
        perfect complements: 全直角 L- shaped
        
        perfect substitutes：全直的斜线
        
        大部分的goods：bowed inward
        
        satiation point (bliss point): 圆圈，bowed outward
  - - - low mobility of production factors
    - - Negative production externality
        
        Marginal external cost(MEC) >0
        
        MSC=MPC+MEC
        Marginal social cost(MSC)=marginal private cost(MPC)+marginal external cost(MEC
        
        MSC>MPC➡️DWL
        
        Market equilibrium: MPC=MPB
        Social optimum: MSC=MSB
        
        Market failure(DWL) arises when: not all costs are borne by consumer and producer
        
        解决方法：regulation (marketed-based policy-tax, command-and-control policy）
      - Positive consumption externality
        
        MEC >0
        
        MSB=MPB+MEC
        
        MSB>MPB ➡️ DWL
        
        Market equilibrium: MPC=MPB
        Social optimum: MSC=MSB
        
        解决方法：gov. subsidy
  - - - CA: NX+money coming in-money coming out
      - CFA: foreign purchase of domestic asset-domestic purchase of foreign asset
      - Deficit<0 Surplus>0
  - - - A区域-line of equal distribution 右，lorenz 左
        B区域-lorenz 右
      - Gini coefficient = A/A+B. 接近于0equal，接近于1inequality
- - - - -distribution of income(income inequalities)
        -environment
        -leisure tiem
        -structure of the economy
    - - How many years to double? 72/growth rate = n years
      - How many years to triple? 115/growth rate = n years
      - Growth rate: 发展中国家增长快，发达国家增长慢
      - China: 14.2% in 2007
  - - - Substitution bias: people might substitute with cheaper goods outside the basket to lower cost of living CPI overstate cost
      - Introduction of new good: same $ higher value because of more choices CPI overstate cost
      - Unmeasured quality change: Quality improvement/worsening is not taken into account of cost of living overstate/understate
  - - - (CPI in Year 2 - CPI in Year 1)/CPI in year 1 * 100%
      - (GDP deflator in Year 2 - GDP deflator in Year1)/GDP deflator in Year 1 * 100%
    - - Winner: borrower
      - Losers: lender, people on fixed income, savers
    - - -redistribution of wealth
        -menn cost
        -shoe leather cost
        -general inconvenience
        -unit of account cost
        -tax distortion
  - - - employment-ppl with a job
      - unemployment-ppl without a job but actively look for one
      - participate rate = labor force/adult population * 100%
      - unemployment rate = unemployed/ labor force *100%
      - Drawbacks:
        
        part time=employed
        
        discouraged worker = not included
        
        underground worker = not included
      - Types of unemployment
        
        Frictional unemployment - short period of time unemployed because of looking for job. e.g. college graduates
        
        Structural unemployment - Qd≠Qs in wage-labor graph
        
        -technological progress
        -min wage
        -labor union: collective, strike
        -efficiency wages: higher than market wages to increase productivity
        
        Cyclical unemployment - unemployment cased by economic downturns (caused by frictional+structural)
        
        real GDP-time graph: recession, peak, trough, expansion
        
        Seasonal unemployment - unemployed during a season
  - - - medium of exchange
        
        store of value
        
        unit of account
      - barter economy - double coincidence of wants
    - - ease to convert to the medium of exchange(money)
      - M1(most liquid form) = money supply (MS) = currency+demand deposit+savings deposit
      - M2= M1+ money market funds+ small time deposit
      - Liquidity trap: MS 上升，但是MD不需要
  - - - commercial banks or banks
        -banks create money by loaning out excess reserve
      - central bank FED:
        
        regulate banking system
        
        control money supply
    - - Money multiplier = 1/reserved ratio
      - Reserved ratio = reserved/demand deposit
        (reserved requirement is the min of reserved ratio)
      - Money supply = reserved money* money multiplier
      - Required reserves= RR% * liabilities
      - Total reserved = required reserved + excess reserved
      - Money supply (MS) = M1 =currency+demand deposit+savings deposit
  - - - shifters:
        
        price level⬆️ MD⬆️
        
        nominal GDP⬆️ MD⬆️
        
        preference⬆️ MD⬆️
    - - shifters
        monetary policy
    - - Limited reserve（08前）
        
        Open market operation - FED buys(MS⬆️) or sells(MS⬇️） gov. bonds
        
        Discount rate - IR that FED charges commercial banks (IR⬆️ MS⬇️）
        
        reserv requirement (IR⬆️ MS⬇️）
      - Ample reserve(08后）
        
        Administered interest rate (interest on reserve)
        
        Open market operation
  - - - wealth effect: PL⬆️ real wealth⬇️ C⬇️ Y⬇️
      - IR effect: PL⬆️ MD⬆️ IR⬆️ I⬇️ Y⬇️
      - exchange rate effect: PL⬆️ MD⬆️ IR⬆️ export⬇️ NX⬇️ Y⬇️
      - Shifters：factors of GDP
    - - shifters:
        -factors of production
        -technology
    - - sticky wage theory: PL⬆️ wage sticky Y⬆️
      - sticky price theory: PL⬆️ price sticky Y⬆️
      - misperception theory: PL⬆️ mistaken for reward Y⬆️
      - Shifters:
        factors of production
        technology
    - - LRAS=SRAS=AD (Yp)
      - Inflationary gap: Y>Yp
        Recessionary gap: Y<Yp
      - AD 可以在SR 向左或向右，从而产生recessionary gap或者inflationary gap，但是LR有self correction，所有SRAS会移动，最后回到equilibrium
        
        AD 向右： in SR(PL⬆️ Y⬆️)
        in LR (inflationary gap->nominal wages⬆️production cost⬆️->SRAS ⬇️向左）
      - 如果SRAS向左，PL⬆️Y⬇️，会产生stagflation（inflation+recession）
    - - demand-side policy(AD)
        
        fiscal policy
        
        government spending⬆️ AD⬆️
        
        tax⬇️ disposable income⬆️
        
        monetary policy
        
        limited reserve
        
        open market operation
        
        discount rate
        
        reserve requirement
        
        ample reserve
        
        administered interest rate
        
        open market operation
      - supply-side policy(AS)
        
        market-based
        
        interrentionist