Micro 1/31

*absolute advantage is never the reason that you specialize*

(slavery in Sudan reading not required but suggested)
-do gooders raised the demand of slaves, which meant that there were more suppliers were willing to supply at a higher price

Chapter 4 in book

-start with demand because without demand, there is no supply
-when you are talking about demand, you are talking about the curve… Therefor an increase in demand would shift the curve out
-***quantity demanded happens on the demand curve***
Demand schedule for Apartments
Price Quantity Demanded
300 400
350 300
400 200
450 100

-Law of Demand: as price goes up, quantity demanded goes down all else constant
-based on Law of Diminishing Marginal Benefit: as you consumer more of “x”, the additional benefit per unit will decrease (what drives the Law of Demand)
Demand equation: P = a+b(Qd)
-b= (p1-p0)/(q1-q0)
-***the slope of a demand curve in this class will ALWAYS be negative***
slope= -1/2
P= a- 1/2(Qd) (from example)
Plug in a P & Q set
400= a- 1/2(200)
a=500
Supply and demand problem on site
Graph

The demand curve is your marginal benefit
The supply curve is your marginal cost

SUPPLY
(to shave head)
P Quantity Supplied
100,000 42
10,000 35
1,000 25
500 23
100 21
50 15

Law of Supply: as price goes up, quantity supplied goes up all else constant
If supply goes up, the curve shifts to the right

Supply schedule of apartments
P Quantity Supplied
250 100
400 200
550 300
700 400

P = a+b(Qs)
b = (P1-P0)/(Q1-Q0)
b = 1.5

Pick a price and quantity supplied (doesn’t matter which pair)
P = a+ 1.5 Q (the supply curve will Always be positive)
700 = a + 1.5(400)
a=100
Equilibrium is where Quantity Demanded and Quantity Supplied are equal (MC=MB)

How to find equilibrium:
-graph
-tables
-set equations equal to each other
-get Quantity first, then plug quantity into either equation
Check by using more than one method

Disequilibrium: when you are not in equilibrium
1. shortage: Qd>Qs
2. surplus: Qd<Qs

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