aleveleconomics基础讲义.ppt

A-LEVEL Microeconomics basic,2,1 What is Economics about? The problem of scarcity,Economics is the study of how society chooses to allocate its scarce resources to the production of goods and services in order to satisfy unlimited wants.,Human wants are unlimited, but Resources are limited (scarce) A central problem therefore existswe call this the problem of SCARCITY,4,3 Definition of economics,Economics is the study of societys decisions about production consumption allocation of scarce resources in order to satisfy as many unlimited wants as possible.,5,4 Two branches of economics,Microeconomics is the branch of economics that studies decision-making by a single individual, household, firm, industry or level of government. Macroeconomics is the branch of economics that studies decision-making for the economy as a whole.,6,5 Macroeconomic Issues,aggregate demand, aggregate supply economic growth unemployment inflation balance of trade exchange rates,7,6 Microeconomic Issues,demand and supply decisions of what to produce, how to produce, for whom to produce the concept of opportunity cost based on comparing what you have decided vs what is the next best alternative you have given up rational decision making based on cost vs benefit; best value for money weighing up marginal costs and marginal benefits based on comparing the extra benefit with the extra cost the social implications of choice society i.e. taking into consideration how a certain choice may have an indirect cost on,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Resources,Resources are the basic categories of inputs used to produce goods and services. Resources can also be called the factors of production.,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Three categories of resources,Land Labour Capital,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Resources: land,Any natural resource provided by nature used in the process of production For example: forests, minerals, wildlife, oil, rivers, lakes, oceans May be renewable or non-renewable,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Resources: labour,The mental and physical capacity of workers to produce goods and services For example: farmers, nurses, lawyers Entrepreneurship is a special type of labour the creative ability of individuals to manage the combination of resources to produce products.,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Entrepreneurship,Organises and manages the resources needed to produce goods and services,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Resources: capital,Capital is the physical plant, machinery and equipment used to produce other goods. That is, human-made goods that do not directly satisfy human wants, for example: Earlier: axe, bow and arrow Now: buildings, production equipment, software, factories.,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,A note about financial capital,Economists do not include money in their definition of capital money simply gives a measure to the value of assets.,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Opportunity cost,The best alternative sacrificed for a chosen alternative Opportunity cost applies to personal, group and national decision-making, for example What could you be doing if you were not currently studying? How many new roads have to be forgone if the government spends tax revenues on homeland security?,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Marginal analysis,Marginal analysis examines how the costs and benefits change in response to incremental changes in actions. Any additional action by an individual or a firm, such as buying an additional pair of shoes or increasing production of a product by an additional unit, brings additional cost. The central question in marginal analysis is whether the expected benefits of that action exceed the added cost,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Marginal analysis,Marginal analysis helps businesses and individuals balance the costs and benefits of additional actions-whether to produce more, consume more, or other decisions-and determine whether the benefits will exceed costs, thus increasing utility.,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Marginal analysis,Marginal analysis benefits government policy makers, as well. Weighing the costs and benefits can help government officials determine if allocating additional resources to a particular public program will generate additional benefits for the general public,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Short-Run v Long Run,Short-Run: A time period in which at least one factor of production is fixed (i.e. cannot increase its amount) it is not defined in terms of number of days/weeks) Long Run: A time period long enough for all inputs to be varied It is not a defined period of time;,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Cost concepts,Total fixed costs are costs that do not vary as output varies and must be paid even if output is zero. Total variable costs are costs that are zero when output is zero and vary as output varies. Total cost is the sum of fixed cost and variable cost. TC = TFC + TVC,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Total costs,Note: The x and y axis units here are unrelated to the previous diagram,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Average cost concepts,Average fixed cost (AFC) total fixed cost divided by the quantity of output produced: Average variable cost (AVC) total variable cost divided by the quantity of output produced:,AFC = TFC,AVC = TVC,Q,Q,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Average total cost,Total cost divided by the quantity of output produced,ATC = AFC + AVC = TC,Q,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Marginal cost,Measures how much total cost increases when an additional unit of output is produced. MC : the change in total cost when one extra unit of output is produced,MC = TC = TVC,Q,Q,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Total costs,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Inverse relationship: MP & MC,Note: The x and y axis units here are unrelated to the previous diagram,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Average and marginal costs,This graph uses information from the previous slide,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Note the marginal-average rule,When MC AC, AC is rising. When MC = AC, AC is at its minimum point.,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Long-run situation,All factors of production are variable. there is time for the firm to build a new factory to install new machines, to use different production techniques, to combine inputs in whatever proportion and quantities it chooses; the firm will need to decide about the scale of its operation and the production techniques that it uses; these decisions will affect production costs so it is important to get these decisions right.,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Relation between LRAC and SRAC Curves,A firm with just one factory and faces SRAC curve (following diagrams); In the long-run it can build more factories and experiences economies of scale due to administrative savings, each successive factory will allow it to produce with a new lower SRAC curve; Thus with 2 factories it will have curve SRAC2 and with three then SRAC3, and so on; Each SRAC curve corresponds to a particular amount of the factor that is fixed in the short-run (in this case the factory); There are many SRAC curves as many different factories of different sizes or extensions to existing one could be made. The LRAC curve is an ENVELOPE CURVE,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Costs,Output,O,Examples of short-run average cost curves,SRAC2,SRAC3,SRAC4,SRAC5,Constructing a Long-run Average Cost Curve from Short-run Average Cost Curves,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,LRAC,Costs,Output,O,SRAC5,SRAC4,SRAC3,SRAC2,Constructing a Long-run Average Cost Curve from Short-run Average Cost Curves,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Scales of production,The long-run average cost curve is U-shaped. This reflects returns to scale three types are recognised: Economies of scale (LRAC falls as output rises) Constant returns to scale Diseconomies of scale (LRAC rises as output rises).,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Scales of production,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Economies of scale,A situation in which the long-run average cost curve declines as the firm increases output Sources of economies of scale: Specialisation and Division of Labour Greater efficiency of larger machines (eg combine harvester, super photocopier. Eg machine A costs $1000 eliminate duplication) Financial economies (bulk discounts) Economies of Scope (producing a range of products may increase sales and spread out overheads Eg: CD, DVD, players, amplifiers etc vs only CD) (Refer to Sloman p87,88 for more info),John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Constant returns to scale,A situation in which the long-run average cost curve does not change as the firm increases output.,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Diseconomies of scale,A situation in which the long-run average cost curve rises as the firm increases output Sources of diseconomies of scale: Bureaucracy Barriers to communication Management difficulties (e.g. lack of coordination). Production-line processes and interdependencies,John Sloman, Keith Norris: Principles of Economics 2e 2007 Pearson Education Australia,Long-run Costs,“To Scale” means that all inputs increase by the same proportion Decreasing returns to scale are quite different from diminishing marginal returns (where only the variable factor increases) DMR (short-run) and DRS (long-run),Profit Maximisation Sloman Ch 5,BUECO1507,Revenue,Defining total, average and marginal revenue total revenue: TR = P Q average revenue: AR = TR / Q marginal revenue: MR = TR / Q,Revenue,Revenue curves when price is not affected by the firms output (horizontal demand curve) average revenue (AR) marginal revenue (MR),Examining revenue curves in 2 situations,1) If a firm is very small relative to the whole market. 2) If a firm has a relatively large share of the market,O,O,AR, MR ($),Pe,S,D,D = AR = MR,Q (millions),Q (hundreds),(a) The market,The firm Being so small, its output, whatever it is, does not affect market price at all,Average Revenue and Marginal Revenue curves (1) of a firm that is very SMALL relative to the whole market. (Price-taking firm),Price ($),TR,Quantity (units),0 200 400 600 800 1000 1200,Price = AR = MR ($),5 5 5 5 5 5 5,TR ($),0 1000 2000 3000 4000 5000 6000,Total Revenue curve (1) of a firm that is very SMALL relative to the whole market. (Price-taking firm),Q,TR ($),Q (units),1 2 3 4 5 6 7,P =AR ($),8 7 6 5 4 3 2,TR ($),8 14 18 20 20 18 14,MR ($),6 4 2 0 -2 -4,MR,AR, MR ($),Quantity,AR,Average Revenue and Marginal Revenue curves (2) of a firm that has a relatively LARGE share of the whole market.,If such a firm wants to sell more, it can only do so by lowering price. If it chooses to raise its price, it will have to accept lower sales. Therefore AR (price) slopes downward. How about the MR curve?,Q (units),1 2 3 4 5 6 7,P =AR ($),8 7 6 5 4 3 2,TR ($),8 14 18 20 20 18 14,MR ($),6 4 2 0 -2 -4,MR,AR, MR ($),Quantity,AR,Average Revenue and Marginal Revenue curves (2) of a firm that has a relatively LARGE share of the whole market.,Supposing firm is selling 2 units at $7 each. It can sell the 3rd unit only by reducing the price of all units to $6. Selling the 3rd unit gains $6 but reducing the price of units 1 & 2 loses $1x2=$2. MR therefore = $6-$2=$4,TR,TR ($),Quantity (units),1 2 3 4 5 6 7,P = AR ($),8 7 6 5 4 3 2,TR ($),8 14 18 20 20 18 14,Total Revenue curve (2) of a firm that has a relatively LARGE share of the whole market.,Quantity,Revenue curves and price elasticity of demand,AR, MR ($),Quantity,MR,AR,Revenue curves and price elasticity of demand,Recall: a) When demand is elastic and price is reduced, total revenue increases. Total revenue increasing means MR is positive b) When demand is inelastic and price is reduce, total revenue decreases. Total revenue decreasing means MR is negative,TR,Elastic,Inelastic,TR ($),TR Curve for a Firm Facing a Downward-sloping Demand Curve,Quantity,Revenue,Revenue curves when price varies with output (downward-sloping demand curve) average revenue (AR) marginal revenue (MR) total revenue (TR) revenue curves and price elasticity of demand Shifts in revenue curves,Hidden,Determining a) Output where profit is maximised b) Profit at that output,1) Using total curves maximising the difference between TR and TC 2) Using marginal and average curves,TR, TC, TP ($),TP,TR,TC,Quantity,1) Using total curves,a) Profit is maximized when output is 3 b) Maximum profit is d-e,Quantity,Costs and r