1、MicroeconomicsYan YANChapter 1:The Fundamentals of Economics（A.Introduction）You want to buy a clock in the grocery near the campus.The price is$20.A friend tells you that it is$10 in the supermarket in downtown.Would you buy the clock in the supermarket？You want to buy a computer which is$2510.while
2、 it is$2500 in the supermarket in downtown.Wherever you buy the computer,it would return to the producer if there is any problem.Where would you buy it？Chapter 1:The Fundamentals of Economics（A.Introduction）1.1 Scarcity and Efficiency What is economics?Economics is the study of how societies use sca
3、rce resources to produce valuable commodities and distribute them among different people.What is efficiency?Efficiency denotes the most effective use of a societys resource in satisfying peoples wants and needs.In economics,we say that an economy is producing efficiently when it cannot make anyone e
4、conomically better off without making someone else worse off.Chapter 1:The Fundamentals of Economics（A.Introduction）1.2 Microeconomics and Macroeconomics What is Microeconomics?It is concerned with the behavior of individual entities such as markets,firms and households.Founder:Adam smith,What is Ma
5、croeconomics?It is concerned with the overall performance of the economy.Funder:John Maynard,Chapter 1:The Fundamentals of Economics（A.Introduction）1.3 The logic of economics The post hoc fallacy It involves the inference of causality.It occurs when we assume that,because one event occurs another ev
6、ent,the first event caused the second event.广东省的人口死亡率为5.4，是全国最低的省份，由此我们就推定生活在广东一定有利于身体健康。Failure to hold other things constant It refers to the failure to hold other things constant when thinking about an issue.税率对收入的影响 Fallacy of composition When you assume that what is true for the part is also tr
7、ue for the whole,you are committing the fallacy of composition.一个农场主丰收 VS.所有农场主都丰收Chapter 1:The Fundamentals of Economics(B.The Three problems of economic organization)There are three problems of economic organization:What commodities are produced and in what quantities?How are goods produced?For wh
8、om are goods produced?There are three types of economies:Market economy Command economy Mixed economyChapter 1:The Fundamentals of Economics(C.Societys technological possibilities)1.4 inputs and outputs Inputs are commodities or services that are used to produce goods and services.Outputs are the va
9、rious useful goods or services that result from the production process and are either consumed or employed in further production.饺子的投入与产出：投入：面粉、肉、蔬菜、调味品、包饺子的技术、擀面杖 产出：饺子Chapter 1:The Fundamentals of Economics(C.Societys technological possibilities)Factors of production:Another name for inputs It can
10、 be classified into three board categories:land,labor and capital Land(natural resource):represents the gift of nature to our productive process.Labor:consists of the human time spent in productionworking in automobile factories,tiling the land,teaching school,or baking pizzas.Capital resource from
11、the durable goods of an economy,produced in order to produce yet other goods.建造房子需要什么生产要素？Chapter 1:The Fundamentals of Economics(C.Societys technological possibilities)1.5 The Production-Possibility Frontier Suppose the income is fixed,we can choose to produce gun or butter.(shown in the chart)Poss
12、ibilityButterGunsA015B114C212D39E45F50Chapter 1:The Fundamentals of Economics(C.Societys technological possibilities)Chapter 1:The Fundamentals of Economics(C.Societys technological possibilities)Chapter 1:The Fundamentals of Economics(C.Societys technological possibilities)Chapter 1:The Fundamental
13、s of Economics(C.Societys technological possibilities)1.6 Opportunity cost The cost of the forgone alternative is the opportunity cost of the decision.How to calculate opportunity cost?Suppose the country decide to increase its gun purchase from 9000 guns at D to 12000 units at C,what is the opportu
14、nity cost of the decision?1 million butter.Chapter 1:The Fundamentals of Economics Exercise&Discussion Assume that Econoland produces haircuts and shirts with inputs of labor.Econoland has 1000 hours of labor available.A haircut requires hour of labor,while a shirts requires 5 hours of labor.Constru
15、ct Econolands production-possibility frontier.Chapter 1:The Fundamentals of Economics Consider the following problem:after your 8hours a day of sleep,you have 16 hours a day to deliver between leisure and study.Let leisure hours be the X variable and study hours be the Y variable:1)plot the straight
16、-line relationship between all combinations of X and Y on a blank piece of graph paper.2)let us say that you absolutely need 6 hours of leisure per day,no more,no less.On the graph,mark the point that corresponds to 6hours of leisure.3)now consider a movement along the curve:assume that you decide t
17、hat you need only 4 hours of leisure a day.Plot the new point.Chapter 2：Markets and Government in a Modern Economy Imagine what process does meat experience?What is market?It is a mechanism through which buyers and sellers interact to determine prices and exchange goods and services.Price=Demand Pri
18、ce Demand Price AVCMIN B.MC=P,PAFCMIN C.RevenueMAX D.AVCMIN Answer:AChapter 8:Analysis of Perfectly Competitive Markets 4.Suppose at certain quantity,firm has minimum average cost,that means:A.MC=AC B.firm has the most profit C.firm has the least profit D.firm has extra profit that is more than 0 An
19、swer:AChapter 8:Analysis of Perfectly Competitive Markets 5.In perfectly competitive market,the condition for equilibrium for firm in short run is:A.P=AR B.P=MR C.P=MC D.P=AC Answer:CChapter 8:Analysis of Perfectly Competitive Markets In a perfect competitive market,suppose a firms cost function in
20、short run is STC=0.1Q3-2Q2+15Q+10,please find:1)quantity and profit in short run when the price is$55;2)what is the price when the firm should shutdown;3)supply function of this firm in short run.Chapter 8:Analysis of Perfectly Competitive Markets 1)SMC=0.3Q2-4Q+15 According to the Rules for a firms
21、 under perfect competition=MC=55 So,0.3Q2-4Q+15=55,Q=20 2)AVC=0.1Q2-2Q+15 dAVC/dQ=0,that is 0.2Q-2=0,so Q=10 P=AVC=5Chapter 8:Analysis of Perfectly Competitive Markets 3)when there is maxmum proofit,P=MC so,0.3Q2-4Q+15=P Q=416-1.2(15-P)1/2/0.6 Q=4+(1.2P-2)1/2/0.6 when P5 or P=5 Q=0 when PMC,addition
22、al unit of output provides more revenue than its costs,the firms profit will increase When MR2 Bundling products are complements,substitutes and non-related goods.Chapter10：Oligopoly and Monopolistic Competition Exercise 1 Suppose you are a supplier in the imperfect market and you are thinking of ho
23、w to price the goods that you produced.The marginal cost is$200,and the demand curve is P=1000-2Q.1)if you are making the fixed price,what is the quantity and price that you are going to choose?What are the total revenue and profit?2)if you take price discrimination for customers,that is to say,you
24、charge$600 and$400 for different customers.What are the quantities under the two prices?What are the total revenue and profit?3)compare the results of question 1and question 2,which one is better?4)under price discrimination,is the consumer surplus raised or decreased?Please plot curves to show your
25、 point.Chapter10：Oligopoly and Monopolistic Competition Exercise 2 Suppose the demand function is P=200-2Q,supply function is P=2Q.1)if the market is perfect competition market,that means demand and supply are decided by the market.Please calculate the consumer surplus and producer surplus.2)if the
26、market is imperfect competition market,that means price discrimination will be taken.Under first degree price discrimination,what will be the output of this supplier?Please Please calculate the consumer surplus and producer surplus.And plot the curve to show your point.Chapter10：Oligopoly and Monopo
27、listic Competition Exercise 3 Suppose there is only one airline company in city A.if the price of flight tickets is$300,500 tickets will be sold.If the price is$150,200 more tickets will be sold.The marginal cost for each ticket is$100.1)if the ticket is fixed for all customer,the price will be(),th
28、e quantity will be(),the profit will be()2)If price discrimination is allowed to be taken.The most profit for this company is()3)under price discrimination,the profit will be(),the consumer surplus will be()A.increased;increased B.increased;decreased C.decreased;increased D.decreased;decreasedChapte
29、r10：Oligopoly and Monopolistic Competition Exercise For a monopoly firm,demand function is given as Q=100-0.5P,MC=40,if this firm takes first degree price discrimination,please calculate the marginal revenue when profit is maximum.Chapter 11：Uncertainty and Game Theory 11.1 Economic risk and uncerta
30、inty Suppose you are trying to explore gold,there are uncertainties like:Cost Machine Labor ProfitChapter 11：Uncertainty and Game Theory Speculation It involves buying and selling in order to make profits from fluctuations in price.A speculator wants to buy low and sell high Is speculation beneficia
31、l to the society?Speculators can move goods from periods of abundance to period of scarcity.They do this by buying when goods are abundant and prices are low and selling when goods are scarce and price are high,and this indeed can improve a markets efficiency.Chapter 11：Uncertainty and Game Theory C
32、orn harvest once a year in autumn，how speculator affect the price of corn?A well-informed corn speculator realizes that if all the corn is thrown on the market after the autumn harvest,it will fetch a very low price because there will be a glut on the market.Several months later,when corn is running
33、 short,the price will tend to skyrocket.In this case,speculator can make a profit by 1)purchasing some of the autumn crop while it is cheap 2)putting it into storage 3)selling it later when the price has risen As a result,the autumn price increases,the spring supply of corn increases,and the spring
34、price declines.Chapter 11：Uncertainty and Game Theory Is speculator increase the public interest?Is period of abundance stands for low marginal utility or high marginal utility?Speculation is buying where the price and marginal utility of the good are low and selling where the price and marginal uti
35、lity are high.Chapter 11：Uncertainty and Game Theory Risk and uncertainty A person is risk-averse when the displeasure from losing a given amount of income is greater than the pleasure from gaining the same amount of income.Please find whether you are risk-averse or not through the questionnaire.Mor
36、al hazard It is at work when insurance increases risky behavior and there by changes the probability of loss.Chapter 11：Uncertainty and Game Theory Moral hazard in application 医疗保险是否应该涵盖美容整形？保险公司是否会为学生提供“成绩保险”？Adverse selection Suppose insurance company divides people into two kinds:healthy and unhe
37、althy.It claims social insurance$2000 per year for healthy people,and$8000 per year for unhealthy people.On average,people should pay$5000 per year.Chapter 11：Uncertainty and Game Theory For those who are healthy,$5000 per year is too expensive.As a result,healthy people would not buy this social in
38、surance.While as for those who are unhealthy,$5000 per year is a real bargain.As a result,unhealthy people would buy this insurance.Finally,insurance company would lose when most customers are unhealthy.So it will increase the price of insurance.Exercise P222.2Chapter 11：Uncertainty and Game Theory
39、11.2 Game theory Game theory analyzes the way that two or more players choose strategies that jointly affect each other.You are the head of an established firm,A,whose motto is“we will not be undersold”.You open your browser and discover that nEwBooks,an upstart internet bookseller has an advertisem
40、ent that says“we sell for 10%less”.What would be the result?Chapter 11：Uncertainty and Game TheoryChapter 11：Uncertainty and Game Theory Payoff table refers to the interaction between two firms or people A payoff table is a means of showing the strategies and the payoffs of a game between two player
41、s.Dominant strategy arises when one player has a single best strategy no mater what strategy the other player follows.When both players have a dominant strategy,we say that the outcome is dominant equilibrium.Chapter 11：Uncertainty and Game Theory Explain what A means Explain what C means and why Pl
42、ease find what is the dominant strategy for Amazing Please find whether nEwBooks have dominant strategy What is the possible strategy for both of them?Chapter 11：Uncertainty and Game Theory A Nash equilibrium is a solution in which no player can improve his or her payoff given the other players stra
43、tegy.In other words,each players strategy is a best response against the there players strategy.纳什均衡是一个在其他博弈者的战略给定时，没有一方还能改善自己的获利的状况。也就是说，在博弈者A的战略已定时，另一个对手不可能做的更好，反之亦然，每一种战略都是针对其对手战略的最佳反应。Chapter 11：Uncertainty and Game Theory 11.3 The prisoners dilemma Prisoners Molly and Knuckles,who are partners
44、in crime.The district attorney interviews each separately,saying“I have enough on both of you to send you to jail for a year.But Ill make a deal with you:if you alone confess,you will get off with a 3-month sentence,while your partner will serve 10 years.If you both confess,you will both get 5 years
45、.”Chapter 11：Uncertainty and Game TheoryChapter 11：Uncertainty and Game Theory 11.4 智猪博弈 猪圈里面有一头大猪和一头小猪，在猪圈的一端设有一个按钮，每按一下，位于猪圈另一端的食槽中就会有10单位的猪食进槽，但每按一下按钮会耗去相当于2各单位猪食的成本。如果大猪先到食槽，则大猪吃到9单位食物，小猪仅能吃到1单位食物；如果两猪同时到食槽，则大猪吃7单位，小猪吃3单位；如果小猪先到，大猪吃6单位而小猪吃4单位食物。Chapter 11：Uncertainty and Game TheoryChapter 11：Un
46、certainty and Game Theory 11.5 The pollution game In a world of regulated firms,each profit-maximizing firm would prefer to pollute rather than install expensive pollution-control equipment.Moreover,any firm which behave altruistically and cleans up its waste will have higher production costs,higher
47、 prices and fewer customers.If its costs are high enough,the firm may even go bankrupt.Chapter 11：Uncertainty and Game TheoryChapter 11：Uncertainty and Game Theory 11.6 Winner take all societyChapter 11：Uncertainty and Game Theory Exercise 1.A and B write“cooperate”and“non-cooperate”on the paper,and
48、 then they show their words at the same time.If both of them write“cooperate”,they may get$100 each.If both of them write“non-cooperate”,they will get nothing.If A writes“cooperate”,and B writes”non-cooperate”.A will get S dollars and B will get T dollars,wise versa.What condition should Sand T meet
49、 if“cooperate”is dominant strategy.()A.S+T200 B.S100 C.S0,T100 D.Above is all wrong.ANSWER:CChapter 11：Uncertainty and Game Theory 1.Will JIA use strategy A?2.Please find out the non-dominant strategy in payoff table.3.Please find Nash equilibrium strategy in the payoff table.Chapter 11：Uncertainty and Game TheoryChapter 11：Uncertainty and Game Theory
