Monday, August 24, 2020
In the current paper, I might want to give my contentions against the new reviewing approach, whose nature is arbitrary determination of evaluations. Truth be told, there are two purposes of its unsteadiness: the way that it really quantifies studentsÃ¢â¬â¢ karma as opposed to their actual accomplishments and that it devastates the whole motivation behind instruction as the way toward picking up information and aptitudes. As a matter of first importance, it is important to characterize the term Ã¢â¬Å"gradingÃ¢â¬ . We will compose a custom exposition test on New evaluating approach or then again any comparable theme just for you Request Now As indicated by the Educational Policies Committee, reviewing is Ã¢â¬Å"the fundamental emblematic strategy for recording the assessment of a studentÃ¢â¬â¢s scholastic performanceÃ¢â¬ (Educational Policies Committee, 1991). Assessment, thusly, can be characterized as appraisal of the estimation of individual accomplishments, as indicated by the current instructive principles. Instruction, as indicated by Fuhrmann and Grasha (1983), is Ã¢â¬Å"the advancement of information, abilities and character of understudies through consistent motivationÃ¢â¬ (Fuhrmann and Grasha, 1983, p.156). As one can comprehend, the new evaluating arrangement doesn't set up the interrelation between the studentÃ¢â¬â¢s scholastic fulfillments and execution and the representative imprint, letter or figure. Those students whose accomplishments are less fortunate have a chance to get higher evaluations through arbitrary choice technique, while increasingly fruitful and dedicated understudies may bomb regarding grade. Thus, one can summarize that the new arrangement really quantifies the personÃ¢â¬â¢s karma, as the evaluation doesn't rely on their endeavors, aptitudes or capacities. Besides, given the meaning of training, it is conceivable to expect that the new reviewing arrangement negates to the reason for school or college examines. This guideline of reviewing doesn't inspire understudies to build up the essential information and aptitudes, as their exhibition isn't properly assessed, for example reality with regards to the estimation of accomplishment is misshaped. Along these lines, understudies, monitoring the way that the genuine data about their accomplishment won't be given, are probably not going to take a shot at their scholarly presentation and lose the ability to succeed. To summarize, a positive examination of oneÃ¢â¬â¢s accomplishments is among the significant motivators in the training framework. The students consequently are probably not going to turn out to be genuine experts after this help is killed with the presentation of the new evaluating arrangement. Works refered to Instructive Policies Committee. Obligation regarding Grading and Grading Policy. 4 Apr 1991, http://www.usu.edu/strategies/pdf/Grading-Responsibility.pdf Fuhrmann, B. what's more, Grasha, A. A Practical Handbook for College Teachers. Boston: Little Brown, 1993. Ã Ã The most effective method to refer to New evaluating approach, Essay models
Saturday, August 22, 2020
Question: Examine about theProfessional Numeracyfor Business Ethics. Answer: Prologue to the Topic Business Ethics is the type of expert morals or applied morals that can inspect the moral or good issues just as the moral rules that emerge in nature of a business. It is likewise alluded to the arrangements of qualities or the contemporary norms or the arrangements of qualities, which administer the conduct and the activity of a person in the associations. The ethical standards just as qualities or standards can direct the route through which a business carries on. Theme Alignment with Curriculum Document Business Ethics is a significant theme in Humanity and Social Science. This is just in light of the fact that that the Business morals has the social ramifications or it has an effect on the general public. Business Ethics adequately manages both of the business just as the social standards and qualities. In this way, if there should arise an occurrence of examining the Humanity and sociology, Business Ethics ought to be consolidated in the investigation of Humanity and Social Science and lined up with the educational plan records. Arithmetic Involvement There are scarcely any huge models, which can depict the fundamental inclusion of the arithmetic in Business Ethics. These are the Berles model, Dodds model and the GermanJapanese model. Globalization has executed the whole social orders responsible just as reliant for the political, social and natural difficulties that compromise for sabotaging the common eventual fate of individuals. Berles model is the investor focused model of guardian obligations. Then again, in the Dodds model, executives of the organization are gatekeepers of the considerable number of interests, which the enterprise influences and not only workers of its truant proprietors. Aside from that, if there should be an occurrence of the GermanJapanese model, the organizations center around the rights and interests of workers just as this model additionally considers the way that the representatives are first among partners Significant Economic Concepts There are scarcely any huge just as helpful financial ideas in relationship with the numerical inclusion in the Business Ethics theme. These monetary ideas are office costs, deficient contracting, uneven data just as good risks route. The term organization costs alludes to the inescapable expenses brought about by an organization in utilizing an operator (who may utilize organization assets to their own advantage) to follow up in the interest of the head. Inadequate contracting is alluded to the holes inside the authoritative plan made in formal way and to the whole relationship aspects that make it work easily or work by any means. The US financial expert Joseph Stiglitz instituted the term hilter kilter data disorder. Stiglitz is alluded to the distinctions in data between, state, the laborer and his manager, the moneylender and the borrower, the insurance agency and the guaranteed. The ethical danger was used initially with regards to protection to allude to the people groups incl ination with protection spread for incomprehensibly decreasing the consideration just as care they take for maintaining a strategic distance from or diminishing safeguarded misfortunes. Educating and Learning Activities There is barely any instructing just as learning exercises those essential for increasing all the aptitudes and information with respect to a specific subject. These are as per the following: Instructions to execute large gains in the understudy learning of the instructors To help the understudies for tolerating that there is more than one right answer Learning upgrade Getting ready for the talks Upgrading the comprehension of the understudies Making increasingly significant the talks as the learning encounters To help the understudies for understanding the troublesome idea To empower the understudies for perusing just as dropping by being set up for the class To assist understudies with mastering the examination just as the substance on Business Ethics Section 2 Models from The Tiger That Isn't This specific book has given the correct case of how numbers can be misconstrued or abused with the proof plainly clarified just as deconstructed in such a way which is anything but difficult to comprehended. Increasingly troublesome ideas are handled as every section creates, in a way that can be gotten to even to those to whom Mathematics is a cobwebbed puzzle. This book has additionally given the instances of genuine for the immediate use in the homeroom. The Journalists should peruse it intently and Mathematics or Statistics educators will discover an abundance of reallife models for direct use in the study hall. This book has additionally portrayed a view that science isn't just a subject of scholarly worth and that it is to be sure not to hard for every one of us to have a go at. The Tiger that isn't has indicated that a little Mathematics goes far towards seeing through the trap of numbers and rates we see around us towards the genuine realities of the story. Impact of the Examples These models have just attempted to make Mathematics intriguing to the students as the greater part of them alarm to tackle issue aggregates. With the assistance of the information depicted in this book, it can without much of a stretch be comprehended that Mathematics is additionally effectively to learn by the students. Then again, this book has additionally depicted that a little Mathematics can go far towards seeing through the rates just as the snare of numbers around the students to the genuine realities of this specific story. Then again, with the assistance of the idea worked in this book, it can likewise be comprehended that the science has its colossal ramifications just as impacts more than a few different subjects. This book has additionally settled the view that Mathematics is essentially not a scholastic qualities subject just as it isn't in fact unreasonably hard for the students all to have a go at. The creators are proficient enough at turning intense issues around just as allowing students for getting them. The book isn't just for mathematicians, however for everybody who for the most part watches the news or read the paper. The guidance can be given to the columnists for intently perusing it just as science or details educators would discover an abundance of genuine models for direct use in the study hall. Reference List Councilman, M. K. (2013).Motivation for accomplishment: Possibilities for instructing and learning. Routledge. Beetham, H., Sharpe, R. (2013).Rethinking instructional method for a computerized age: Designing for 21st century learning. routledge. Blastland, M., Dilnot, A. W. (2008).The tiger that isn't: seeing through a universe of numbers. Profile Books. DesJardins, J. R., McCall, J. J. (2014).Contemporary issues in business morals. Cengage Learning. age Rossouw, D., Van Vuuren, L. (2010).Business morals. Oxford University Press, 2010. Ferrell, O. C., Fraedrich, J. (2015).Business morals: Ethical dynamic cases. Nelson Education. Hoffman, W. M., Frederick, R. E., Schwartz, M. S. (Eds.). (2014).Business morals: Readings and cases in corporate ethical quality. John Wiley Sons. Kang, D. (2013). Paper Tiger: Why isnt the remainder of Asia terrified of China.Foreign Policy. April,25. Lea, M. R., Nicoll, K. (2013).Distributed learning: Social and social ways to deal with training. Routledge. Manninen, J. also, Tuomela, R. eds., 2012.Essays on clarification and comprehension: concentrates in the establishments of humanities and social sciences(Vol. 72). Springer Science Business Media. Okabe, A. (Ed.). (2016).GIS-based Studies in the Humanities and Social Sciences. CRC Press. Weiss, J. W. (2014).Business morals: A partner and issues the board approach. Berrett-Koehler Publishers. Williford, C., Henry, C. J., Friedlander, A. (2012).One culture: Computationally serious research in the humanities and sociologies: A report on the encounters of first respondents to the delving into information challenge. Board on Library and Information Resources. Yow, V. R. (2014).Recording oral history: A guide for the humanities and sociologies. Rowman Littlefield.
Thursday, July 23, 2020
American Capitalism American Capitalism HomeâºEconomics PostsâºAmerican Capitalism Economics PostsHenry Ford came up with the Fordism philosophy, in the event coming up with his own concept of practices in business. He introduced the daily 5 dollar pay in 1913 and the Assembly line. The concept of Fordism has eventually come to the realization of consumerism, rationalization and community ideology. This is concept is often used in the initial sense as a brief portrayal of sense of mass production.The mobile assembly line spearheaded the technical competence in task processes in industries. This was achieved through the use of tools which were of special purpose. It also improved the mode of transport globally. This led to the rise in the conveyor belts that are used in various Industrial processes. High wages and low prices principle culminated into the reduction of automobile cost.Eventually, the franchising system came up as a technical business innovation. This led to the rise in the period of con sumerism. The workers now were able to purchase the vehicles that they manufactured. The income that the workers earned was used to improve their standards of living.Fordâs intention was to make complex procedures simpler to undertake as a result of realizing that the people were productive. Initially, the assembly line existed although it was not as effective as Fordâs assembly line. A great achievement that Ford made was the standardization of output.Then there came the economic depression. In the year 1927, Ford was not able to offer his cars for sale. The greatest global economy crumpled in 1930. Although that happened, the most amazing thing is that Ford attributed the economic depression to laziness. Therefore, he named that particular period, the era of laziness.
Friday, May 22, 2020
Julia Mordecai Mrs. Sklarski Religion 3 June 2016 Human Trafficking What is human trafficking? Ã¢â¬Å"Human trafficking is a common form of slavery today that involves the illegal trade of people for exploitation or commercial gain.Ã¢â¬ It is when people are bought and sold basically into slavery. There are multiple types of human trafficking which are domestic Sex Trafficking of Adults, Sex Trafficking of International Adults and Children, Forced labor, and Domestic Servitude. Human trafficking does not just happen in the U.S. it happens all around the world. Most traffickers who buy and sell other humans mostly send them out of their country and to a different one to work. Most questions people ask is Ã¢â¬Å"Is human traffickingÃ¢â¬ ¦show more contentÃ¢â¬ ¦Traffickers have many ways in controlling their victims by physically, emotionally, and sexually abusing them. People who are mostly at risk of human trafficking runaway and homeless teenagers that are male, female, and transgender. Traffickers can sense vulnerability and low self esteem in the victims they choose. Social media can play a huge part in human trafficking because itÃ¢â¬â¢s very easy for a trafficker to pretend to be someone else on the internet that a victim may trust to lure them into human trafficking. The signs to look out for when a person is being trafficked is their living conditions, poor mental health and abnormal behavior, health, and lack of control. A trafficker that is convicted of human trafficking can face 15 years to life in prison and can face fines up to $1,500,000. Human trafficking happens all over the world no matter what country you live in. Every year at least 600,000 to 800,000 men, women, and children are bought, forced, and sold into human trafficking. Law enforcement is trying to make this statistic go down by trying hard to prevent human trafficking not only in the United States but also in other countries. Not only is law enforcement trying to prevent human trafficking but the church is also. Churches try and prevent this by starting organizations against human trafficking. These organizations help look for ways to try and prevent human trafficking from happening and also helping the victims that have escaped and survived human
Thursday, May 7, 2020
Read the prose passage carefully and write an essay in which you describe the attitude of the narrator toward nature. Make specific references to the text and show how the author uses figurative language, comparison, and contrast to convey this attitude. As you write, remember your essay will be scored based on how well you: develop a multi-paragraph response to the assigned topic that clearly communicates your thesis to the audience. support your thesis with meaningful examples and references from the text, carefully citing any direct quotes. organize your essay in a clear and logical manner, including an introduction, body, and conclusion. use well-structured sentences and language that are appropriate for yourÃ¢â¬ ¦show more contentÃ¢â¬ ¦In the presence of nature a wild delight runs through the man, in spite of real sorrows. Nature says, -he is my creature, and maugre [in spite of] all his impertinent griefs, he shall be glad with me. Not the sun or the summer alone, but every hour and season yields its tribute of delight; for every hour and change corresponds to and authorizes a different state of the mind, from breathless noon to grimmest midnight. Nature is a setting that fits equally well a comic or a mourning piece. In good health, the air is a cordial of incredible virtue. Crossing a bare common [park or grassy square], in snow puddles, at twilight, under a clouded sky, without having in my thoughts any occurrence of special good fortune, I have enjoyed a perfect exhilaration. I am glad to the brink of fear. In the woods, too, a man casts off his years, as the snake his slough [dead skin] and at what period soever of life is always a child. In the woods is perpetual youth. Within these plantations of God, a decorum and sanctity reign, a perennial festival is dressed, and the guest sees not how he should tire of them in a thousand years. In the woods, we return to reason and faith. There I feel that nothing can befall me in life-no disgrace, no calamity (leaving me my eyes), which nature cannot repair. Standing on the bare ground-my head bathed by the blithe [joyous] air and uplifted into infinite space-all meanShow MoreRelated Nature Themes in HurstonÃ¢â¬â¢s Novels, Their Eyes Were Watching God and Seraph on the Suwanee508 Words Ã |Ã 3 PagesNatur e Themes in HurstonÃ¢â¬â¢s Novels, Their Eyes Were Watching God and Seraph on the Suwanee Nature themes resound throughout HurstonÃ¢â¬â¢s Their Eyes Were Watching God and Seraph on the Suwanee. Perhaps two of the most notable instances where the lush Florida scenery augments the novelsÃ¢â¬â¢ plot lines are the Ã¢â¬Å"tree scenesÃ¢â¬ , in which Janie kisses Johnny Taylor beneath the pear tree in Their Eyes Were Watching God (p. 10-12) and Arvey loses her virginity to Jim beneath the mulberry tree in Seraph on theRead MoreThomas has a very distinctive eye for the miniature of nature, often overlooked by others. Explore his appreciation of the natural world in the poem Ã¢â¬ËBut These Things Also.Ã¢â¬â¢1169 Words Ã |Ã 5 PagesThomas has a very distinctive eye for the miniature of nature, often overlooked by others. Explore his appreciation of the natural world in the poem Ã¢â¬ËBut These Things Also.Ã¢â¬â¢ But These Things Also is a poem that presents us with an alternative view of Winter and Spring. Similarities are drawn between the two seasons, and Thomas explains how the two are not separate entities, but instead merge into one another until they are inseparable. Thomas connection with nature, and the time that he would spendRead MoreTintern Abbey as a Nature Poem724 Words Ã |Ã 3 PagesTintern Abbey as a nature poem Throughout WordsworthÃ¢â¬â¢s poem Ã¢â¬Å"Tintern Abbey,Ã¢â¬ he uses the image of the eyes, more specifically what the eye is able to perceive. He begins the poem by describing what it is his eyes are seeing as he paints for the reader a picture of where he is situated in nature. Details of shape, color and movement are revealed, yet it is not with the eyes that the scene is made visible to readers, it is with the mind that the trees, rocks and hedge-rows emerge. This plays intoRead MoreIn The PoemsMy Mistress Eyes Are Nothing Like The Sun1137 Words Ã |Ã 5 PagesMistress Eyes Are Nothing Like the Sun and Shall I Compare Thee to a Summer s Day?, William Shakespeare seems to compare his loved ones to nature frequently. When you read these two poems you can really see he uses natural elements in order for him to show that nature is superior to human life. However, Shakespeare comes to the conclusion that even though nature is more perfect than human beings, he loves his lovers m ore than nature for the unique qualities that human beings have over nature. AlreadyRead MoreAnalysis Of Ralph Emerson And Michael W. Popejoy927 Words Ã |Ã 4 PagesBest? Beauty in nature is a topic that may be depicted in various ways. People see in different lights. The part a person wishes to see often is what sets people apart from one another. There are people who look at life as a glass half full, and those who see it half empty. The outlook on beauty is the same way. It is how one decides to see it. As the saying goes beauty is in the eye of the beholder. Ralph Waldo Emerson discussed his idea of what beauty means in his essay Ã¢â¬Å"NatureÃ¢â¬ in chapter IIIRead MoreTranscendentalism Essay1384 Words Ã |Ã 6 Pagesessential part of human nature. The evidence is in the common culture of religions in the world. The soul is the essence of humanity and spirituality is the condition of oneÃ¢â¬â¢s soul. Spirituality is the condition of a consciousness. One answer to creating this essential growth in spirituality is Transcendentalism. Transcendentalism is the rebellion of oneÃ¢â¬â¢s soul against the societal laws that humanity upholds. It is the integrity of a being and the healing of a scarred mind through nature. Ralph Waldo EmersonRead MoreRomantic and Gothic Literature1659 Words Ã |Ã 7 Pagesbetween romantic and gothic literature. One of the most defining characteristics on romanticism is the tendency to exalt nature. The wilderness is often described to the minutest detail, as fully fleshed out as many of the human characters in the story. The Last of the Mohicans is a prime example of the nature worship practiced by romantics. Cooper describes the area in which Hawk-eye and Chingachgook hold a discussion as follows: Ã¢â¬Å"The vast canopy of woods spread itself to the margin of the river, overhangingRead MorePlatos Allegory Of The Cave Essay1537 Words Ã |Ã 7 PagesHuman Freedom Freedom in mind, freedom in nature, and freedom in subjectivity of individual are three kinds of freedoms. However, freedom should be expressed within the limits of reason and morality. Having freedom equals having the power to think, to speak, and to act without externally imposed restrains. As a matter of fact, finding freedom in order to live free is the common idea in Plato with The Allegory of the Cave; Henry David Thoreau with Where I lived and What I lived for; and JeanRead MoreEssay on James Joyce1161 Words Ã |Ã 5 Pagesgiven for example, Her name sprang to my lips at moments in strange prayers and praises which I myself did not understand. His eyes were often full of tears (I could not tell why) and at times a flood form my heart seemed to pour itself out into my bosom. The reports are all characteristic of religious and occult practices. Joyce reemphasizes the religious nature of the boys affair by leading his readers to the back room of the boys house that is charged with supernatural tendencies. TheRead MoreEssay Shakespeares Sonnet 18823 Words Ã |Ã 4 Pagesis during this time of the year that the flowers and the nature that surround them are at there peak for beauty. The theme of the poem is to show the speakers true interpretation of beauty. Beauties worst enemy is time and although beauty might fade it can still live on through a persons memory or words of a poem. The speaker realizes that beauty, like the subject of the poem, will remain perfect not in the eyes of the beholder but the eyes of those who read the poem. The idea of beauty living through
Wednesday, May 6, 2020
ECON *120: Principles of Microeconomics Spring 2010 I. FOUNDATIONS OF ECONOMICS A. Scarcity, Production Possibilities, Efficiency and Exchange Section I. We will write a custom essay sample on Econ 120 Ã¢â¬â Principles of Micro-Economics or any similar topic only for you Order Now A Learning Objectives: Ã¢â¬ ¢ Define or explain a number of basic economic terms and concepts. Ã¢â¬ ¢ Explain, illustrate, and apply marginal analysis. Ã¢â¬ ¢ Explain, illustrate, and apply the production possibilities model. Ã¢â¬ ¢ Explain, illustrate, and apply the law of comparative advantage. 1. Ã¢â¬Å"Life is EconomicsÃ¢â¬ Q: Is this statement true or false? Why? 2. Economic Goals and Priorities of Society, or, Ã¢â¬Å"What does society want out of its economy? Ã¢â¬ ¢ Ã¢â¬ ¢ Ã¢â¬ ¢ Ã¢â¬ ¢ Ã¢â¬ ¢ Economic growth/rising living standards Low unemployment/high employment Low inflation/stable prices Economic equity Economic efficiency Remark: On the individual decision-making level, the incentives that motivate economic activity and choices are utility maximization for consumers, profit maximization for producers/firms, and social welfare maximization for government units. 3. Economics Defined a) Economic Scarcity DEF: Economic scarcity exists when human needs and wants e xceed an economyÃ¢â¬â¢s ability to satisfy them given available resources and current technology. DEF: The four basic economic resources are labor, capital (a capital good is a produced good that is used as an input in the production of other goods and is not available for current consumption), land (energy, natural resources, raw materials and other Ã¢â¬Å"gifts of natureÃ¢â¬ ) and entrepreneurial ability (the ability to recognize and exploit economic opportunities, develop and produce new goods/services and organize economic resources). Technology refers to the ability (based upon a body of knowledge or set of skills) to transform resources into goods and services. 1 DEF: An economic good (bad) is something that increases (decreases) an individualÃ¢â¬â¢s Ã¢â¬Å"utilityÃ¢â¬ , the economic term for well-being, happiness, satisfaction or welfare. Examples: Economic goods: kringle, DVDs and shoes. Economic bads: garbage and pollution. CLAIM: Economics is based on two axioms (self-evident truths): (i) societyÃ¢â¬â¢s material wants and needs are unlimited or insatiable; (ii) economic resources and current technology are limited. Remark: Physical scarcity alone does not cause economic scarcity. Economic goods are both physically and economically scarce. Economic bads, such as pollution, toxic wastes and garbage, are physically scarce but they are not economically scarce. CLAIM: Economic scarcity implies that (i) people must compete for scarce goods and resources, (ii) goods and resources must be rationed by some rationing device or mechanism, (iii) choices must be made and when choices are made, other opportunities and alternatives must be sacrificed. 2 Remark: Economic scarcity is most easily seen when a person has to give up or sacrifice something (in the form of money or time) in order to obtain more of something else. Price is a clear indicator or signal of economic scarcity. Remark: People and society in general are confronted with the following problem: The Economizing Problem: Attain the greatest or maximum fulfillment of a personÃ¢â¬â¢s or societyÃ¢â¬â¢s unlimited wants (the goal of production) given limited resources and technology (the means of production). Question: How does one make the Ã¢â¬Å"bestÃ¢â¬ or Ã¢â¬Å"optimalÃ¢â¬ choice? DEF: Economics is the study of economic scarcity and how individuals and society allocate their limited resources and technology to try to satisfy their unlimited needs, wants and desires; i. . , economics is the study of how best to solve the Economizing Problem. b) Opportunity Cost Claim: To solve the Ã¢â¬Å"Economizing Problem,Ã¢â¬ the decision-maker must make choices or decisions and so must know the value or cost of alternatives. DEF: The opportunity cost of a choice or decision is the value of the next best alternative that is forgone or sacri ficed when the choice or decision is made. What is the opportunity cost of (or sacrifices required by) the following? taking Econ *120 or working an additional 10 hrs/week Ã¢â¬ ¢ buying 100 shares of Microsoft stock or conducting wars in Iraq and Afghanistan Ã¢â¬ ¢ developing the oil fields in AlaskaÃ¢â¬â¢s ANWR or operating a coal fired power plants Remarks: (i) Opportunity cost focuses on tradeoffs and so opportunity cost is measured in terms of sacrificed alternatives and not necessarily in terms of money. (ii) Opportunity cost is subjective and typically varies from person to person. (iii) The opportunity cost of an activity usually increases as more of the activity is pursued. Example: Suppose your employer wants to increase your work hours in increments of 2-hour blocks of time. What is the opportunity cost of each additional block of time and how does the opportunity cost of each additional block of time change? List alternatives. 1st 2-hr block of work, give up _____? 2nd 2-hr block of work, give up _____? 3rd 2-hr block of work, give up _____? 4th 2-hr block of work, give up _____? 5th 2-hr block of work, give up _____? or, 1st hour of studying: give up _____? or, 2nd hour of studying: give up _____? r, 3rd hour of studying: give up _____? or, 4th hour of studying: give up _____? or, 5th hour of studying: give up _____? 3 (iv) Differences in opportunity cost provide the basis for mutually beneficial exchange. Example: Suppose that Max, a plumber, and Wanda, an electrician, each had 5 days of vacation time and each wanted to add a bedroom and bathroom onto their houses. Max can plumb a bathroom in 1 day and wire a bedroom in 4 days; Wanda can wire a bed room in 1 day and plumb a bathroom in 4 days. In terms of opportunity cost: OCM1 wired bedroom = 4 plumbed bathrooms; OCM1 plumbed bathroom = 1/4 wired bedroom. OCW1 wired bedroom = 1/4 plumbed bathroom; OCW1 plumbed bathroom = 4 wired bedrooms. In five days, both Max and Wanda each could complete their house additions. How should they spend their time? Can Max and Wanda benefit from an exchange of some sort? Because of the differences in opportunity costs, Max should plumb both additions and Wanda should wire both additions and then each would have the desired additions to their houses plus three Ã¢â¬Å"extraÃ¢â¬ days. TradingÃ¢â¬ or exchanging 1 plumbed bathroom (one unit or day of plumbing) for in return for 1 wired bedroom (one unit or day of wiring) would be mutually beneficial. Example: Suppose Wilma has 20 cookies and 5 apples and Fred has 25 cookies and 10 apples. Wilma prefers apples over cookies and Fred prefers cookies over apples. Will Wilma and Fred eat the cookies and apples that they initially possess or wil l they exchange/trade? Explain. 4. Economic Methodology a) Model/Theory Building The process: (i) Observe economic phenomena; (ii) Identify important variables; (iii) State assumptions that clarify, simplify and focus the relevant economic issues and questions being investigated; (iv) State the hypothesis or propositions; (v) Evaluate the validity of the propositions by proving the proposition logically and by testing the propositions against Ã¢â¬Å"realityÃ¢â¬ or Ã¢â¬Å"real-worldÃ¢â¬ evidence; and, (vi) Accept the theory/model or reject it and reformulate the theory/model or construct a new theory/model. ) Marginal Analysis and Efficiency Ã¢â¬Å"DEFÃ¢â¬ : Marginal means incremental or additional and refers to a small change in an economic variable resulting from a unit change in some other economic variable; e. g. the marginal utility of a good X, the marginal cost of a good Y, the marginal product of labor. Remark: Marginal analysis evaluates and compares the marginal benefit and the marginal cost of a decision or c hoice and provides the solution to the Ã¢â¬Å"Economizing Problem. Ã¢â¬ 4 DEF: The marginal benefit, MB, of an economic variable Q is the change in the total benefit, ? TB, resulting from a unit change in Q); the marginal cost, MC, of an economic variable Q is the change the change in the total cost, ? TC, resulting from a unit change in Q); that is, MB = ? TB/? Q, and, MC = ? TC/? Q. CLAIM: A rational economic decision-maker will increase a economic variable Q as long as the marginal benefit of that change in Q exceeds the marginal cost of that change; that is, if MB (( MC at the quantity Q1 (or, MB MC at the quantity Q2), then the quantity Q1 (Q2) is inefficient. Example: Suppose that you buy a used car for $500 but after you gain possession of the car you discover that repairs are needed to make it go and stop. The MB from driving the car is $1,000, MB = $1,000; the MC of fixing it up is $700, MC = $700. Do you spend an additional $700 to fix up and keep the car? Yes! Because, the MB of having and driving the car = $1,000 $700 = the MC of having and driving the car, repair the car. The net benefit of repairing the car is $300 0. The $500 spent to buy the car is a sunk cost, a cost that has been incurred in the past and cannot be changed and or ecovered. Thus, a sunk cost does not enter into the decision/choice to repair the car. Example: A pizza place next to a residence hall on a university campus operates from 11 am to 9 pm and sells 400 pizzas for $10 each during its business hours. After observing a large number of students carrying-in pizza boxes during the later part of the evening, a part-time pizza worker and economics student has suggested that the firm stay open later into the night. The student estimated the total benefits and total costs for different closing times (hours of operation) and created the table below. Should the pizza place stay open later? If so, how late? What should be its closing time? That is, what is the efficient or optimal closing time? 5 Closing Time 9 pm 10 pm 11 pm 12 am 1 am 2 am Total Benefit, TB $4,000 $4,500 $4,900 $5,200 $5,400 $5,500 Marginal Benefit, MB Ã¢â¬â Total Cost, TC $1,000 $1,100 $1,250 $1,500 $1,900 $2,500 Marginal Cost, MC Ã¢â¬â Answer: For the hour ending at 12 am, MB = $300 $250 = MC and so the pizza place should still be open at 12 am. For the hour ending at 1 am, MB = $200 $400 = MC and so it doesnÃ¢â¬â¢t Ã¢â¬Å"payÃ¢â¬ to be open until 1am. Thus, the firm should close somewhere between 12 am and 1 am. Formally, the efficient o r optimal closing time is somewhere between 12 am (midnight) and 1 am, at which point MB = MC. Graphically: c) Microeconomics vs. Macroeconomics DEF: Microeconomics is the study of (i) economic decision-making by the individual consumer, firm or governmental unit, (ii) the allocation of resources and the determination of prices and output in specific markets and industries, (iii) the distribution of income in society, and, (iv) market structures. DEF: Macroeconomics is the study of conomic Ã¢â¬Å"aggregatesÃ¢â¬ or Ã¢â¬Å"totalsÃ¢â¬ such as Gross Domestic Product (GDP), national income, national employment/unemployment, economic growth, the price level/inflation, interest rates, the money supply, total consumption, total investment, govt. spending, total spending, industrial capacity, and trade/budget deficits. Remark: Microeconomics focuses on the decision-making of the individual economic a gent (a person, firm, or governmental unit) and the Ã¢â¬Å"smallÃ¢â¬ individual parts of the economy. Macroeconomics focuses on the whole economy and the sum of its individual parts. 6 d) Positive vs. Normative Economics Positive economics is descriptive and predictive and investigates Ã¢â¬Å"what was, what is and what will beÃ¢â¬ and is value free (does not depend on oneÃ¢â¬â¢s value system or religious beliefs). Normative economics is prescriptive and investigates Ã¢â¬Å"what should beÃ¢â¬ ; it evaluates the desirability of economic decisions and policies using value judgements and depends upon oneÃ¢â¬â¢s moral code or religious beliefs. e) Fallacy of Composition Claim: What is true for a single economic agent (individual consumer or producer) is NOT necessarily true for the economy as a whole. Examples: the balanced budget amendment; 15% wage increase for one person vs. everyone. f) Assumptions in Economics Remark: Assumptions simplify and distill the real world into its basic component parts in order to obtain a better understanding of the basic structure of an economy and its parts and the fundamental relationships; Ã¢â¬Å"separates the wheat from the chaff. Ã¢â¬ Assumption: ceteris paribus or Ã¢â¬Å"all other things held constantÃ¢â¬ or Ã¢â¬Å"nothing else changes. Ã¢â¬ g) Causation vs. Correlation Ã¢â¬Å"DEFÃ¢â¬ : Correlation (or association) occurs when two variables are related in some systematical and dependable way; the variables change together but a change in one variable does NOT necessarily cause a change in the other. Causation occurs when a change in one variable causes a change in the other. Remark: Economic analysis focuses on causation, not correlation. The ceteris paribus assumption simplifies the analysis and enables one to determine and understand the causal relationships between variables Remark: Unintended effects generally complicate economic analysis. For example, installing and using seatbelts and airbags are intended to reduce traffic deaths and injuries. But, despite the presence of these safety devices, the number of traffic accidents and deaths and the severity of traffic accident injuries initially increased instead. Why? The greater protection offered by these devises in auto crashes actually encouraged greater highway speeds and reckless and risky driving, all of which tend to increase the number of accidents and traffic deaths and injuries. Seatbelts and airbags do not cause more traffic deaths and injuries, but these variables are correlated or related in a systematic way. h) Teakettle and Table Problem 7 5. The Production Possibilities Frontier (Curve) Model a) Definitions and Properties of the PPF Model DEF: The Production Possibilities Frontier, PPF (or Curve, PPC) shows the different combinations of goods and services that an economy can produce given the efficient use of available fixed resources and current technology. Example: Consider the Guns Ã¢â¬â Butter PPF below. If the economy is operating at point C and producing 370 units of guns, then the maximum quantity of butter that the economy can produce using its technology and available resources efficiently and fully is 200 units. Alternatively, if the economy is producing 400 units of butter, the maximum quantity of guns it can produce is 200 units. Remark: Construct your own PPF; can you work 20 hours per week and achieve a 3. 67 (AÃ¢â¬â) gpa? Alternatively, construct the PPF for the U. S. for health care and cell phones or for food and energy (should we grow corn and sugar to eat or to make biofuels? . Remark: The PPF model can be used to illustrate three basic concepts: (i) the opportunity cost of a good; (ii) the law of increasing opportunity cost in the case of a concave outward PPF; and (iii) economic efficiency (productive efficiency, full employment and allocative efficiency). DEF: Productive (technical) efficiency is achieved when given quantities of goods are produced in the least c ostly way, or equivalently, when employed resources produce the maximum possible output of goods and services. Full employment is achieved when all available resources are employed. Remark. Productive efficiency and full employment are achieved at output combinations that lie on the PPF. Inefficiency occurs at output combinations that lie inside the PPF (resources or technology are either not being fully or efficiently used). Unattainable output combinations lie outside the PPF. 8 DEF: Allocative efficiency is achieved when the economy is producing the combination of goods most desired by society. Remark: Which point on the PPF that is Ã¢â¬Å"bestÃ¢â¬ depends upon societyÃ¢â¬â¢s preferences and thereby becomes a normative issue. In the PPF below, is point C Ã¢â¬Å"betterÃ¢â¬ than point D or is D Ã¢â¬Å"betterÃ¢â¬ than C? Democrats and Republicans have different perspectives on which combination of butter and guns is Ã¢â¬Å"best. Ã¢â¬ Claim. Moving from one efficient output allocation (point on the PPF) to another requires a transfer of resources from the production of one good to another. Consequently, when more guns are produced, less of butter can be produced; the opportunity cost of an increase in the production of guns is the resulting decrease in the production of butter. Furthermore, the |slope| of the PPF at a point shows the opportunity cost of one additional unit of good X as measured in terms of the other good Y. That is, the |slope| indicates how much of good Y must be sacrificed in order to obtain one additional unit of good X. Graphically: (see above graph) Points A, B, C, D, E and F represent three different combinations of guns and butter that the economy can produce when using all of its resources in a technologically efficient manner. When all resources and technology are used to produce butter, 500 units of butter can be produced but zero units of guns can be produced (pt. F). At any point on the PPF, the economy must sacrifice some guns to obtain more butter. Point G is inefficient because more of either or both goods can be produced; in this case, the opportunity cost of either good is zero. b) Constant Opportunity Costs and the Linear PPF Model DEF: A resource is specialized if it is not completely adaptable to alternative uses or cannot easily be substituted for another resource in the production of some good. Claim: If resources used in the production of goods X and Y are non-specialized or perfectly substitutable, then the opportunity costs are constant and the PPF is linear. That is, if the opportunity cost of a good X (as measured in terms of another good Y) is constant, then the same quantity of Y must be sacrificed for each additional unit of X, regardless of the quantity of X produced, and so the PPF is linear (a downward sloping straight line). Example: Assume that a farmer has 80 acres of land (of uniform fertility) and given quantities of other economic resources (labor, capital and entrepreneurial ability) with which to produce either corn or soybeans. On each acre of land, the farmer can produce either 100 bu. f corn or 50 bu. of soybeans. The opportunity cost of one bu. of soybeans is 2 bu. of corn and the opportunity cost of one bu. of corn is 1/2 bu. of soybeans. The farmer changes the combination of corn and soybeans produced by changing the number of acres planted in corn or soybeans. Non-specialized Resources Ã¢â¬â Linear PPF Production Possibility Schedule Possible Output Combinations A B C D E 0 2000 4000 6000 8000 4000 3000 2000 1000 0 Corn: Soybeans: 9 Note: At pt. A, all acres are in soybeans. At pt. B, 20 acres are in corn and 60 acres are in soybeans. At pt. C, 40 acres are in corn and 40 acres are in soybeans. At pt. D, 60 acres are in corn and 20 acres are in soybeans. At by E, all acres are in corn. Remark: The opportunity cost of 4000 bu. of soybeans is 8000 bu. of corn; the opportunity cost of 8000 bu. of corn is 4000 bu. of soybeans. The opportunity cost of 2000 of corn is 1000 bu. of soybeans whereas the opportunity cost of 3000 bu. of soybeans is 6000 bu. of corn. Remark: At any point on the PPF, the opportunity cost of one additional bu of corn is 1/2 bu. of soybeans = |slope| of the PPF; i. . , OCcorn = ? bu. of soybeans per bu. of corn. Likewise, the opportunity cost of one additional bu of soybeans is 2 bu of corn = 1/|slope| of the PPF; i. e. , OCsoybeans = 2 bu. of corn per bu of soybeans = 1/(1/2) bu of corm per bu. of soybeans. Note that ? soybeans/? corn = |slope| of PPF can be written as (i) ? soybeans = |slope| ? ?corn, or, (ii) ? corn = ? soybeans/|slope|. Thus, if ? corn = 1, then ? soybeans = |slope| of PPF ? ?corn = ? ? 1 bu = ? bu, or, OCcorn = ? bu of soybeans. Likewise, if ? soybeans = 1 bu. , then ? corn = ? oybeans/|slope| = 1 bu. /(? ) = 2 bu. , or , OCsoybeans = 2 bu of corn. b) Increasing Opportunity Costs and the Concave-outward PPF Model The Law of Increasing Opportunity Cost: When resources are specialized, increased production of a good X comes at increased opportunity cost. That is, as the production of a good X increases, the quantity of a good Y that must be sacrificed for each additional unit of good X increases. Claim: The Law of Increasing Opportunity Costs and specialized resources are represented by a concave outward PPF. A movement down along a concave outward PPF implies that the opportunity cost of X is increasing. Remark: Most economic resources are specialized in the production of some good and so PPFs are most often drawn bowed outward. 10 Specialized Resources Ã¢â¬â Concave Outward PPF Production Possibility Schedule Possible Output Combinations A B C D E Good X (butter) 0 100 200 300 400 Good Y (guns)400 400 395 370 315 200 F 500 0 Examples: Given pt. B, the opportunity cost of 100 additional units of good X (butter) is 25 units of good Y (guns). At pt. C = (200X,370Y), suppose the |slope| of the PPF at C is OCX = ? 0. 5, then the opportunity cost of one additional unit of X (butter) is 0. 5 units of good Y(guns); alternatively, the opportunity cost of one additional Y is 2X. I. e. , at pt C, OCX = ? Y and OCY = 2X. At pt. D = (300X,315Y), suppose the |slope| of the PPF at D is 0. 8. The opportunity cost of one additional unit of X is 0. 8 units of good Y and the OC of one additional Y is 1 /0. 8 = 1. 25 units of X. Formally, recall that ? Y/? X = |slope| of PPF. So, at pt D, |slope| = ? Y/? X = 0. 8, which can be rewritten as either (i) ? Y = 0. 8 ? ?X, or, (ii) ? X = ? Y/0. 8. So, at pt. D, if ? X = 1 (good X increases by 1 unit from 300 to 301 units of X), then good Y must be decreased by approximately 0. 8 units. That is, given ? X = 1 unit, it follows that ? Y = |slope| ? ?X = 0. 8 ? ?X = 0. 8 ? 1 unit, or OCX = 0. 8 units of Y. Likewise, at pt. D, if ? Y = 1 (good Y increases by 1 unit from 315 to 316 units of Y), then good X must be decreased by approximately ? X = 1/(0. 8) = 5/4 units. That is, given ? Y = 1 unit, it follows that ? X =? Y/0. 8 = 1 unit/0. 8 = 1 unit/(4/5) = 5/4 units = 1. 25 units, or OCy = 1. 25 units of X. Similarly, if at pt. E the |slope| = 1. , then OCX = 1. 5 Y = 3/2 Y and OCY = 2/3 X = 0. 67 X. 11 d) Shifts of the PPF Claim: Shifts of the PPF are caused by Ã¢â¬ ¢ changes in the quantities available resources: L^ or K^ ? PPF shifts from PPF1 to PPF2. Ã¢â¬ ¢ changes in technology: TechX^ ? PPF shifts from PPF2 to PPF3. Ã¢â¬ ¢ changes in capital good vs. current consumption good choices Examples: Remark: An economic recession, a decrease in nati onal real output for six or more months, is represented by a movement to a point inside the PPF and not an inward shift of the PPF, because in a recession not all resources (e. g. labor and capital) are fully or efficiently employed. 6. Choices and the PPF a) Choices Claim: Any society must decide: (i) What, how much and when to produce. (ii) How to produce (production technology) and distribute goods (allocation mechanism). (iii) For whom to produce, how to divide the economic pie. b) An Illustration: Present Choices, Future Possibilities and the PPF Model Claim: A choice of fewer capital goods and more current consumption goods implies smaller future increases (outward shifts) of the PPF, less capital accumulation, slower economic growth and smaller increases in living standards. In other words: Ã¢â¬Å"Party now, pay later. Pay now, party much more later. Ã¢â¬ 12 Graphically: Choose wisely! 7. Opportunity Cost, Comparative Advantage and Exchange (See Arnold, pp. 457-62). DEF: A(n) nation, firm or individual has a comparative advantage (CA) in the production of a good X if it can produce good X at a lower opportunity cost than can any other nation, firm or individual. A(n) nation, firm or individual has an absolute advantage in the production of a good X if it can produce more of good X with a given amount of resources than can any other nation, firm or individual. CLAIM: Every country has a CA is the production of at least one good. CLAIM: If nations, firms or individuals specialize in the production of the good in which they have a comparative advantage and engage in free, unrestricted trade (exchange), then total production will increase and exchange/trade can result in mutual gain for every nation, firm or individual. Remark: Specialization based on comparative advantage and free trade implies that a nation can consume outside its economyÃ¢â¬â¢s PPF and that Ã¢â¬Å"self-sufficiency breeds inefficiency. An Example of Comparative Advantage and Mutual Gain Given: Wilma and Fred, computers and pizza, 100 units of labor, and linear PPFs. Ã¢â¬ ¢ Wilma can produce either 50 comps or 1000 pizzas ? 1 comp Ã¢â¬Å"? Ã¢â¬Å" 20 pizzas ? OCWcomp = 20 pizzas and OCWpizza = 1/20 comp Ã¢â¬ ¢ Fred can produce either 20 computers or 900 pizzas ? 1 comp Ã¢â¬Å"? Ã¢â¬Å" 45 pizzas ? OCFcomp = 45 pizzas and OCFpizza = 1/45 comp 13 Hence, Wilma has a CA in c omputers because OCWcomp = 20 pizzas 45 pizzas = OCFcomp, and, Fred has a CA in pizza because OCFpizza = 1/45 comp 1/20 comp = OCWpizza. Remark. Even though Wilma has an absolute advantage in the production of both pizza and computers, Fred still has a comparative advantage in the production of one of the goods. (i) Ã¢â¬Å"AutarkyÃ¢â¬ : Initial no trade production and consumption: Labor Allocation Wilma 50% on comps 50% on pizza Fred: 50% on comps 50% on pizza Totals Production 25 comps 500 pizzas 10 comps 450 pizzas 35 comps 950 pizza Consumption 25 comps 500 pizzas 10 comps 450 pizzas 35 comps 950 pizza (ii) Mutual Gain from specialization and free trade. Fred and Wilma each specialization in the production of the good in which they hold a comparative advantage. Labor Allocation Wilma 80% on comps 20% on pizza Fred: 0% on comps 100% on pizza Totals Production 40 comps 200 pizzas 0 comps 900 pizzas 40 comps 1100 pizza #1 Trade Ã¢â¬â15 comps +425 pizzas +15 comps Ã¢â¬â425 pizzas #1 Cons Allocation 25 comps 625 pizzas 15 comps 475 pizzas #2 Trade Ã¢â¬â12 comps +360 pizzas +12 comps Ã¢â¬â360 pizzas #2 Cons. Allocation 28 comps 560 pizzas 12 comps 540 pizzas Remark. Note that Ã¢â¬Å"all-or-nothingÃ¢â¬ specialization for both Wilma and Fred is not required to establish the result. This is true in general as well. Remark: The mutually agreeable terms of trade, or mutually beneficial price, for one good X as measured in terms of the other good Y is established between the opportunity costs of good X of each individual/country. That is, OCWcpu = 20 pizzas terms of trade (tot) 45 pizzas = OCFcpu, or, OCWpizza = 1/20 computer 1/(tot) 1/45 computers = OCFpizza. 14 In the above example, Wilma trades away 12 computers in exchange/return for 360 pizzas and so the terms of trade, tot, are 1 computer for 30 pizzas; i. e. , the tot or Ã¢â¬Å"priceÃ¢â¬ of 1 computer = 30 pizzas. Hence, total (world) production and consumption are both greater under specialization and free trade than under autarky. Mutual gain results because Fred and Wilma each consume more of both goods. That is, specialization and free trade leads to an allocation that is Pareto superior to autarky. DEF: An allocation A is Pareto superior to an allocation B if no person is worse off at allocation A than at allocation B and at least one person is better off at allocation A than at allocation B. An allocation C is Pareto efficient (Pareto optimal) there does not exist an allocation D that is Pareto superior to allocation C. That is, allocation C is Pareto optimal if it is impossible to find another allocation D that makes one person better off without making someone else worse off. [The concept of Pareto efficiency is attributed to Vilfredo Pareto, a late 19th Ã¢â¬â early 20th century Italian economist. ] Graphically: The Ã¢â¬Å"specialization and free tradeÃ¢â¬ consumption bundle (EW, EF) = ((560 pizza, 28 comps), (540 pizza, 12 comps)) is Pareto superior to the Ã¢â¬Å"autarkyÃ¢â¬ consumption bundle ((500 pizza, 50 comps), (450 pizza, 10 comps)) because, compared to autarky, at least one person is better off and no one is worse off (in this case, both Fred and Wilma are better off). 5 ECON *120: Principles of Microeconomics I. FOUNDATIONS OF ECONOMICS B. Demand Section I. B Learning Objectives: Ã¢â¬ ¢ Explain and differentiate the quantity demanded of a good and the demand for a good Ã¢â¬ ¢ Explain, illustrate, and apply the law of demand and the demand curve Ã¢â¬ ¢ Explain and illustrate t he effects of changes in the determinants of demand (a. k. a. , non-own price factors or demand Ã¢â¬Å"shiftersÃ¢â¬ ) Ã¢â¬ ¢ Explain and illustrate the effects of taxes and subsidies on demand 1. Definitions Ã¢â¬Å"DEFÃ¢â¬ : Demand represents the behavior f the consumer and the relationships between the quantities of a good an individual consumes and other factors such as the goodÃ¢â¬â¢s price, the consumerÃ¢â¬â¢s income, the consumerÃ¢â¬â¢s tastes and preferences, the prices of goods related in consumption (substitutes and complements), expectations, government policies (taxes and subsidies), and the number of consumers. DEF: The quantity demanded of a good X, QXd, is the specific quantity of good X that a consumer is willing and able to purchase at a particular price. DEF: The demand curve, DX, shows the maximum quantity demanded of good X, QXd, by a consumer at each possible price in a series of prices for good X, ceteris paribus; alternatively, it shows the maximum price that a consumer is willing and able to pay for each possible quantity demanded of good X, QXd, in a series of quantities for good X, ceteris paribus. Remark: Demand is represented by the entire demand curve. The quantity demanded is represented by a single point on the demand curveÃ¢â¬âa particular price and quantity pair. 2. The Law of Demand The Law of Demand: the quantity demanded of a good X, QXd, varies inversely with the price of good X, PX, ceteris paribus; i. e. , PX^(v) ? QXdv(^) and so the demand curve is downward sloping. 16 A brief explanation of the notation: The expression Ã¢â¬Å"PX^(v) ? QXdv(^)Ã¢â¬ is a form of symbolic shorthand, which will appear frequently in the lecture notes. The items outside the parentheses are associated with each other and the items within parentheses are associated with each other. Thus, the above expression can be separated and re-written as two separate expressions: Ã¢â¬Å"PX^ ? QXdvÃ¢â¬ , and, Ã¢â¬Å"PXv ? QXd^Ã¢â¬ . The expression Ã¢â¬Å"PX^ ? QXdvÃ¢â¬ reads: Ã¢â¬Å"an increase in the price of good X, PX, causes a decrease in the quantity demanded of good X, QXd. Ã¢â¬ Similarly, the expression Ã¢â¬Å"PXv? QXd^Ã¢â¬ reads: Ã¢â¬Å"a decrease in the price of good X, PX, causes an increase in the quantity demanded of good X, QXdÃ¢â¬ . Thus, the initial expression Ã¢â¬Å"PX^(v) ? QXdv(^)Ã¢â¬ states that an increase in the price of good X, PX, implies or causes a decrease in the quantity demanded of good X, QXd, and a decrease in the price of good X, PX, implies or causes an increase in the quantity demanded of good X, QXd. CLAIM: The Law of Demand is based on (i) substitution and income effects and (ii) the Law of Diminishing Marginal Utility. Intuitively: The income effect is the change in the quantity demanded of a good X, QXd, caused by a change in the purchasing power of a consumerÃ¢â¬â¢s income, a. k. a. real income, which results when the price of good X, PX, changes, i. e. , PX^(v) ? purchasing power v (^) ? QXdv(^) The substitution effect, SE, is the change in the quantity demanded of a good X, QXd, caused by a change in the relative price of X (and while holding real income constant). PX^(v) ? the consumer substitutes the relatively cheaper good Y (X) in ? QXdv(^) place of the relatively more expensive good X (Y) Assumption: A consumerÃ¢â¬â¢s total utility or happiness can be measured in terms of Ã¢â¬Å"utils. Ã¢â¬ DEF: The marginal utility of a good X, MUX, is the increase in total utility, TU, (satisfaction, happiness) that a consumer derives from the consumption of an additional unit of good X, ceteris paribus: MUX = ? Total Utility/? QX = ? TUX/? QX. The Law of Diminishing Marginal Utility (LDMU) states that the marginal utility derived from the consumption of a good X decreases (increases) as the quantity of good X consumed increases (decreases), ceteris paribus, i. e. , MUXv(^) as QX^(v) Remark: The LDMU implies that as the quantity consumed of a good increases, the price a consumer is willing to pay for those additional quantities decreases: QX^(v) ? MUXv(^) ? the price the consumer is willing to pay v(^). In the D2L Ã¢â¬Å"Interactive GraphsÃ¢â¬ section, click on the link Ã¢â¬Å"Demand Schedule CurveÃ¢â¬ to see the interactive graph Ã¢â¬Å"An Example of a Demand Schedule and Demand Curve. Ã¢â¬ 17 3. Determinants of Demand (Non-own Price Factors or Ã¢â¬Å"Demand ShiftersÃ¢â¬ ) Remark: An increase in demand means that at any given price, consumers are willing and able to buy a larger quantity of the good, or, alternatively, that at any given quantity, consumers are willing and able to pay a higher price per unit. A decrease in demand means that at any given price, consumers are willing and able to buy a smaller quantity of the good, or, alternatively, that at any given quantity, consumers are willing and able to pay a lower price per unit. Claim: Movements vs. Shifts. Changes in a goodÃ¢â¬â¢s Ã¢â¬Å"ownÃ¢â¬ price, PX, cause changes in the quantity demanded of X, QXd, and movements along the good X demand curve, DX. Changes in the determinants of demand (a. k. a. the non-own price factors or Ã¢â¬Å"shiftersÃ¢â¬ of demand) cause changes the demand for good X, DX, and shifts of the entire demand curve, DX. Example: A decrease in the price of gas, Pgas causes an increase in the quantity demanded of gas, Qgasd, and a downward movement along the demand curve for gas because Pgas is the Ã¢â¬Å"ownÃ¢â¬ price of gas. In contrast, the same change in Pgas causes an increase in the demand for SUVs and an outward or upward shift of the SUV demand curve because Pgas is a Ã¢â¬Å"non-own priceÃ¢â¬ factor with respect to SUV demand. In the D2L Ã¢â¬Å"Interactive GraphsÃ¢â¬ section, click on the link Ã¢â¬Å"An Increase/Shift in DemandÃ¢â¬ to see the interactive graph Ã¢â¬Å"An Explanation of an Increase in Demand and a Shift of the Demand Curve. a) Tastes and preferences Tastes and preferences for good X ^(v) ? DX^(v), the demand curve shifts up/right (down/left). An Ã¢â¬Å"increaseÃ¢â¬ in preferences implies that at any given price, say P1, the consumer is willing and able to buy a greater quantity, Q2d instead of Q1d. Or equivalently, at any given quantity, Q1d, the consumer is willi ng and able to pay a higher price, P2 instead of P1. 18 Examples: Ã¢â¬ ¢ summer vacation travel ? the demand for gasoline increases, DX shifts up/right Ã¢â¬ ¢ tornado destruction in the Midwest ? he demand for lumber increases, DX shifts up/right Ã¢â¬ ¢ mad cow disease ? demand for McDonaldÃ¢â¬â¢s hamburgers decreases (DX shifts down/left) and demand for chicken sandwiches (good Y) increases (DY shifts up/right) Ã¢â¬ ¢ medical studies change the demand for various goods (cigarettes, bran, mercury, etc. ) b) Consumer income: normal and inferior goods DEF: A good X is a(n) normal (inferior) good if an increase in the consumerÃ¢â¬â¢s income I increases (decrease) the demand for good X, ceteris paribus; i. e. , Normal good: I ^(v) ? DX^(v) Inferior good: I ^(v) ? DXv(^) 19 Remark: Whether a good is normal or inferior depends upon an individualÃ¢â¬â¢s preferences and tastes. Goods such as computers, new cars, eating out and jewelry are typically considered normal goods whereas goods such as pasta, potatoes, hotdogs, beer and the Bible. c) Prices of goods related in consumption: substitutes and complements DEF: Two goods, X and Y, are substitutes (complements) in consumption if an increase in the price of good Y, PY, increases (decreases) the demand for good X, DX, ceteris paribus; i. . , X and Y are substitutes: PY^(v) ? DX^(v). X and Y are complements: PY^(v) ? DXv(^). Examples: Ã¢â¬ ¢ Ã¢â¬ ¢ Complement goods: beer and pizza, gasoline and cars, staples and staplers, and computers and software, printers and printer cartridges, shoes and socks. Substitute goods: Pepsi and Coke, sub sandwiches and hamburgers, tea and coffee, ice cream and frozen yogurt, and staples and paperclips. Example: If jelly and peanut butter are complements in consum ption, then Pjelly^(v) ? Qdjellyv(^) ? Dpeanut butterv(^). In this example, an increase in the price of jelly, Pjelly^, decreases the quantity demanded of jelly, Qdjellyv, which then (because consumers are buying less jelly) decreases the demand for peanut butter, Dpeanut butterv and shifts the demand curve for peanut butter down and to the left: when the intermediate step is removePjelly^ ? Dpbv . 20 Example: If coffee and tea are substitutes in consumption. Then Pcoffee^(v) ? Qdcoffeev(^) ? Dtea^(v). d) Expectations about future income, prices, and availability of goods. e) Government policies (taxes and subsidies). Remark: An excise tax (subsidy) on the consumption of a good shifts the Ã¢â¬Å"effectiveÃ¢â¬ demand curve vertically down (up) by the amount of the tax (subsidy). Graphically: An excise tax on consumption and the effective (after tax) demand curve. 21 Example: A $0. 50 excise tax shifts the Ã¢â¬Å"effectiveÃ¢â¬ demand curve down vertically by $0. 50 from the perspective of the producer because of the tax, the maximum price consumers are willing and able to pay producers (again, from the producers perspective) for Q0 = 100 units falls from $2. 25 to $1. 75. Consumers still pay the original $2. 25 but after the tax is imposed, producers receive $1. 5 and the rest goes to the government. Graphically: An excise subsidy on consumption and the effective (after subsidy) demand curve. Example: From the perspective of producers, an excise subsidy increases the maximum price consumers are willing and able to pay and so shifts the demand curve up vertically by $1. f) Number of consumers ^ (v) ? DX^(v) Remark: Follows directly from the derivation of the market demand curve (next page). In the D2L Ã¢â¬Å"Interactive GraphsÃ¢â¬ section, click on the link Ã¢â¬Å"Examples of Changes in DemandÃ¢â¬ to see the interactive graph Ã¢â¬Å"Determinants of Demand and Shifting the Demand Curve. Please note the remark about the incorrect scripting of one of the cases of a demand change. 22 4. The Market Demand Curve Claim: The market demand curve is the horizontal summation of the individual demand curves of all consumers. Graphically: 23 ECON *120: Principles of Microeconomics I. FOUNDATIONS OF ECONOMICS C. Supply Section I. C Learning Objectives: Ã¢â¬ ¢ Explain and differentiate the quantity supplied of a good and the supply for a good Ã¢â¬ ¢ Explain, illustrate, and apply the law of supply and the supply curve Ã¢â¬ ¢ Explain and illustrate the effects of changes in the determinants of supply (a. k. a. nonown price factors or supply Ã¢â¬Å"shiftersÃ¢â¬ ) Ã¢â¬ ¢ Explain and illustrate the effects of taxes and subsidies on supply 1. Definitions Ã¢â¬Å"DEFÃ¢â¬ : Supply represents the behavior of the producer and the relationships between the quantities of a good a firm produces and other factors such as the goodÃ¢â¬â¢s price, technology, prices of inputs, prices of goods related in production, expectations, government policies (taxes and subsidies), the number of producers. DEF: The quantity supplied of a good X, Qs, is the specific quantity of good X that a producer is willing and able to produce and make available for sale at a specific price. DEF: The supply curve for a good X, SX, shows the maximum quantity supplied of good X by a producer at each possible price in a series of prices, ceteris paribus; alternatively, it shows the minimum price per unit that a producer must receive (or is willing to accept) for each possible quantity of a good X in a series of quantities, ceteris paribus. Remark: Supply is represented by the entire supply curve; the quantity supplied at a specific price is represented by a single point on the supply curveÃ¢â¬âa particular price and quantity pair. 2. The Law of Supply The Law of Supply: the quantity supplied of a good, Qs, varies positively with the goodÃ¢â¬â¢s price P, ceteris paribus; i. e. , P^(v) ? Qs^(v) and so the supply curve is upward sloping. 24 CLAIM: The Law of Supply and the upward sloping short run (SR) supply curve are based on the Law of Increasing Opportunity Costs. As the quantity supplied/produced increases, more inputs or resources must be used. Because inputs experience increasing opportunity cost, the opportunity costs of additional inputs increase thereby increasing the per unit cost of producing additional output. Producers must receive a higher price in order to cover the higher costs of production. 3. Determinants of Supply (Non-own price factors or supply Ã¢â¬Å"shiftersÃ¢â¬ ) Remark: An increase in supply means that at any given price, producers are willing and able to produce a larger quantity of the good, or, alternatively, that at any given quantity, producers are willing and able to accept a lower price per unit. A decrease in supply demand means that at any given price, producers are willing and able to producer a smaller quantity of the good, or, alternatively, that at any given quantity, producers must receive a higher price per unit. Remark: Movements vs. Shifts. Changes in the goodÃ¢â¬â¢s own price cause changes in the quantity supplied of good X, QXs, and movements along the supply curve. Changes in the determinants of supply (the non-own price factors) cause changes in supply of good X, SX, and shifts of the entire supply curve, SX. a) Production technology: Tech ^(v) ? S^(v) 25 b) Input prices/resource costs: Input prices ^(v) ? Sv(^) Graphically: c) Prices of goods related in production: substitutes and joint products DEF: Two goods/products, X and Y, are substitutes in production if PY^(v) ? SXv(^). Two goods/products, X and Y, are joint products if PY^(v) ? SX^(v) X and Y are substitutes in production: PY^(v) ? QsY^(v) ? SXv(^). X and Y are joint products: PY^(v) ? QsY^(v) ? SX^(v). Example of Joint Products: Beef and Leather (Other examples: Donuts and donut holes, electricity and wall board/gypsum). Example of Substitutes in Production: Kringle and donuts. (Other examples: Jockey sweatshirts and T-shirts, SUVs and pickups, corn and soybeans. ) 26 d) Expectations with respect to. Inventories, future prices (of both inputs and output) and resource availability ) Government policies (taxes, subsidies and regulations) Remark: An excise tax (subsidy) on production shifts the Ã¢â¬Å"effectiveÃ¢â¬ supply curve vertically up (down) by the amount of the tax (subsidy). Graphically: An excise tax on production and the effective (after tax) supply curve. Graphically: An excise subsidy on production and the effective (after tax) supply curve. 27 f) Number of producers 4. The Market Sup ply Curve Claim: The market supply curve is the horizontal summation of the individual supply curves of all producers/firms. Graphically: 28 ECON *120: Principles of Microeconomics I. FOUNDATIONS OF ECONOMICS D. Market Equilibrium Section I. D Learning Objectives: Ã¢â¬ ¢ Explain and illustrate a market equilibrium quantity and price Ã¢â¬ ¢ Explain and illustrate market disequilibrium (shortage or surplus) Ã¢â¬ ¢ Explain and illustrate the functions of market prices Ã¢â¬ ¢ Explain and illustrate the effects of changes in the determinants of demand and supply on the market equilibrium quantity and price 1. Definitions DEF: A market equilibrium is a price P* and a quantity Q* such that at P* the quantity demanded equals the quantity supplied, Qd = Q* = Qs. DEF: A surplus exits at a price P1 if Qd ; Qs at P1. A shortage exits at the price P2 if Qd ; Qs at P2. Remark: Intuitively, a market equilibrium exists when market forces (demand and supply) are balanced and there is nothing that causes a change in the market price or quantity of a good. Illustrations: a marble at the bottom of a bowl. Remark: At a market equilibrium quantity and price, Q* and P*, the quantity demanded, Qd, equals the quantity supplied, Qs, equals Q* (Qd = Q* = Qs) at P*. At a market equilibrium, demand DOES NOT EQUAL supply; i. e. , it is NOT the case that D = S. To state that D = S means that the demand curve is identical to the supply curve, which clearly is an incorrect statement! 9 2. The Functions of Prices Claim: Prices play a critical role in competitive markets: (i) Prices are flexible and adjust to Ã¢â¬Å"clearÃ¢â¬ the market; prices ensure internal consistency by coordinating the production and consumption plans made independently by producers and consumers. DEF: The price adjustment mechanism: at a price P0, Qd ;( Q0* = Qs at P0* ? P^(v) as consumers bi d up (down) prices ? Qdv along D1 from Q1 and Qs^ along S0 from Q0* (Qd^ along D1 from Q1 and Qsv along S0 from Q0*) until Qd = Q1* = Qs at P1*. Graphically: Dv and S constant ? P*v and Q*v. 30 Examples: Be able to work through changes in preferences, income for normal goods (e. g. , cell phones and computers) and inferior goods (e. g. , hotdogs and pasta); prices of substitutes (e. g. , tea and coffee, Coke and Pepsi, staples and paperclips), prices of complements (beer and brats, staples and staplers, computers and floppy disks), etc. For the case of an increase in demand, see with the interactive graph Ã¢â¬Å"Demand Increase Market Clearing,Ã¢â¬ which is available on the D2L ECON 120 website. b) S^(v) and D constant ? P*v(^) and Q*^(v). Remark: S^(v) from S0 to S1 ? surplus (shortage) is created at the initial equilibrium price P0*, i. e. , Qd = Q0* ; Q1 = Qs at P0* ? Pv(^) as consumer bid down (up) price ? Qd^ along D0 from Q0* and Qsv along S1 from Q1 (Qdv along D0 from Q0* and Qs^ along S1 from Q1) until Qd = Q1* = Qs at P1*. Graphically: Sv and D constant ? P*^ and Q*v. For the case of an increase in supply, see with the interactive graph Ã¢â¬Å"Supply Increase Market Clearing,Ã¢â¬ which is available on the D2L ECON 120 website. Examples: Be able to work through changes in technology, input prices or resource costs (e. g. , wages, pizza toppings, energy), prices of substitutes in production (e. . , kringle and donuts, corn and soy beans), prices of joint products (donuts and donut holes, hamburger beef and leather, electricity and bricks). c) Simultaneous changes in D and S Claim: When demand and supply change simultaneously, then the change in the equilibrium price and quantity demand upon the magnitudes of the change in demand and supply. Four cases exist: 31 (i) (ii) (iii) (iv) D^ and S^ ? Q*^ and the change in P* is indeterminate D^ and Sv ? P*^ and the change in Q* is indeterminate Dv and Sv ? Q*v and the change in P* is indeterminate Dv and S^ ? P*v and the change in Q* is indeterminate Graphically: Case (i) D^ and S^ ? Q*^, P* may increase, remain constant, or decrease (? P* ). Or, equivalently: Work through the remaining cases on your own! 32 ECON *120: Principles of Microeconomics I. FOUNDATIONS OF ECONOMICS Section I. E Learning Objectives: Ã¢â¬ ¢ Explain and illustrate consumer surplus and producer surplus Ã¢â¬ ¢ Explain and illustrate total benefit and total cost Ã¢â¬ ¢ Explain and illustrate the efficiency of a competitive market equilibrium for a pure private good Ã¢â¬ ¢ Explain and illustrate the effects of price controls, taxes and subsidies and the resulting deadweight losses E. Applications 1. Consumer and Producer Surplus Recall: The Marginal Benefit, MB (Marginal Cost, MC) of a good Q is the increase in total benefit, TB (cost, TC) resulting from a unit increase in Q; i. e. , MB = ? TB/? Q (MC = ? TC/? Q). Claim: Because the maximum price a consumer is willing and able to pay for an additional unit of a good is based upon the consumerÃ¢â¬â¢s MB from consuming that additional unit, the demand curve represents the marginal benefit derived from the consumption of the good. Likewise, because the minimum price a producer is willing and able to accept for an additional unit of a good is based upon the producerÃ¢â¬â¢s MC from producing that additional unit, the supply curve represents the marginal cost incurred from the production of the good. Thus, the demand (supply) curve can be used to measure a consumerÃ¢â¬â¢s (producerÃ¢â¬â¢s) Ã¢â¬Å"economic welfareÃ¢â¬ at a given quantity. CS (PS) is used to measure the change in consumer (producer) welfare resulting from a change in the price and quantity and of a good consumed by consumers (produced by producers). DEF: Consumer Surplus, CS, is the difference between the price that a consumer is willing and able to pay and the price the consumer must actually pay in the market. 33 Remark: CS at a quantity Q1 is the difference between the total benefit of the consumer at Q1 (represented by the area under the demand curve between 0 and Q1 or the area of 0abQ1) and consumer total expenditures at Q1 (= P1? Q1 or the area of 0cbQ1). Thus, CS at Q1 represents the net benefits of consumers and is illustrated by the area between the demand curve and the market price line. DEF: Producer Surplus, PS, is the difference between the price that a producer is willing and able to accept and the price the producer actually receives for that good in the market. Remark: PS of a given quantity Q1 is the difference between the total revenue of the producer at Q1 ( = P1? Q1 or the area of 0cbQ1) and the total cost at Q1 (represented by the area under the supply curve between 0 and Q1 or the area of 0dbQ1). Thus, PS at Q1 represents the net benefits of producers at Q1 and is illustrated by the area between the supply curve and the market price line. Remark: For consumers, a price increase (decrease) lowers (raises) consumer surplus CS. The los (gain) of CS measures the decrease (increase) in consumer economic welfare. For prioducers, a price increase (decrease) raises (lowers) producers surplus PS. The gain (loss) of PS measures the increase decrease) in producer economic welfare. 34 Recall: The Total Benefit, TB (Total Cost, TC) at a given quantity Q1 is represented by the area under the MB (MC) curve between 0 and the quantity Q1. In the graph below, TB at Q1 = area abQ10 and TC at Q1 = area deQ10. Similarly, TB at Q2 = area acQ20 and TC at Q2 = area dfQ20. Remark: The change in TB caused by a change in Q is given by the area under the MB curve for that change in Q. For example, given an increase in Q from Q1 to Q2, the increase in TB = ? TB = area bcQ2Q1. Likewise, given an increase in Q from Q1 to Q2, the increase in TC = ? TC = area efQ2Q1. Remark: At a given quantity, Q1, the economic gain to consumers and producers at the market equilibrium is represented by the Total Surplus or Net (Social) Benefit = net benefit of consumers + net benefit of producers = CS(Q1) + PS(Q1) = TB(Q1) Ã¢â¬â TC(Q1) = area abd in the graph below. 35 2. Market Equilibrium and Efficiency in the Ã¢â¬Å"Private GoodÃ¢â¬ MB/MC Model DEF: A good is a pure private good if there are no external benefits or costs from the consumption or production of that good and so Dmkt = MB = ? iMBi and Smkt = MC = ? jMCj. DEF: In a market, the quantity Q* is efficient if the maximum price consumers are willing and able to pay per unit for Q*, which represents the marginal benefit to consumers or Ã¢â¬Å"consumers priceÃ¢â¬ equals the minimum price producers are willing and able to accept per unit for Q*, which represents the marginal (opportunity) cost to producers or Ã¢â¬Å"producers priceÃ¢â¬ . That is, the quantity Q* is (socially or economically) efficient if MB = MC at Q*. Claim: (The First Fundamental Theorem of Welfare Economics) In a market for a pure private good, the market equilibrium quantity is efficient, provided that certain technical conditions are satisfied; i. e. , at the market equilibrium Q* and P*, P* = MB(Q*) = MC(Q*). Remark: In other words, net social benefit is maximized at Q*. In addition, if at a quantity Q0, MB ) MC, then Q0 is inefficient and a deadweight loss, DWL, (also know as a Ã¢â¬Å"welfare costÃ¢â¬ or Ã¢â¬Å"loss in efficiencyÃ¢â¬ ) is imposed upon society. The DWL at Q1 (Q2) is represented below by the area bce (cgh). Remark: The quantity Q1 is inefficient because MB(Q1) MC(Q1); similarly, the quantity Q2 is inefficient because MB(Q2) MC(Q2). At Q1 (Q2), society can be made better off by producing one more (less) unit of Q. Increasing Q from Q1 to Q* increases social welfare by the amount DWL at Q1 = area bce = ? TB Ã¢â¬â ? TC = area beQ*Q1 Ã¢â¬â area ecQ*Q1. Alternatively, decreasing Q from Q2 to Q* increases welfare by DWL at Q2 = area cgh = ? TB Ã¢â¬â ? TC = area Q*chQ1 Ã¢â¬â area Q*cgQ1. 3. Price Controls DEF: A price ceiling is a maximum legal price that a producer/seller may charge for a good or service; a price ceiling, Pc, is effective only if it is below the market equilibrium price (Pc P*mkt). A price floor is a minimum price, fixed and Ã¢â¬Å"supportedÃ¢â¬ by the government, that a producer/seller can receive for a good or service; a price floor, Pf, is effective only if Pf P*mkt. 36 Claim: At a price floor Pf, the quantity supplied in the market, Qsmkt, is inefficient and the good is Ã¢â¬Å"overproducedÃ¢â¬ (i. e. , Qsmkt Q*mkt) because t Qsmkt, the maximum price consumers are willing and able to pay per unit for Qsmkt is less than the minimum price producers are willing and able to accept per unit for Qsmkt. That is, at Qsmkt, MB MC and so Qsmkt is inefficient. Graphically: (iii) At a price ceiling, Pc, the quantity supplied in the market, Qsmkt, is inefficient and the good is Ã¢â¬Å"under-producedÃ¢â¬ (i. e. , Qsmkt Q*mkt) because at Qsmkt, the m aximum price consumers are willing and able to pay per unit for Qsmkt is greater than the minimum price producers are willing and able to accept per unit for Qsmkt. That is, MB MC and so Qsmkt is inefficient. Graphically: 37 4. Taxes and Subsidies: Who Pays and Who Benefits? DEF: Consumers price vs. producers price. Claim: An excise tax (subsidy) drives a Ã¢â¬Å"wedgeÃ¢â¬ between the consumersÃ¢â¬â¢ price and the producersÃ¢â¬â¢ price and imposes a deadweight loss (welfare cost or loss in efficiency) upon society because the losses in CS and PS exceed the tax revenues. Graphically: Excise tax on consumption. Remark: The after-tax equilibrium quantity, Qtax, is inefficient because MB MC at Qtax, and so a deadweight loss is imposed upon society, represented by DWL(Qtax) = area abc. The tax revenue is not an economic loss for society in general but does constitute a redistribution of economic welfare from consumers and producers of the good to society in general. The DWL is the difference between the sum of the loss in consumers surplus, area P*dab, and the loss of producers surplus, area eP*bc and the tax revenue generated by the excise tax, area edac, i. e. , DWL(Qtax) = ? CS + ? PS Ã¢â¬â Tax Revenue = area P*dab + area eP*bc Ã¢â¬â area edac = area abc Graphically: Excise tax on production. 38 ECON 120: Principles of Microeconomics Spring 2010 II. MICROECONOMIC MODELS AND DECISION-MAKING Section II. A Learning Objectives: Ã¢â¬ ¢ Explain and calculate the price elasticity of demand Ã¢â¬ ¢ Explain and illustrate elastic, inelastic, unit elastic, perfectly elastic, and perfectly inelastic demand and corresponding demand curves Ã¢â¬ ¢ Explain the determinants of elasticity Ã¢â¬ ¢ Explain and illustrate the effects on total revenue of producers or total expenditures of consumers of a change in price given elastic, unit elastic, and inelastic demand Ã¢â¬ ¢ Explain and calculate other elasticities of demand (income and cross price elasticities) Ã¢â¬ ¢ Explain and calculate the price elasticity of supply and its basic determinant Ã¢â¬ ¢ Explain and illustrate how the elasticity of demand and supply affect consumers and producers prices given an excise tax on production A. Elasticity of Demand and Supply 1. Elasticity of Demand a) The Concept of Elasticity and Elastic/Inelastic Demand Curves DEF: The (own) price elasticity of demand, Ed, is a numerical measure of the sensitivity or responsiveness of the quantity demanded to changes in price, ceteris paribus, and is calculated as Ed = ? %? Qd/%? P?. Examples: Suppose that the quantity demanded of gas, Qgas, decreases by 10% when the price of gas, Pgas, increases by 20%. Then Ed = ? Ã¢â¬â10%/20%? = 0. 5. If the Qd of Mountain Dew decreases by 50% when the price of Mountain Dew increases by 20%, then Ed = ? Ã¢â¬â50%/20%? = 2. 5. Remark: %? Qd = Ã¢â¬â Ed? %? P. Example: If Ed = 2 and price increases by 8%, %? P = +8%, then %? Q = Ã¢â¬â2? (8%) = Ã¢â¬â16%. If Ed = 0. 4 and price decreases by 25%, %? P = Ã¢â¬â25%, then %? Q = Ã¢â¬â0. 4? (Ã¢â¬â25%) = +10%. Alternatively, if a firm wants to increase its sales by 30% and Ed = 1. 5, then it should decrease price by 20% because %? P = %? Q/ Ã¢â¬âEd = 30%/ Ã¢â¬â1. 5 = Ã¢â¬â20%. DEF: Midpoint elasticity formula: Given two points on a demand curve, (Q1,P1) and (Q2,P2), the (own) price elasticity of demand at the midpoint between these two points is calculated by Ed = ? %? Qd/%? P? = ? (Q1 Ã¢â¬â Q2)/(Q1 + Q2)]/[(P1 Ã¢â¬â P2)/(P1 + P2)] ?. 39 Example: Let pt A = (Q1,P1) = (8,16); pt. B = (Q2,P2) = (12,14); pt. C = (Q3,P3) = (28,6); pt. D = (Q4,P4) = (32,4). The midpoint price elasticity of demand between pts A B : Ed = ? [(8 Ã¢â¬â 12)/(8 + 12)]/[(16 Ã¢â¬â 14)/(16 + 14)]? = (4/20)/(2/30) = 3. pts B C: Ed = ? [(12 Ã¢â¬â 28)/(12 + 28)]/[(14 Ã¢â¬â 6)/(14 + 6)]? = (16/40)/(8/20) = 1. pts C D: Ed = ? [(28 Ã¢â¬â 32)/(28 + 32)]/[(6 Ã¢â¬â 4)/(6 + 4)]? = (4/60)/(2/10) = 1/3. Remark: A linear demand curve has a different elasticity coefficient, Ed, at each point on the demand curve, Ed ranges from Ed = 0 at the horizontal intercept to Ed = ? at the vertical intercept. DEF: Demand is said to be: elastic if Ed 1 or ? %? Qd? ? %? P? , unit elastic if Ed = 1 or ? %? Qd? = ? %? P? , inelastic if Ed 1 or ? %? Qd? ? %? P? , perfectly elastic if Ed = ? and perfectly inelastic if Ed = 0. Remarks: (i) Perfectly elastic demand is represented by a demand curve that is horizontal at the market price. A perfectly elastic demand curve implies that, at the market price, consumers will buy whatever quantity producers are willing and able to produce. (ii) Perfectly inelastic demand is represented by a demand curve that is vertical at the market quantity and implies that consumers will pay whatever price producers want for the market quantity. iii) Elastic demand can be represented by a demand curve that is relatively flat, such as D3. The majority of the demand curve D3 that appears in the graph is the elastic portion of the demand curve because the midpoint of the demand curve, where Ed = 1, is near the Ã¢â¬Å"lower-endÃ¢â¬ of D3. 40 (iv) Likewise, inelasti c demand can be represented by a demand curve that is relatively steep, such as D2. The majority of the demand curve D2 that appears is the inelastic portion of the demand curve because the midpoint of the demand curve, where Ed = 1, is near the Ã¢â¬Å"upper-endÃ¢â¬ of D2. b) Determinants of Elasticity Claim: The demand for good X is more elastic (inelastic) (i) the greater (fewer) the number of substitutes there are for good X. Remark: In general, Edcaterory Edbrand. For example, because very few substitutes for gas exist but many substitutes for Mobil gas exist (such as BP, Citgo, Phillips, Shell, etc. ), Edgas EdMobil gas. Likewise, Edsoda EdMountain Dew. (ii) the more (less) an item absorbs as a share or portion of a consumerÃ¢â¬â¢s budget, Example: Because student expenditures on tuition or rent as a percentage are much greater than their expenditures on toothpicks or salt as a percentage of their income, Edcollege ; Edsalt. (iii) the less of a necessity and the more of a luxury (the more of a necessity and the less of a luxury) good X is; for example, Edfood ; Eddiamond jewelry. iv) the longer (shorter) the time interval considered, which allows for changes in preferences or the emergence of more substitutes; i. e. Edshort run ; Edlong run. c) Elasticity and Total Expenditures (Total Revenue) Remarks: Total Revenue of producers = TR = P? Q = TE = Total Expenditures of consumers. Because TR = TE = P? Q, total revenue or total expenditures can be represented graphically by the area of a rectangle of width Q and height P. 41 Claim: Along the (i) elastic portion of the demand curve, Ed ; 1 or ? %? Qd? ; ? %? P? : Pv(^) ? TE^(v). (ii) unit elastic point of the demand curve, Ed = 1 or ? %? Qd? = ? %? P? : Pv(^) ? ?TE = 0. iii) inelastic portion of the demand curve, Ed ; 1 or ? %? Qd? ; ? %? P? : Pv(^) ? TEv(^). Remark: In the graphs below, consider a given change in price, ? P (= P1 Ã¢â¬â P2 = P3 Ã¢â¬â P4), and change in quantity demanded, ? Q (= Q1 Ã¢â¬â Q2 = Q3 Ã¢â¬â Q4). Along the elastic section of the demand curve (left graph), the decrease in price, ? P, from P1 to P2, and the increase in the quantity demanded, ? Q, from Q1 to Q2, increases total expenditures of consumers (or total revenue of producers); i. e. , TE1 = P1Ã ·Q1 ; P2Ã ·Q2 = TE2 because the increase in expenditures from a greater quantity is greater than the decrease in expenditures from a lower pr ice. Alternatively, along the inelastic section of the demand curve (right graph), the same decrease in price, ? P (from P3 to P4), and increase in quantity demanded, ? Q (from Q3 to Q4), decreases total expenditures of consumers (or total revenue of producers); i. e. , TE3 = P3Ã ·Q3 ; P4Ã ·Q4 = TE4 because the increase in expenditures from a greater quantity is less than the decrease in expenditures from a lower price. 42 Claim: TR is at a maximum at the quantity at which Ed = 1. d) Other Elasticities of Demand (i) Income elasticity of demand, EI, is a numerical measure of the responsiveness or sensitivity of the quantity demanded to changes in income, ceteris paribus. If EI ;(( %? P), then supply is elastic, 1 ; Es ; ?. f production costs do NOT increases as output increases, then supply is perfectly elastic, Es = ?. Ã¢â¬ ¢ 44 P perfectly inelastic : ES = 0 S1 S2 inelastic: 0 ; E S ; 1 S3 elastic: 1 ; E S ?P S4 perfectly elastic : E S = ? ?Q 2 ? Q 3 0 Q0 Q Ã¢â¬ ¢ Given S2, a change in price of ? P yields a relatively small change in the quantity supplied (i. e. , %? P ; 0 ? %? Qs ; 0 but %? P ; %? Qs) and so 0 ; ES = %? Qs/%? P ; 1. For example, if supply is inelastic, then a 5% increase in price results in a less than 5% (perhaps 3%) increase in Qs. Given S3, a change in price of ? P yields a relatively large change in the quantity supplied (i. e. , %? P ; 0 ? %? Qs ; 0 but %? P ; %? Qs) and so 1 ; ES = %? Qs/%? P. For example, if supply is elastic, then a 5% increase in price results in a more than 5% (perhaps 8%) increase in Qs. Given S4, a change in price of ? P yields an Ã¢â¬Å"infiniteÃ¢â¬ response from producers. Producers are willing to produce and sell whatever quantity consumers are willing and able to buy at the market price (i. e. , %? P ; 0 ? %? Qs = ? and so ES = %? Qs/%? P = ? ). Ã¢â¬ ¢ Ã¢â¬ ¢ 3. Elasticity and Taxes Claim: Given an excise tax on either consumption or production, if the elasticity of demand is greater (less) than the elasticity of supply, then the portion of the tax paid by consumers is less (greater) than the portion of How to cite Econ 120 Ã¢â¬â Principles of Micro-Economics, Essay examples
Monday, April 27, 2020
Supportive Communication BY sheep0803 Topic: Supportive Communication In this essay we are going to discuss and evaluate a kind of interpersonal communication that helps managers to communicate accurately and honestly without Jeopardizing interpersonal relationships namely, supportive communication (Cole 1999). Positive supportive communication not only can enhance personal image and social acceptance, also is an essential value in organization. Bentley (1999) point out that, with supportive communication, organization have this positive relationship tends to have a higher productivity, faster problem solving leads o less conflict between managers and employees, even individual feel more successful because of higher leanings. It means that supportive communication is an important tool to help organization to accomplish their goals. To build up an effective and efficient organizing, there is a need of supportive environment, good leadership and effective communication. It is an advantage to both company and individuals. This essay is going to illustrate how supportive communication affect an organization and the factors involved in maintaining and building an effective organization. We will write a custom essay sample on Supportive Communication or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page In this essay, there are three different peer- reviewed articles, which talk about supportive communication in the frame work within an organization, academic stress and health. According to the information in U. S. Bureau of Labor (2004), over 50% of the married households were reckoned to have dual-income. Dual income means that both parents were working. Families with children at home would require more fund to support. However, both parents working will create difficult struggle for them to balance between work and family demands. There is a good example that showed the serious of this problem. Hill, Hawkins, Ferris, and Weitzman (2001) had done a survey on 6451 IBM employees. The result has shown that around 50% of the participants reported to have problem to maintain balance between work and family. To improve this situation Clark (2000) had introduced a border theory. This theory framework is focus on how to manage relationship between work and family o create and maintain balance. This theory will describe later in this essay. Another example that appeared supportive communication is relevant there was a questionnaire packet survey on instruments relevant to the present study interspersed with other, on-relevant instruments has taken at two Eastern universities. 739 of questionnaires had been collected. Xu and Burleson (2001) had an Expericenced Support instrument to measure the scale. The result of the survey shown that students standard of feeling stress is 5 (degree form 1-7, 1 is strongly disagree and 7 is strongly agree). This example shown students are feeling stressed and how much informational supportive communication received from closed friends and families are essential to release this problem. Emotional support, like, attentive listening, and nformational support, such as advice and training, had been use to solve this problem in this survey. More about that will describe later in this essay. The last students attended college fail to obtain a bachelor degree. To help these academic- at-risk student Center for Basic Skill (CBS) programs provide support to students, such as academic support and personal advice support, this is supportive communication. With this program students can better off to get retention in college. The author also use two models to evaluate this risk, they are Epidemiological Model, Social Constructivist Model. These two model help to reduce number of at-risk- student. Further detail on how to help students by supportive communication will discuss later in this essay. This essay emphasize that how important the balance between interaction of work envoironment and interaction between family environment. We have discuss in pervious part of the essay that 50% of the Americans families suffer in uneven distribution communication between family and work and Clark (2000) had introduced a border theory to improve this problem. . This interaction between these two factors family and work, is the central focus in border theory. Border theory is helping people according to individual situation, to create and maintain balance. Clark (2000) got her idea for work/family border theory based on concept of Lewin (1996) conception of regions to divide boundaries within individuals lifespace. However, Clark state that ambiguous may occur where there is too osmosis and flexible between the borders. A strong layer between family and work will benefit to certain people (Edwards and Rothbard 1999). Based on the responses form 1700 employees, researchers found out that borders between family and work are tightly mpacted by the perceptions of importance to employees about work and family. It simply means that how they put weight between work and family. For people who feel their work is not important and pervade work into family domain is classified as intrusive. In other hand, for those who think their families are more important an intrusive of work into family domain will not happened. Also, Frone et al. (1992) found out that conflict between family members and more common than conflict between managers and employees. The proportion of family conflict is 60% while work conflict is only 20%. It can be seen from this theory that there is a need of communication to achieve work-family balance. That communication is supportive communication. Coaching is processes that will help you get your people t do their best work (Florence 1999). Therefore, coaching and counseling is one of the main tools of supportive communication. With coaching it can help to improve ability problem. Manager can give direction and advice to help employees to understand their weakness so as to improve them. Individuals will not have negative feelings since managers are coaching instead of blaming, even negative feedback is given ndividuals can recognize their problem and get improvement. In this way positive image and relationship is built. Moreover, the second scenario is described about the academic stress. Author of this article said that Emotional support had a main effect on depression and informational support has effect on physical illness. Emotional support is attentive listening, notarize the experience of emotional experience and expression, and states which negative cognitions and emotions can be effectively processed. While informational supportive effect on physical illness, informational support, included iving advice, information and training, this kind of support help student to engage healthy activity, such as healthy eating, doing enough exercise and enough sleep. This study was design to inspect the extent of supportive communication mitigate between students heath and academic health. With these two methods of supportive communication, students can release stress cause by assignments exams and all other academic tests. Advice from informational support can help student keeping themselves healthy at any time, not study too late in exam, or spend all night before exam without resting. In this case, physically and mentally are also supported because of an essential kind of communication supportive communication. Finally, this method can reduce the risk of failing the course and exclude from the university. The last scenario we have talk about is also evaluate on students, it is about academic risk is a Junction of individual, social, and cultural communication phenomena. Roueche Roueche (1994) stated that those family who had supportive communication is important to help in motivating at-risk-student to succeed, while this kind of communication teach students social norms are needed in the college nvironment. Garard Hunt (1998) and Hunt Lippert (1999) state that improvement in communication skill will improvement academic success. There are some approaches of education risk focus on students characteristics inherent. Epidemiological model, which had mentioned before, identifies students who are at the edge of failure requirements of college need if they process deficient characteristics. The students with this character usually engage learning disable or low self-esteem. Under this model many students had improved their grade by understanding their weakness of individuals characteristics. Since communication had create while advisor giving advice and teaching what students should do in a positive way, supportive communication has being build. Then social constructivist Model (Richardson et al. 1989) suggested that certain student may at-risk in different classroom. They will change their attitude according to environment and to the person they are communicating to. Educators should interact with student by encounter their daily basic to classify the difference. This model also has the outcome of improve communication on teachers and students while teachers are bserving and encountering their students. The CBS program had mention in pervious paragraph state that this program gives students information and advice to help them reduce academic risk. This is also a kind of supportive communication. This program makes communication more success. Albrecht Adelman (1987), Granovetter (1973) and Haythornthwaite (2000) suggested that the program develops strong bridge between student and advisor through frequent communication. Individuals build strong relationship base on intimacy, self-disclosure and many types of interactions. Again, this program need plenty of communication between individuals, advisors, family, friends and teachers, they are going to interact with each other under this program, so communication has been build. Also, this kind of support towards study, therefore, it is a kind of supportive communication. From all of the above discuss, we can see there are five advantages can be classified. Firstly, with supportive communication by managers to employees, the organizations become more productive. Workers work more efficient and effective because of positive communication being obtain form manager. Blaming can change to advice. Secondly, manager attentive listening, consulting and coaching give rights to positive feedback and feeling while communicating with workers. Better relationship and better workplace atmosphere can be built. Thirdly, family conflict is decrease. When family and friends are supporting each other in their work and study, they will feel warm and comfortable, a well relationship also being built by supportive communication in this way. Fourthly, with the help of Epidemiological Model, Social Constructivist Model and CBS program at-risk-academic student is reduced. When processing this program and practicing this model, communication and trust will create, and these factors are essential component of supportive communication. Lastly, academic stress had decrease because of supportive communication. Emotional and informational communication helps students to realize their weakness and improve them. This two communication also factors of support communication. There are so many advantages to supportive communication, however, there are several limitations to supportive communication. Firstly, organization need to spend time and resources on training manager the way f positive communication to employees, the resources can be use in other way which may give organization more profit. Secondly, same as educational institution, they can use the resources in many other ways, like build some welfare facilities. Thirdly, there is limitation in doing research in addition to calculate participants result about others behavior, some kind of support behavior in third party objective method should be taken place. Also, they can be more ethical when choosing sample, because individual are from different country and with different culture, herefore, behavior maybe different to some extent. To conclude, supportive communication is a kind of communication which communicates accurately, honestly without Jeopardizing interpersonal relationship. Accurate message will enhance positive supportive communication. Good relationship will build up when two people are interchange idea accurately, patiently, and in a good manner. Researcher had done survey to understand what supportive communication is. Everywhere need supportive communication to improve a better off communication between each other. Workplace is one of the example we have een talking about, manager use supportive communication method when communicate with workers. Research found out that proportion in percentage of work conflict is greater than percentage in family conflict. Border theory had been use to distinguish boundaries between workplace and family, in this many family conflict can be avoided. Emotional and informational support communication from friends and family can help reducing academic stress. Epidemiological Model, Social Constructivist Model and BCS program had used to help improve support between one and other. 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