alevel economics 基礎(chǔ) 講義課件

A-LEVELMicroeconomicsbasicaleveleconomics基礎(chǔ)講義21WhatisEconomicsabout?

Theproblemofscarcity Economicsisthestudyofhowsocietychoosestoallocateitsscarceresourcestotheproductionofgoodsandservicesinordertosatisfyunlimitedwants.aleveleconomics基礎(chǔ)講義Humanwantsareunlimited,butResources

arelimited(scarce)Acentralproblemthereforeexists…wecallthistheproblemofSCARCITYaleveleconomics基礎(chǔ)講義43Definitionofeconomics Economicsisthestudyofsociety’sdecisionsaboutproductionconsumptionallocationofscarceresources inordertosatisfyasmanyunlimitedwantsaspossible.aleveleconomics基礎(chǔ)講義54TwobranchesofeconomicsMicroeconomicsisthebranchofeconomicsthatstudiesdecision-makingbyasingleindividual,household,firm,industryorlevelofgovernment.Macroeconomicsisthebranchofeconomicsthatstudiesdecision-makingfortheeconomyasawhole.aleveleconomics基礎(chǔ)講義65MacroeconomicIssuesaggregatedemand,aggregatesupplyeconomicgrowthunemploymentinflationbalanceoftradeexchangeratesaleveleconomics基礎(chǔ)講義76MicroeconomicIssuesdemandandsupplydecisionsofwhattoproduce,howtoproduce,forwhomtoproducetheconceptofopportunitycostbasedoncomparingwhatyouhavedecidedvswhatisthenextbestalternativeyouhavegivenuprationaldecisionmakingbasedoncostvsbenefit;bestvalueformoneyweighingupmarginalcostsandmarginalbenefitsbasedoncomparingtheextrabenefitwiththeextracostthesocialimplicationsofchoicesocietyi.e.takingintoconsiderationhowacertainchoicemayhaveanindirectcostonaleveleconomics基礎(chǔ)講義ResourcesResourcesarethebasiccategoriesofinputsusedtoproducegoodsandservices.Resourcescanalsobecalledthefactorsofproduction.aleveleconomics基礎(chǔ)講義ThreecategoriesofresourcesLandLabourCapitalaleveleconomics基礎(chǔ)講義Resources:landAnynaturalresourceprovidedbynatureusedintheprocessofproductionForexample:forests,minerals,wildlife,oil,rivers,lakes,oceansMayberenewableornon-renewable

aleveleconomics基礎(chǔ)講義Resources:labourThementalandphysicalcapacityofworkerstoproducegoodsandservicesForexample:farmers,nurses,lawyersEntrepreneurshipisaspecialtypeoflabourthecreativeabilityofindividualstomanagethecombinationofresourcestoproduceproducts.aleveleconomics基礎(chǔ)講義EntrepreneurshipOrganisesandmanagestheresourcesneededtoproducegoodsandservicesaleveleconomics基礎(chǔ)講義Resources:capitalCapitalisthephysicalplant,machineryandequipmentusedtoproduceothergoods.Thatis,human-madegoodsthatdonotdirectlysatisfyhumanwants,forexample:Earlier:axe,bowandarrowNow:buildings,productionequipment,software,factories.aleveleconomics基礎(chǔ)講義AnoteaboutfinancialcapitalEconomistsdonotincludemoneyintheirdefinitionofcapitalmoneysimplygivesameasuretothevalueofassets.aleveleconomics基礎(chǔ)講義OpportunitycostThebestalternativesacrificedforachosenalternativeOpportunitycostappliestopersonal,groupandnationaldecision-making,forexampleWhatcouldyoubedoingifyouwerenotcurrentlystudying?Howmanynewroadshavetobeforgoneifthegovernmentspendstaxrevenuesonhomelandsecurity?aleveleconomics基礎(chǔ)講義MarginalanalysisMarginalanalysisexamineshowthecostsandbenefitschangeinresponsetoincrementalchangesinactions.Anyadditionalactionbyanindividualorafirm,suchasbuyinganadditionalpairofshoesorincreasingproductionofaproductbyanadditionalunit,bringsadditionalcost.Thecentralquestioninmarginalanalysisiswhethertheexpectedbenefitsofthatactionexceedtheaddedcostaleveleconomics基礎(chǔ)講義MarginalanalysisMarginalanalysishelpsbusinessesandindividualsbalancethecostsandbenefitsofadditionalactions---whethertoproducemore,consumemore,orotherdecisions---anddeterminewhetherthebenefitswillexceedcosts,thusincreasingutility.aleveleconomics基礎(chǔ)講義MarginalanalysisMarginalanalysisbenefitsgovernmentpolicymakers,aswell.Weighingthecostsandbenefitscanhelpgovernmentofficialsdetermineifallocatingadditionalresourcestoaparticularpublicprogramwillgenerateadditionalbenefitsforthegeneralpublicaleveleconomics基礎(chǔ)講義Short-RunvLongRunShort-Run: Atimeperiodinwhichatleastonefactorofproductionisfixed(i.e.cannotincreaseitsamount) itisnotdefinedintermsofnumberofdays/weeks)LongRun: Atimeperiodlongenoughforallinputstobevaried Itisnotadefinedperiodoftime; aleveleconomics基礎(chǔ)講義CostconceptsTotalfixedcostsarecoststhatdonotvaryasoutputvariesandmustbepaidevenifoutputiszero.Totalvariablecostsarecoststhatarezerowhenoutputiszeroandvaryasoutputvaries.Totalcostisthesumoffixedcostandvariablecost.

TC=TFC+TVCaleveleconomics基礎(chǔ)講義TotalcostsNote:Thexandyaxisunitshereareunrelatedtothepreviousdiagramaleveleconomics基礎(chǔ)講義AveragecostconceptsAveragefixedcost(AFC)–totalfixedcostdividedbythequantityofoutputproduced:Averagevariablecost(AVC)–totalvariablecostdividedbythequantityofoutputproduced:AFC=TFCAVC=TVCQQaleveleconomics基礎(chǔ)講義AveragetotalcostTotalcostdividedbythequantityofoutputproducedATC=AFC+AVC=TCQaleveleconomics基礎(chǔ)講義MarginalcostMeasureshowmuchtotalcostincreaseswhenanadditionalunitofoutputisproduced. MC:thechangeintotalcostwhenoneextraunitofoutputisproducedMC=TC

=TVCQQaleveleconomics基礎(chǔ)講義Totalcostsaleveleconomics基礎(chǔ)講義Inverserelationship:MP&MCNote:Thexandyaxisunitshereareunrelatedtothepreviousdiagramaleveleconomics基礎(chǔ)講義aleveleconomics基礎(chǔ)講義aleveleconomics基礎(chǔ)講義AverageandmarginalcostsThisgraphusesinformationfromthepreviousslidealeveleconomics基礎(chǔ)講義Notethemarginal-averageruleWhenMC<AC,ACisfalling.WhenMC>AC,ACisrising.WhenMC=AC,ACisatitsminimumpoint.aleveleconomics基礎(chǔ)講義Long-runsituationAllfactorsofproductionarevariable.thereistimeforthefirmtobuildanewfactorytoinstallnewmachines,tousedifferentproductiontechniques,tocombineinputsinwhateverproportionandquantitiesitchooses;thefirmwillneedtodecideaboutthescaleofitsoperationandtheproductiontechniquesthatituses;thesedecisionswillaffectproductioncostssoitisimportanttogetthesedecisionsright.aleveleconomics基礎(chǔ)講義RelationbetweenLRACandSRACCurvesAfirmwithjustonefactoryandfacesSRACcurve(followingdiagrams);Inthelong-runitcanbuildmorefactoriesandexperienceseconomiesofscaleduetoadministrativesavings,eachsuccessivefactorywillallowittoproducewithanewlowerSRACcurve;Thuswith2factoriesitwillhavecurveSRAC2andwiththreethenSRAC3,andsoon;EachSRACcurvecorrespondstoaparticularamountofthefactorthatisfixedintheshort-run(inthiscasethefactory);TherearemanySRACcurvesasmanydifferentfactoriesofdifferentsizesorextensionstoexistingonecouldbemade.TheLRACcurveisanENVELOPECURVEaleveleconomics基礎(chǔ)講義CostsOutputOExamplesofshort-runaveragecostcurvesSRAC1SRAC2SRAC3SRAC4SRAC5ConstructingaLong-runAverageCostCurvefromShort-runAverageCostCurvesaleveleconomics基礎(chǔ)講義LRACCostsOutputOSRAC5SRAC4SRAC3SRAC2SRAC1ConstructingaLong-runAverageCostCurvefromShort-runAverageCostCurvesaleveleconomics基礎(chǔ)講義ScalesofproductionThelong-runaveragecostcurveis U-shaped.Thisreflectsreturnstoscale–threetypesarerecognised:Economiesofscale(LRACfallsasoutputrises)ConstantreturnstoscaleDiseconomiesofscale(LRACrisesasoutputrises).aleveleconomics基礎(chǔ)講義Scalesofproductionaleveleconomics基礎(chǔ)講義EconomiesofscaleAsituationinwhichthelong-runaveragecostcurvedeclinesasthefirmincreasesoutputSourcesofeconomiesofscale:SpecialisationandDivisionofLabourGreaterefficiencyoflargermachines(egcombineharvester,‘super’photocopier’.EgmachineAcosts$1000&produces1000unitsdaily.MachineBcosts$4000butcanproduce8000unitsdaily.Unitcostis$1vs$0.50.)ByproductsOrganisationaleconomies(centraliseadminorI.T.supportfunctions;eliminateduplication)Financialeconomies

(bulkdiscounts)EconomiesofScope(producingarangeofproductsmayincreasesalesandspreadoutoverheadsEg:CD,DVD,players,amplifiersetcvsonlyCD)

(RefertoSlomanp87,88formoreinfo)aleveleconomics基礎(chǔ)講義ConstantreturnstoscaleAsituationinwhichthelong-runaveragecostcurvedoesnotchangeasthefirmincreasesoutput.aleveleconomics基礎(chǔ)講義DiseconomiesofscaleAsituationinwhichthelong-runaveragecostcurverisesasthefirmincreasesoutputSourcesofdiseconomiesofscale:BureaucracyBarrierstocommunicationManagementdifficulties(e.g.lackofcoordination).Production-lineprocessesand‘interdependencies’aleveleconomics基礎(chǔ)講義Long-runCosts

“ToScale”meansthatallinputsincreasebythesameproportion’Decreasingreturnstoscalearequitedifferentfromdiminishingmarginalreturns(whereonlythevariablefactorincreases)DMR(short-run)andDRS(long-run)aleveleconomics基礎(chǔ)講義ProfitMaximisationSlomanCh5BUECO1507RevenueDefiningtotal,averageandmarginalrevenuetotalrevenue:TR=P×Qaveragerevenue:AR=TR

/

Q

marginalrevenue:

MR=

TR

/

QRevenueRevenuecurveswhenpriceisnotaffectedbythefirm’soutput(horizontaldemandcurve)averagerevenue(AR)marginalrevenue(MR)Examiningrevenuecurvesin2situations1)Ifafirmisverysmallrelativetothewholemarket.2)IfafirmhasarelativelylargeshareofthemarketOOAR,MR($)PeSDD=AR=MRQ(millions)Q(hundreds)(a)ThemarketThefirmBeingsosmall,itsoutput,whateveritis,doesnotaffectmarketpriceatallAverageRevenueandMarginalRevenuecurves

(1)ofafirmthatisverySMALLrelativetothewholemarket.(Price-takingfirm)Price($)TRQuantity(units)020040060080010001200Price=AR=MR($)5555555TR($)0100020003000400050006000TotalRevenuecurve(1)ofafirmthatisverySMALLrelativetothewholemarket.(Price-takingfirm)QTR($)Q(units)1234567P=AR($)8765432TR($)8141820201814MR($)6420-2-4MRAR,MR($)QuantityARAverageRevenueandMarginalRevenuecurves

(2)ofafirmthathasarelativelyLARGEshareofthewholemarket.Ifsuchafirmwantstosellmore,itcan onlydosobyloweringprice.Ifitchoosestoraiseitsprice,itwillhaveto acceptlowersales.ThereforeAR(price)slopesdownward.HowabouttheMRcurve?Q(units)1234567P=AR($)8765432TR($)8141820201814MR($)6420-2-4MRAR,MR($)QuantityARAverageRevenueandMarginalRevenuecurves

(2)ofafirmthathasarelativelyLARGEshareofthewholemarket.Supposingfirmisselling2unitsat$7 each.Itcansellthe3rdunitonlyby reducingthepriceofallunitsto$6.Sellingthe3rdunitgains$6butreducingthe priceofunits1&2loses$1x2=$2.MRtherefore=$6-$2=$4TRTR($)Quantity(units)1234567P=AR($)8765432TR($)8141820201814TotalRevenuecurve

(2)ofafirmthathasarelativelyLARGEshareofthewholemarket.QuantityRevenuecurvesandpriceelasticityofdemand

Elasticity=-1Elastic(a)Inelastic(b)AR,MR($)QuantityMRARRevenuecurvesandpriceelasticityofdemandRecall:a)Whendemandiselasticandprice isreduced,totalrevenueincreases. TotalrevenueincreasingmeansMRispositiveb)Whendemandisinelasticandpriceisreduce,totalrevenuedecreases.TotalrevenuedecreasingmeansMRisnegativeTRElasticity=-1ElasticInelasticTR($)TRCurveforaFirmFacingaDownward-slopingDemandCurveQuantityRevenueRevenuecurveswhenpricevarieswithoutput(downward-slopingdemandcurve)averagerevenue(AR)marginalrevenue(MR)totalrevenue(TR)revenuecurvesandpriceelasticityofdemandShiftsinrevenuecurvesHiddenDetermining

a) Outputwhereprofitismaximised

b) Profitatthatoutput1)UsingtotalcurvesmaximisingthedifferencebetweenTRandTC2)UsingmarginalandaveragecurvesTR,TC,TP

($)TP

TRTCdefQuantity1)Usingtotalcurvesa)Profitismaximizedwhenoutputis3b)Maximumprofitisd-eQuantityCostsandrevenue($)eMRMCProfit-maximisingoutput2a)Usingmarginalandaveragecurves

todetermineprofitmaximisingoutputa)Profitismaximizedatoutputof3Below3units,thefirmshouldincreaseoutputbecausetherewillbeabiggeradditiontorevenue(MR)thantocost(MC).Beyond3unitsadditionalcost(MC)isbiggerthanadditionalrevenue(MR)thereforeshouldn’tgobeyondit6.004?QuantityCostsandrevenue($)MCACARbaTotalprofit=$1?x3=$4.00

2b)Usingmarginalandaveragecurves

tomeasure