Access to Commerce Economics Simon Ward simon.ward@ucdconnect.ie Class 1 17th January 2008
Thursday 17 January 2008
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Course Info... • Thursdays 8.30pm • 80% Attendance required • Essay... • Textbook: Economics & Society
(McDowell and O’Grada) Principles of Economics - an Irish Textbook (Turley & Maloney).
• Exam on the 24th April Thursday 17 January 2008
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Introduction • So what is economics all about? • Leaving Cert definition:
Economics is a social science which allocates scarce resources, with various uses, among the infinite needs and wants of mankind
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Ok... • ...but what do economists do? Some economical questions...
• What would be the effects of a smoking ban? • Conjestion charges - How can we achieve the optimum traffic in a city?
• What are the returns to education? Thursday 17 January 2008
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The two branches... • Macroeconomics: Study of the interaction
of countries and major issues affecting the economy as a whole
• Microeconomics: Concentrates on the
market - Made up by the person, the firm and the industry
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TANSTAAFL... • Scarcity is always a factor • You simply cannot avoid the need to trade off. • The consumer is therefore faced with choices • First assumption: Rationality
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Evaluating the costs and benefits
•V
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Rationality • Bill will weight up the costs and benefits • When will he pick up the money? • Choice made through his expectations • He’ll make the choice that will benefit him,
ie. the benefits from the action chosen exceed the benefits from the action foregone
• That is the opportunity cost • But do consumers always act rationally? Thursday 17 January 2008
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Supply and Demand Turley et. al: Chapter 2
• The market: The arrangement that facilitates all the buyers and sellers of a good/service.
• So the market for say.... pizza? • Lets look at the demand first Thursday 17 January 2008
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Demand Curve Price
20 16 12
10 12 14
Thursday 17 January 2008
Quantity
Price
Quantity
10
20
12
16
14
12
11
The law of demand • In terms of demand - there’s a negative
relationship between price and quantity
• This follow the normal law of demand • As price increases, the demand for it will fall
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Illustrating the law • When either change in
Price
either price or quantity takes place, there is a movement along the demand curve
20 16 12
10 12 14
Thursday 17 January 2008
Quantity
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So what about the supply side? • So now that we’ve dealt with consumers, what about the suppliers?
• If you were running a company, what kind of market would you like to sell in?
• We assume that all firms want to
maximise profits, and make as much money as they can
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The Supply Curve • Supply is the quantity sellers want to sell at every conceivable price
• So under what conditions will the supplier want to sell more?
• As prices increase, firms enter the market to pursue profits
• Implies a positive relationship between price and quantity
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The Supply Curve • Normal law of
Price
supply indicates that if price goes up quantity supplied goes up.
20 16 12
• Positive relationship 10 12 14
Thursday 17 January 2008
Quantity
between Qs and P
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Other changes... • What about changes to other things? • Question: What outside factor could influence the price or quantity?
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Family fortunes...
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Top answers: Shifts in the demand curves
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Substitutes and complements
• A substitute good. If good A and good B are substitutes, then if the price of A increases, the demand for B increases
• But if the goods are complements, then if the price of A goes up, then demand for B will fall
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Graphing the shift Price
Substitute What happens when our competitors price goes up?
Quantity Thursday 17 January 2008
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