Summary xxxxxx

Chapter 3
Demand curve
- Max price demanders are willing to pay for one more unit.
- Looks the same as the marginal benefit. (you get the benefit from
one more unit)

Supply curve:
- Minimum price suppliers want to receive to supply one more unit to
the market
- Looks the same as the marginal cost
o Why are the cost per unit higher? the first units you make you
choose the best workers to produce them. If you want to make
more, you need to have more people to work for and so you
select the people who are less productive. That is why the
price per unit is higher, you pay them more while they do less
work.

Equilibrium:
- Cross point of supply and demand

Elasticity:
- Elasticity of demand (Ed)
% change∈quantity demanded
o
% change∈ price

o Relevant to know, because then you know what will happen if
you change a component.
o E.g.: price =10, lower that to 9.
o Demand will go up 100  120
o Calculate elasticity:
new−old 120−100
x 100 %= x 100 %=20 %
old 100
o =−2 % price elasticity
new−old 9−10
x 100 %= x 100 %=−10 %
old 10
o Which means,


∆Q
Q ∆Q P ∆ Q P
E d= = x = x
∆P Q ∆P ∆P Q
P
∆Q 1
-
∆ P ¿ SLOPE DEMAND CURVE