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ECON1101 Chapter Notes - Chapter 4: Pareto Efficiency, Aggregate Demand, Perfect Competition

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beigecricket196
31 May 2018
School
UNSW, UNSW Sydney
Department
Economics
Course
ECON1101
Professor
All

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The Aggregate Demand (or Supply) represents the horizontal sum of the individual
demand (or supply) curves.
Excess Supply: Depicts a situation where the quantity supplied is larger than
the quantity demanded.
-
Excess Demand: Depicts a situation where the quantity demanded is larger
than the quantity supplied.
-
The Equilibrium Price (Quantity) represents the price (quantity) such that the
quantity supplied equals the quantity demanded.
Pareto efficiency is a situation in which it is impossible to make any individual
better off without making at least one another individual worse off.
A perfectly competitive market's equilibrium is pareto efficient.
-
Total surplus is maximised.
-
There is no pareto improving transaction = no possible transaction that would
make someone better off without harming someone else.
-
A pareto improving transaction is a transaction where all parties involved are
better off.
The Invisible Hand Principle states that individuals' independent efforts to
maximise their gains (profits for sellers; utility for buyers) will generally be
beneficial for society and result in the socially optimal allocation of resources.
Chapter 4: Demand & Supply, An Equilibrium
Analysis
Monday, 16 April 2018
8:00 pm
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Related Questions

The corresponding table shows the demand schedule and two supply schedules for a tire producer

Price($) Quantity Demanded (daily demand) Quantity Supplied(if firms only consider private costs((Daily Supply) Quantity Supplied (if firms consider both private costs and environmental pollution costs) (daily supply)
60    110      70    50   
80 100 80 60
100 90 90 70 
120  80 100  80
140 70 110  90 
160 60 120 100

 

a. Is there an externality associated with tires? 

  1.Yes, a positive externality.

  2.Yes, a negative externality.

  3. No.

b. At a price of $100/tire, 90 tires are demanded daily. At this price, how will society be affected environmentally if the producer is not required to account for environmental pollution costs and produces 90 tires? 

  1. Society is better off 

  2. Society is worse off

  3. Society experiences no change

c. The socially efficient number of tires is .......than the number of tires that results from the market provision of the good.

   1. higher

   2. lower

   3. the same as

 

 

 

Who bears the primary costs of a rent control program?

A. landlords
B. renters that get rent-controlled apartments
C. taxpayers
D.

the wealthy

Assume the demand for sushi is Qd = 180 - 3P, where Qd is quantity demanded and P = price in dollars. The supply of sushi is Qs = 80 + 5P, where Qs is quantity supplied (and P is, again, price in dollars). A price of $20 would result in:

A. Excess supply of 60
B. Excess supply of 120
C. Excess supply of 140
D. Excess demand of 140

US agricultural price supports are politically popular because

A. They have no adverse impacts
B. The US would have food shortages without them
C. The benefits accrue to a large number of voters and the costs are paid by a small number of voters
D.

The costs are spread out among millions of people

Assume the demand for sushi is Qd = 180 - 3P, where Qd is quantity demanded and P = price in dollars. The supply of sushi is Qs = 80 + 5P, where Qs is quantity supplied (and P is, again, price in dollars). What would be the equilibrium price?

A. $15.50
B. $12.50
C. $10
D.

$15

Price floors and ceiling prices:

A. cause the supply and demand curves to shift until equilibrium is established.
B. both cause surpluses.
C. interfere with the rationing function of prices.
D.

A change in the price of a good leads to a change in ________, which leads to a ___________

A. quantity supplied; shift of the supply curve
B. supply; shift of the supply curve
C. quantity supplied; movement along the supply curve
D.

When the supply of a product increases, this implies that

A. the price of the product first declined
B. more will be purchased at the same price
C. producers will be willing to accept a lower price for each unit sold
D. demand for the good must have increased
E.

producers will offer less for sale at each possible price

If there is a excess demand for product X:

A. fewer resources will be allocated to the production of this good.
B. the price of the product will rise.
C. the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.
D.

the price of the product will decline.

Which of the following will occur when there is a simultaneous decrease in demand and a decrease in supply?

A. B and D both necessarily occur
B. An increase in equilibrium quantity
C. A and C both necessarily occur
D. An increase in price
E. A and D both necessarily occur
F. A decrease in price
G.

A decrease in equilibrium quantity

Velcro is becoming more and more popular for a variety of uses, including as fasteners for shoes. What should happen to the equilibrium price and quantity for shoelaces as a result?

A. Both price and quantity should decrease.
B. Price should increase and quantity decrease.
C. Both price and quantity should increase.
D. Price should decrease and quantity increase.
E.

Nothing.

If the government imposes a ceiling price on apartment rents, we would expect to observe all of the following except one. Which is the exception?

A. conversion of some apartment complexes to condos
B. a shortage
C. an increase in the number of new apartment complexes being built
D. lower maintenance of existing apartments
E. long waiting lists for apartment seekers

supply; movement along the supply curve

both cause shortages.

. Low-skilled workers operate in a competitive market. The labor supply is Qs = 10W (where W is the price of labor measured by the hourly wage) and the demand for labor is Qd = 240 – 20W. Q measures the quantity of labor hired (in thousands of hours).

a. What is the equilibrium wage and quantity of low-skilled labor working in equilibrium?

b. If the government passes a minimum wage of $9 per hour, what will be the new quantity of labor hired? Will there be an excess demand or excess supply of labor? How large?

c. What is the deadweight loss of a $9 minimum wage?

d. How much better off does the $9 minimum wage make low-skilled workers (in other words, how much does producer surplus change), and how much worse off are employers?