Essay About Find Equilibrium Price And Pic

Comm 220 – Analysis of Markets
Essay Preview: Comm 220 – Analysis of Markets
Report this essay
COMM        220Analysis of        MarketsFinal        Review Arthur Schiller [email protected] Disclaimer: These slides do not cover all the material needed for the final exam. They are meant to serve as a review of some of the key concepts. Make sure you read the class notes, class slides, and practice answeringthe quizzes.  Topic 1Building Economic ModelsThe Endowment Effect  Kahneman, Daniel; Jack L. Knetsch, and Richard H. Thaler, “The Endowment Effect, Loss Aversion, and Status Quo Bias,”  People ascribe more value to things merely because they own them  Goes against the idea of humans being perfectly raOonal economic beings[pic 2]EXAMPLE: Find Equilibrium Price and Quan;ty In the Following Call MarketBQBPBSQSPSB12010S1145B2148S2227B32515S32616B41112S41914B5296S5911STEP 1 – REARRANGE ACCORDING TO PRICE         Arrange buyers in descending order         Arrange sellers in ascending orderBQBPBSQSPSB32515S1145B41112S2227B12010S5911B2148S41914B5296S32616STEP 2 – FIND EQUILIBRIUM[pic 3][pic 4][pic 5][pic 6][pic 7][pic 8][pic 9][pic 10][pic 11][pic 12][pic 13][pic 14][pic 15]Equilibrium Quan;ty = 14 + 11 + 11 = 36 Equilibrium Price = ($12 + $7)/2 = $9.50[pic 16][pic 17][pic 18][pic 19][pic 20][pic 21][pic 22]STEP 3 – ADD/SUBTRACT TAX/SUBSIDY         Apply only to the price of the SUPPLIERSe.x. $2 subsidySTEP 4 – RE-CALCULATE EQUILIBRIUMe.x. $2 subsidy[pic 23][pic 24][pic 25][pic 26][pic 27][pic 28][pic 29][pic 30][pic 31][pic 32][pic 33][pic 34][pic 35]B1$109        S5$9[pic 36][pic 37][pic 38][pic 39][pic 40][pic 41][pic 42][pic 43][pic 44][pic 45]X        S4Equilibrium Quan;ty = 14 + 11 + 11 + 9 = 45 Equilibrium Price = ($10 + $9)/2 = $9.50$12Adding to the buyers vs. to the sellersNote:While the tax burden or subsidy is shared by the seller and buyer, apply the tax/subsidy only to the price of the seller.Topic 2Utility TheoryConsumption Optimum[pic 46]BQBPBSQSPSB32515S1145B41112S2227B12010S5911B2148S41914B5296S32616BQBPBSQSPSB32515S1143B41112S2225B12010S599B2148S41912B5296S32614BQBPBSQSPS SubB32515S1143B41112S2225B12010S599B2148S41912B5296S32614Where the slope of the indifference curve meets the slope of the budget line