1 / 24

Alfred Marshall

Alfred Marshall. Archer  Jean  Cathy . Who is Alfred Marshall??. The 1992 Nobel Prize winner in economics Founder of the Cambridge School of Economics * Author of the famous book called the Principles of Economics An opponent to women’s educational degree. Background Information.

jens
Download Presentation

Alfred Marshall

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Alfred Marshall Archer Jean  Cathy 

  2. Who is Alfred Marshall?? • The 1992 Nobel Prize winner in economics • Founder of the Cambridge School of Economics • *Author of the famous book called the Principles of Economics • An opponent to women’s educational degree

  3. Background Information • Born in a London suburb on 26 July 1842 • Died on 13 July 1924 (age 81) • Educated at the Merchant Taylor's School • showed particular interest for mathematics

  4. Contributions to Modern Economics • Supply & demand curve • Elasticity of demand • Consumer surplus • Producer surplus

  5. Supply & Demand Curve

  6. Definitions A curve that shows the equilibrium between supply and demand • Demand: how much (quantity) of a product or service is desired by buyers. • Supply: how much the market can offer • Price is a reflection of supply and demand

  7. Price is a reflection of supply and demand

  8. Shifts in Demand Demand Increases Demand Decreases

  9. Shifts in Supply Supply Increases Supply Decreases

  10. Equilibrium • Goods are being distributed efficiently because the amount being supplied is exactly the same as the amount being demanded

  11. Disequilibrium Demand Supply • Price above the equilibrium level • Supply surplus Price Floor Price Ceiling • Price below the equilibrium level • Supply shortage

  12. Elasticity of Demand

  13. Definition • A formula that measures the change in quantity demanded due to a price change. Change in quantity demand Initial Price × Initial Demand Change in Price

  14. Values • Smaller than 1 - Inelastic • Small change in price doesn’t create a big effect on the quantity demanded • Good is a necessary • There are no substitutes available • Doesn’t cost a lot (Salt) • Greater than 1 - Elastic • Small change in price cause a great change in the quantity demanded • The higher the price elasticity, the more sensitive consumers are to price changes • Good is not a necessary • There are substitutes available • Cost a lot (Pizza) • Equals to 1 - Unitary elastic • Small changes in price do not affect the total revenue

  15. Consumer Surplus

  16. Definition • The difference between the maximum price that consumers are willing to pay and the price that the consumers are paying for a goods • Can be calculate from the supply and demand curve • Adjustable for price ceiling and price floor

  17. Calculation of Consumer Surplus • Consumer surplus equals the area of the green triangle • ½(5 × 5) = 12.5

  18. Calculations with Price floor and Price Ceiling • Consumer surplus equals the area of the green triangle • ½(4 × 4) = 8

  19. Producer Surplus

  20. Definition • The difference between the minimum price that producers are willing to sell and the price that the producers are selling for a goods • Can be calculate from the supply and demand curve • Adjustable for price ceiling and price floor

  21. Calculation of Producer Surplus • Producer surplus equals the area of the pink triangle • ½(5 × 5) = 12.5

  22. Calculations with Price floor and Price Ceiling • Producer surplus equals the sum of area of the pink triangle and the area of the rectangle • ½(4 × 4) + (4 × 2) = 16

  23. Deadweight Loss Calculation • Deadweight loss is the loss of consumer and producer surplus from government intervention • Deadweight loss can be calculate in two ways: • (Sum of producer and consumer surplus without price floor and ceiling) – (Sum of producer and consumer surplus with price floor and ceiling) • (12.5 + 12.5) – (8 + 16) = 1 • Area of the gray triangle • ½(2 × 1) = 1

  24. THE END! 

More Related