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MICROECONOMICS

MICROECONOMICS. LAW OF SUPPLY AND DEMAND. PRINCIPLES DEMAND COMES FIRST. SUPPLY ADJUSTS TO DEMAND. PRODUCTION REQUIRES TIME. EQUILIBRIUM IS A THEORETICAL CONSTRUCTION. THE MARKET DETERMINES PRICE AND PRODUCTION. LAW OF SUPPLY AND DEMAND. SUPPLY ADJUSTS TO DEMAND : THE ECONOMY IS

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MICROECONOMICS

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  1. MICROECONOMICS

  2. LAW OF SUPPLY AND DEMAND PRINCIPLES DEMAND COMES FIRST. SUPPLY ADJUSTS TO DEMAND. PRODUCTION REQUIRES TIME. EQUILIBRIUM IS A THEORETICAL CONSTRUCTION. THE MARKET DETERMINES PRICE AND PRODUCTION.

  3. LAW OF SUPPLY AND DEMAND SUPPLY ADJUSTS TO DEMAND: THE ECONOMY IS DEMAND PULL.

  4. Maslow’s Hierarchy of Needs MATERIAL LEVEL

  5. THE DEMAND CURVE GIVEN THE INCOME, IF PRICE RISES THEN QUANTITY DEMANDED FALLS. THEREFORE, THE DEMAND IS A RELATION CONNECTING PRICE AND QUANTITY WITH NEGATIVE SLOPE

  6. WHAT CAN SHIFT THE DEMAND CURVE? THE EXOGENOUS VARIABLES

  7. WHAT CAN CHANGE DEMAND CURVE SLOPE? RICH COUNTRY POOR COUNTRY

  8. Maslow’s Hierarchy of Needs ELASTICI- TIES

  9. SUPPLY ADJUSTS TO DEMAND: 1. PROPOSING A PRICE (MARKETING). 2. DECIDING PRODUCTION. WHICH DEPENDS ON COSTS, DEMAND (INVENTORIES) AND COMPETITION. WHICH DEPENDS ON PROFITS, DEMAND (INVENTORIES) AND COMPETITION.

  10. SUPPLY ADJUSTS TO DEMAND: (INVENTORIES FALL) THEN PRICE RISES AND PRODUCTION GROWS. WHEN DEMAND RISES SO, THE SUPPLY CURVE IS A POSITIVE RELATION BETWEEN PRICE AND PRODUCTION. THE SUPPLY CURVE IS A THEORETICAL CONSTRUCTION.

  11. WHAT CAN SHIFT THE SUPPLY CURVE? THE COST OF PRODUCTION.

  12. WHAT CAN CHANGE SUPPLY CURVE SLOPE? • LESS CAPITAL • PERISHABLES INELASTIC • MORE CAPITAL • NON-PERISHABLES ELASTIC

  13. WHAT CAN CHANGE SUPPLY CURVE SLOPE? LESS CAPITAL PERISHABLES AGRICULTURE INDUSTRY MORE CAPITAL NON-PERISHABLES

  14. WHAT CAN CHANGE SUPPLY CURVE SLOPE? LESS CAPITAL PERISHABLES POOR COUNTRY MORE CAPITAL NON-PERISHABLES RICH COUNTRY

  15. SUPPLY AND DEMAND: THE MARKET BRAZILIAN CEMENT MARKET

  16. LAW OF SUPPLY AND DEMAND THEORETICAL EQUILIBRIUM LEVELS OF PRODUCTION AND PRICE DEPEND ON: 1. BUYERS AND SELLERS INTERACTION 2. DEMAND AND SUPPLY CURVES SHIFTS STEMMING FROM EXOGENOUS FACTORS AND DECISIONS OF ECONOMIC POLICY

  17. GOVERNMENT INTERVENTION WHAT SUPPORTS THE PRICE LEVEL IS THE DEMAND

  18. CASE STUDY: THE BRAZILIAN CEMENT MARKET ECONOMETRICS

  19. 2SLS METHOD – SECOND STAGE THE BRAZILIAN CEMENT MARKET DEMAND CURVE: D*t = 14.778 - 0.288 P*t + 33.735 Ft- 2.979 D1 SUPPLY CURVE: Q*t = - 33.868 + 2.579 P*t - 3.140 Wt- 2.982 D1 SUPPLIERS PRICE: P*t = 32.776 + 5.008 Wt - 51.899 E*t - 20.858 D1 SUPPLIERS PRODUCTION DECISION: Q*t = - 25.515 + 2.428 M*t - 9.351 E*t - 6.740 D1

  20. BRAZILIAN CEMENT MARKET ANALYSIS PRICE ELASTICITY OF DEMAND INVESTMENT ELASTICITY OF PRODUCTION

  21. BRAZILIAN CEMENT MARKET ANALYSIS REDUCED MODEL – CONTROL PANEL P*t = CONSTANT + 1.098 Wt + 12.050 Ft Q*t = CONSTANT + - 0.308 Wt + 31.083 Ft EXAMPLE: SOURCES OF VARIATIONS P*t = 1.098 Wt + 12.050 Ft - INFLATION Q*t = - 0.308 Wt + 31.083 Ft - GROWTH

  22. A MATHEMATICAL DEMONSTRATION OF WHY NEOCLASSICAL THEORY IS WRONG

  23. THE IMPOSSIBLE NEOCLASSICAL SUPPLY CURVE THE PROFIT MAXIMIZATION EQUATION • ASSUMPTIONS: • PRODUCTION CAPACITY IS “GIVEN” • dP/dQ = ZERO THEREFORE P = dC/dQ IS SAID TO BE A SUPPLY CURVE HOWEVER...

  24. THE IMPOSSIBLE NEOCLASSICAL SUPPLY CURVE WHEN DEMAND SHIFTS TO THE RIGHT PROFITS RISE AND NEW INVESTMENT EXPANDS PRODUCTION CAPACITY AND THEN THE “SUPPLY CURVE” IS SHIFTED TO THE RIGHT.

  25. THE MATTER OF COMPETITION

  26. DEMAND PRICE ELASTICITY e INDIVIDUAL FIRM DEMAND PRICE ELASTICITY ei

  27. BRAZILIAN CEMENT MARKET MONOPOLY PRICE MP versus ACTUAL PRICE P

  28. BRAZILIAN CEMENT MARKET OLIGOPOLY DEGREE Z versus PROFIT MARGIN M

  29. BRAZILIAN CEMENT MARKET THE PHILIPS CURVE

  30. THE END OF THE NEOCLASSICAL DOMINANCE? TO BE CONTINUED.

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