Absolute advantage:
Fewer inputs to produce a good
For example:
US: 100 hours 1 computer
Japan: 125 hours 1 computer
US has the absolute advantage
US should specialize this product
Comparative advantage:
Need to sacrifice the product having lower opportunity cost
CHAPTER 4
CHAPTER 4................................................................................................................. 1
I. Markets and Competition.................................................................................. 3
1. Market............................................................................................................ 3
1.1. Buyers determine demand................................................................3
1.2. Sellers determine supply...................................................................3
2. Competitive market B&S has negligible impact on market price...............3
2.1. “Price taker”: Buyers and sellers are so numerous that no one can
affect the market price...................................................................................... 3
II. Demand:........................................................................................................... 3
1. Quantity demanded amount of good people wanna buy...........................3
2. Law of demand.............................................................................................. 3
3. Demand schedule.......................................................................................... 4
4. Market demand.............................................................................................. 4
5. Market demand curve: sum the individual demand curves horizontally........5
III. Demand curve shifter.................................................................................... 6
1. Non-price determinants of demand change shift the D curve (test)......6
1.1. Number of buyers.................................................................................. 6
1.2. Income................................................................................................... 6
1.3. Prices of related goods, substitutes.......................................................7
1.4. Prices of related goods, complements...................................................7
1.5. Tastes (thị hiếu)..................................................................................... 7
1.6. Expectations about the future...............................................................7
2. Overview of the variables that influence buyers (test)..................................7
IV. Supply............................................................................................................ 8
1. Quantity supplied........................................................................................... 8
2. Law of supply................................................................................................. 8
3. Market Supply vs. Individual Supply..............................................................9
4. Supply Curve Shifters................................................................................... 10
4.1. The supply curve:................................................................................ 10
4.2. non-price determinants of suply shift the S curve...........................10
a. Input prices (giá đầu vào)....................................................................10
b. Technology........................................................................................... 11
c. Number of sellers shift right............................................................11
d. Expectations about future....................................................................11
4.3. overview of the factor affecting sellerr................................................11
V. Supply and Demand Together.........................................................................12
1. Equilibrium................................................................................................... 12
1.1. Equilibrium price:................................................................................. 14
1.2. Equilibrium quantity:............................................................................14
2. Market not in equilibrium.............................................................................15
2.1. Surplus: quantity supplied is greater than quantity demanded...........15
2.2. How to solve the surplus situation................................................15
a. Shortage: the price is low quantity demanded is greater than
quantity supplied......................................................................................... 17
b. How to solve the shortage situation....................................................17
3. Three steps to analyzing changes in equilibrium.........................................17
substitute: sản phẩm thay thế.................................................................................. 19
Compliment: sản phẩm tương trợ.............................................................................19
Price determinant & non-price determineant...........................................................19
Equilibrium: điểm cân bằng quantity suply = quantity demand we will see
the average price base on it to increase or decrease \........................................19
I. Markets and Competition
1. Market
A group of buyers and sellers of a particular good or service
[Link] determine demand
[Link] determine supply
2. Competitive market B&S has negligible impact on market price
2.1.“Price taker”: Buyers and sellers are so numerous that no one can affect the market
price
II. Demand:
1. Quantity demanded amount of good people wanna buy
2. Law of demand
a. Other things equal
b. Price rises quantity demanded falls
c. Price falls quantity demanded rise
3. Demand schedule
4. Market demand
Sum of all individual demands for a good or service
5. Market demand curve: sum the individual demand curves horizontally
Shows how price affects quantity demanded, other things being equal
[Link] curve shifter
1. Non-price determinants of demand change shift the D curve (test)
Things that determine buyers’ demand for a good, other than the good’s
price
[Link] of buyers
- Increase in # of buyers
Increases quantity demanded at each price
Shifts D curve to the right
- Decrease in # of buyers
Decreases quantity demanded at each price
Shifts D curve to the left
[Link]
- Normal good, other things constant
An increase in income leads to an increase in demand: Shifts D curve to
the right
- Inferior good, other things constant
An increase in income leads to a decrease in demand: Shifts D curve to the
left
[Link] of related goods, substitutes
An increase in the price of one leads to an increase in the demand for the
other
For example:
- pizza and hamburgers
An increase in the price of pizza increases demand for hamburgers, shifting
hamburger demand curve to the right
[Link] of related goods, complements
An increase in the price of one leads to a decrease in the demand for the
other
For example:
- Computers and software
If price of computers rises, people buy fewer computers, and therefore less
software; Software demand curve shifts left
[Link] (thị hiếu)
- Anything that causes a shift in tastes toward a good will increase demand for
that good and shift its D curve to the right
[Link] about the future
- Expect an increase in income, increase in current demand
- Expect higher prices, increase in current demand
2. Overview of the variables that influence buyers (test)
The variable that influences buyers
Price of the good itself - Represent a movement along the
demand curve
- Affect the price then will affect
the curve (but the curve not shift,
remember that)
Non-price determinants of demand
1. Income
2. Price of related goods (substitute
Shifts the demand curve
and complement)
3. Tatses
4. Expectation
5. Number of buyers
IV. Supply
1. Quantity supplied
- Amount of good
- Sellers are willing and able to sell
2. Law of supply
- The price of good => the quantity supplied
- The price => the quantity supplied
3. Market Supply vs. Individual Supply
Sum of the supplies of all sellers of a good or service
- Market supply curve
sum of individual supply curves horizontally
4. Supply Curve Shifters
[Link] supply curve:
Shows how price affects quantity supplied, other things being equal
4.2. non-price determinants of suply shift the S curve
a. Input prices (giá đầu vào)
- Examples of input prices: wages, prices of raw materials
- a fall of input the rise output prices rise of supply the S curve shift
to the right
- and vice versa
b. Technology
- Determines how much inputs are required to produce a unit of output
High tech cost saving reduce input prices shift right
c. Number of sellers shift right
d. Expectations about future
- Example: Events in the Middle East lead to expectations of higher oil prices
Owners of Texas oilfields reduce supply now, save some inventory to sell later at
the higher price
S curve shifts left
- Sellers may adjust supply* when their expectations of future prices change
(*If good not perishable)
4.3. overview of the factor affecting sellerr
The variable that influences sellers
Price of the good itself - Represent a movement along the
supply curve
- Affect the price then will affect
the curve (but the curve not shift,
remember that)
Non-price determinants of demand
1. Input prices (giá đầu vào)
2. Technology
Shifts the supply curve
3. Number of sellers
4. Expectations about future
V. Supply and Demand Together
1. Equilibrium
Price has reached the level where quantity supplied equals quantity
demanded
[Link] price:
[Link] quantity:
2. Market not in equilibrium
2.1. Surplus: quantity supplied is greater than quantity demanded
2.2. How to solve the surplus situation
CUTTING PRICES TO INCREASE SALES, DEMAND AND REDUCE
QUANTITY SUPPLIED
a. Shortage: the price is low quantity demanded is greater than quantity supplied
b. How to solve the shortage situation
Raise the price quantity demand falls quantity supplied rise
3. Three steps to analyzing changes in equilibrium
1. Decide whether the event shifts the supply curve, the demand
curve, or, in some cases, both curves
2. Decide whether the curve shifts to the right or to the left
3. Use the supply-and-demand diagram
• Compare the initial and the new equilibrium
• Effects on equilibrium price and quantity
Supply curve (non-price determinant affect) != quantity supplied (affected by
price)
substitute: sản phẩm thay thế
Compliment: sản phẩm tương trợ
Price determinant & non-price determineant
Equilibrium: điểm cân bằng quantity suply = quantity demand we
will see the average price base on it to increase or decrease \
Surplus: (nhiều mặt hàng quá) muốn bán nhiều hơn giảm price