FIGURES © Richard B. McKenzie in addition to Dwight E. Lee 2006 www.cambridge.org/mckenzie
Crowe, Herb, Host has reference to this Academic Journal, PHwiki organized this Journal FIGURES © Richard B. McKenzie in addition to Dwight E. Lee 2006 www.cambridge.org/mckenzie Figure 2.1 Market dem in addition to as long as tomatoes Dem in addition to , the assumed inverse relationship between price in addition to quantity purchased, can be represented by a curve that slopes down toward the right. Here, as the price falls from $11 to zero, the number of bushels of tomatoes purchased per week rises from zero to 110,000. Figure 2.2 Shifts in the dem in addition to curve An increase in dem in addition to is represented by a rightward, outward, shift in the dem in addition to curve, from D1to D2. A decrease in dem in addition to is represented by a leftward, or inward, shift in the dem in addition to curve, from D1 to D3.
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Figure 2.3 Supply of tomatoes Supply, the assumed relationship between price in addition to quantity produced, can be represented by a curve that slopes up toward the right. Here, as the price rises from zero to $11, the number of bushels of tomatoes offered as long as sale during the course of a week rises from zero to 110,000. Figure 2.4 Shifts in the supply curve A rightward, or outward, shift in the supply curve, from S1 to S2, represents an increase in supply. A leftward, or inward, shift in the supply curve, from S1 to S3, represents a decrease in supply. Figure 2.5 Market surplus If a price is higher than the intersection of the supply in addition to dem in addition to curves, a market surplus a greater quantity supplied, Q3, than dem in addition to ed, Q1 results. Competitive pressure will push the price down to the equilibrium price P1, the price at which the quantity supplied equals the quantity dem in addition to ed (Q2).
Figure 2.6 Market shortages A price that is below the intersection of the supply in addition to dem in addition to curves will create a shortage a greater quantity dem in addition to ed, Q3, than supplied, Q1. Competitive pressure will push the price up to the equilibrium price P2, the price at which the quantity supplied equals the quantity dem in addition to ed (Q2). Figure 2.7 The effects of changes in supply in addition to dem in addition to An increase in dem in addition to panel (a) raises both the equilibrium price in addition to the equilibrium quantity. A decrease in dem in addition to panel (b) has the opposite effect: a decrease in the equilibrium price in addition to quantity. An increase in supply panel (c) causes the equilibrium quantity to rise but the equilibrium price to fall. A decrease in supply panel (d) has the opposite effect: a rise in the equilibrium price in addition to a fall in the equilibrium quantity. Figure 2.8 Price ceilings in addition to floors A price ceiling Pc panel (a) will create a market shortage equal to Q2 Q1. A price floor Pf panel (b) will create a market surplus equal to Q2 Q1.
Figure 2.9 The efficiency of the competitive market Only those pricequantity combinations on or below the dem in addition to curve panel (a) are acceptable to buyers. Only those pricequantity combinations on or above the supply curve panel (b) are acceptable to producers. Those pricequantity combinations that are acceptable to both buyers in addition to producers are shown in the darkest shaded area of panel (c). The competitive market is efficient in the sense that it results in output Q1, the maximum output level acceptable to both buyers in addition to producers. Figure 2.10 Consumer preference in television size Consumers differ in their wants, but most desire a medium-sized television. Only a few want a very small or a large television. Figure 2.11 Long-run market as long as calculators With supply in addition to dem in addition to as long as calculators at D1 in addition to S1, the short-run equilibrium price in addition to quantity will be P2 in addition to Q1. As existing firms exp in addition to production in addition to new firms enter the industry, the supply curve shifts to S2. Simultaneously, an increase in consumer awareness of the product shifts the dem in addition to curve to D2. The resulting long-run equilibrium price in addition to quantity are P1 in addition to Q2, respectively.
Figure 2.12 Prices in the long run If dem in addition to increases more than supply, the price will rise along with the quantity sold panel (a). If supply keeps up with dem in addition to , however, the price will remain the same even though the quantity sold increases panel (b). Figure 2.13 Twisted pay scale The worker expects his productivity to rise along line A with years of service. If she starts work with less pay than she could earn elsewhere, then her career pay path could follow line B, representing greater increases in pay with time in addition to greater productivity. Figure 3.1 Constrained choice With a given amount of time in addition to other resources, you can produce any combination of study in addition to games along the curve E1 G1. The particular combination you choose will depend on your personal preferences as long as those two goods. You will not choose point x, because it represents less than you are capable of achieving in addition to , as a rational person, you will strive to maximize your utility. Because of constraints on your time in addition to resources, you cannot achieve a point above E1 G1.
Figure 3.2 Change in constraints If your study skills improve in addition to your ability at the game remains constant, your production possibilities curve will shift from E1G1 to E2G1. Both the number of chapters you can study in addition to the number of games you can play will increase. On your old curve, E1G1, you could study two chapters in addition to play four games (point a). On your new curve E2G1, you can study three chapters in addition to play five games (point b). Figure 3.3 Policy trade-offs of a negative income tax With a guaranteed income of SI1($5,000) in addition to a break-even earned income level of EI1($10,000), the implicit marginal tax rate on the poor is 50 percent. If policy makers attempt to reduce the implicit tax rate by raising the break-even income level, however, the governments poverty relief budget will rise by the shaded area SI1ab. A higher explicit tax burden will fall on a smaller group of taxpaying workers. Figure 3.4 Maslows hierarchy of needs The pyramid orders human needs by broad categories from the most prepotent needs on the bottom to lesser in addition to lesser prepotent needs as an individual moves up the pyramid. According to Maslow, an individual can be expected to satisfy her needs in the order of their prepotence, or will move from the bottom of the pyramid through the various levels to the top, so long as the individuals resources to satisfy her needs last.
Figure 3.5(a) Dem in addition to , price, in addition to need satisfaction The extent to which needs are satisfied depends, in the economists view of the world, on the nature of the needs dem in addition to in addition to its price. Physiological needs may indeed be more completely satisfied than other needs, but that may only be because physiological needs have relatively low prices (panel (a)). But then, as shown in this figure (panel (b)), the price of the means of satisfying physiological needs might be higher than the prices of the means of satisfying safety in addition to love needs. Figure 3.5(b) Figure 5.1 The economic effect of an excise tax An excise tax of $0.25 will shift the supply curve as long as margarine to the left, from S1 to S2. The quantity produced will fall from Q3 to Q2; the price will rise from P2 to P3. The increase, $0.20, however, will not cover the added cost to the producer, $0.25.
Figure 5.2 The effect of an excise tax when dem in addition to is more elastic than supply If dem in addition to is much more elastic than supply, the quantity purchased declines significantly when supply decreases from S1 to S2 in response to the added cost of the excise tax. Producers will lose $0.20; consumers will pay only $0.05 more. Figure 5.3 The effect of price controls on supply If the supply of gasoline is reduced from S1 to S2, but the price is controlled at P1, a shortage equal to the difference between Q1 in addition to Q2 will emerge. Figure 5.4 The effect of rationing on dem in addition to Price controls can create a shortage. For instance, at the controlled price P1, a shortage of Q2 – Q1 gallons will develop. By issuing a limited number of coupons that must be used to purchase a product, the government can reduce dem in addition to in addition to eliminate the shortage. Here, rationing reduces dem in addition to from D1 to D2, where dem in addition to intersects the supply curve at the controlled price.
Figure 5.5 The conventional view of the impact of the minimum wage When the minimum wage is set at Wm ( in addition to the market clearing wage is Wo), employment will fall from Q2 to Q1; simultaneously, the number of workers who are willing to work in this labor market will exp in addition to from Q2 to Q3. The market surplus is then Q3 – Q1. Figure 5.6 An unconventional view of the impact of the minimum wage When the minimum wage is raised to Wm, a surplus is created equal to Q3 – Q1. As a consequence, employers can be expected to respond to the surplus by reducing fringe benefits or increasing work dem in addition to s on workers. The supply curve of labor contracts, reflecting the greater wage the workers will dem in addition to to compensate as long as the reduction in fringe benefits or increase in work dem in addition to s. The employers dem in addition to as long as labor increases, reflecting the higher wage they are willing to pay workers in terms of money wages who get fewer fringe benefits or work harder in addition to produce more. Figure 5.7 Marginal benefit versus marginal cost The dem in addition to curve reflects the marginal benefits of each loaf of bread produced. The supply curve reflects the marginal cost of producing each loaf. For each loaf of bread up to Q1, the marginal benefits exceed the marginal cost. The shaded area shows the maximum welfare that can be gained from the production of bread. When the market is at equilibrium (when supply equals dem in addition to ), all those benefits will be realized.
Figure 5.8 External costs Ignoring the external costs associated with the manufacture of paper products, firms will base their production in addition to pricing decisions on the supply curve S1. If they consider external costs, such as the cost of pollution, they will operate on the basis of the supply curve S2, producing Q1 instead of Q2 units. The shaded area abc shows the amount by which the marginal cost of production of Q2 Q1 units exceeds the marginal benefits to consumers. It indicates the inefficiency of the private market when external costs are not borne by producers. Figure 5.9 External benefits Ignoring the external benefits of getting flu shots, consumers will base their purchases on the dem in addition to curve D1 instead of D2. Fewer shots will be purchased than could be justified economically Q1 instead of Q2. Because the marginal benefit of each shot between Q1 in addition to Q2 (as shown by dem in addition to curve D2) exceeds its marginal cost of production, external benefits are not being realized. The shaded area abc indicates market inefficiency. Figure 5.10 Is government action justified Because of external costs, the market illustrated produces more than the efficient output. Market inefficiency, represented by the shaded triangular area abc, is quite small so small that government intervention may not be justified on economic grounds alone.
Figure 15.4 Effects of tariff protection on individual industries: Case 2 In this case, the auto industry gains from tariff protection, even if both sectors are protected (cell IV). The textiles industrys income falls from $20 (cell I) to $17 (cell IV), but the auto industrys income rises from $30 (cell I) to $31 (cell IV). Thus the auto industry has no incentive to agree to the elimination of tariffs. Figure 15.5 Supply in addition to dem in addition to as long as euros on the international currency market The international exchange rate between the dollar in addition to the euro is determined by the as long as ces of supply in addition to dem in addition to , with the equilibrium at E. If the exchange rate is below equilibrium, say at ER1, the quantity of euros dem in addition to ed, shown by the dem in addition to curve, will exceed the quantity supplied, shown by the supply curve. Competitive pressure will push the exchange rate up. If the exchange rate is above equilibrium, say, ER3, the quantity supplied will exceed the quantity dem in addition to ed in addition to competitive pressure will push the exchange rate down. Thus the price of a as long as eign currency is determined in much the same way as the price of any other commodity. Figure 15.6 Effect of an increase in dem in addition to as long as euros An increase in the dem in addition to as long as euros will shift the dem in addition to curve from D1 to D2, pushing the equilibrium from E1 to E2. At the initial equilibrium exchange rate ER1, a shortage will develop. Competition among buyers will push the exchange rate up to the new equilibrium level, ER2.
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