Graphs



Graphs

( Economists are very fond of graphs.

( What information is displayed in a graph?

( In all cases, a comparison is given.

( Graphs display "covariation."

( They always suggests a relationship.

Simple Bar Graph

( Compares men to women: Covariation by sex

( Compares 1990 to 1995: Covariation by year

Plot of a Variable over Time

( Compares values at one point in time with

those at another.

( Suggests changes over time

Plot of one Variable Against Another

( Compares values of two variables, usage and

Income - suggests that they move in the same

direction, over time.

( "Positive" covariation.

Linear Relationships

( Enumeration

Newspapers Production Cost

0 $50,000 (setup costs)

100,000 $55,000

200,000 $60,000

500,000 $75,000

and so on (not very efficient).

( Functional Relationship

Cost = $50,000 + $0.05 Newspapers

( In a Graph

Linear Relationships

Fahrenheit and Centigrade Temperatures

( Fahrenheit = [pic] ( Centigrade + 32

‘

( Centigrade = [pic]( Fahrenheit - [pic](32

Slope of a Function

Definition: Dependent Variable: The variable on the left of the equals sign in a linear function.

Independent variable: The variable on the right.

Dep.Var. = a + b ( Indep.Var.

Definition: Slope of a function: The ratio of the change in the dependent variable to a change in the independent variable. This is often written

Slope = [pic] =

[pic]

[pic].

For example, [pic].

Nonlinear Relationships

( Slope changes as independent variable changes

( Example: Progressive Income Tax

Independent Dependent

Income ($1000s) Tax (Amount)

0 to 25 20%

25 to 50 5 + 50% ( amount over $25

50 to 500 17.5 + 80% ( amount over 50

Over 500 A very large number.

A Function of More than One Variable

( Functional Relationship: Familiar, one variable

relates to another. Y = a + bX.

( A variable may depend on more than one other

variable. Taxes = a + bRooms + cLotSize

( To graph, hold one constant, vary the other.

Holding Other Things Constant

( Most economic relationship involve many

variables

( To study a relationship, we isolate an effect of

interest by “holding other things constant.”

( The U.S. gasoline market, 1960-1995.

Doesn’t quantity sold when price rises?

( Income is not held constant – it is rising.

Income also exerts a significant effect.

Solving a Set of Equations

( “Circular Systems” – Pairs of Equations

Lottery Tickets Sold = a + b ( $Jackpot Prize

$Jackpot Prize = c + d ( Tickets Sold

( How to “solve?” T = -10 + ½ P (Tickets)

P = 5 + 3 T (Prize)

( Graphically: T = -10 + ½ P ( P = 20 + 2T

Algebraic Solution

(1) If necessary, invert one of the equations, so

that the same variable is on the left hand

side of both equations.

P = 20 + 2T

P = 5 + 3T

(2) Equate the two results. P = P. So,

20 + 2T = 5 + 3T.

(3) Solve the resulting one equation for the

one variable.

20 - 5 = 3T - 2T

( 15 = T

(4) Use either of the equations in Step 1 to solve

for the other variable.

P = 20 + 2(15) = 50.

Break Even Analysis

( Newspaper production costs

$50,000 + .05 N

where N is the number of newspapers sold.

( Revenue is $5,000 in advertising revenue plus

50 cents ($.50) per newspaper.

( How many newspapers must be sold in order

to have revenues equal (or exceed) costs?

Find N for which revenues is greater than or

equal to cost.

$5,000 + .50 N > $50,000 + .05 N

The break-even point is

N = 100,000 newspapers.

Marginals, Averages and Totals

( Total = The quantity of Interest

( Average = [pic].

( Marginal = [pic]

= Change in Total Per Unit Change in Items

( Airborne Advertising, Inc., N = Flights

Total Revenue = R = $2,000 + $50 N

[pic]

Average Revenue = [pic]

Marginal Revenue = Additional Revenue Per

Additional Flight

= $50

Compound Interest

( Interest, then interest on interest, and so on.

( Per $: Now: $1

1 Yr.: $1 ( (1 + r)

2 Yrs: $1 ( (1 + r) ( (1 + r)

T Yrs: $1 ( (1 + r)T

( The Rule of 72. How long to become $2?

Years = T ( 72 / (100 ( r)

At 10%, T ( 7.2 years.

Discounting

( How much is a promise to pay $1 sometime in

the future worth right now?

( Discounting accounts for the fact that interest

can be earned if you have the money now, but

not if you must wait for it.

( Discounted Present Value. How much is

the $1 million sweepstakes (lottery) worth?

Depends on the appropriate r and the number

of years. Suppose first payment is after

one year, $25,000 per year.

( DPV = $25,000/(1+r) + $25,000/(1+r)2

+ ... + ($25,000)/(1+r)40.

( Assuming r = 10%, DPV = $244,476.

( “Funding” the $1 million lottery requires

only $244,476!

Rates of Change

( Percentages and Absolutes

( Change over Time: Index Numbers

What is the CPI?

Distinguish between “high” and “rising.”

What do index numbers tell you?

( Useful Math for Rates of Growth

Product: Growth Rate of XY = Growth

Rate for X + Growth Rate for Y

Revenue = Units Sold ( Price per Unit

Growth in revenue is from increased sales

and from increase in price.

Ratio: Growth Rate of X/Y = Growth Rate

for X – Growth Rate for Y

Growth in Per Capita Computers = Growth

rate in number of computers minus growth

rate of population.

Microeconomics

Topics

( Some Basic Principles

( Supply (Sellers) and Demand (Buyers)

( Demand in a Market (Consumers)

( Supply in a Market (Business Decisions)

( Market Equilibrium (Price Determination)

( Changes in Market Equilibrium

( Describing a Market Using Elasticities

Some Basic Principles of Microeconomics

( Scarcity in the economy

Resources: space, materials, wealth

Time

( Opportunity cost

A consequence of scarcity

The implication of an economic decision

( The cost benefit “test”

People do this naturally

A natural form of economic behavior

( Application of the cost benefit test “at the

margin”

( Economic incentives

Their implication for behavior

As an explanation for economic decisions

Demand and Supply

( What is a market?

Physical characteristics

Essential characteristics – buyers and sellers

( What takes place in a market?

Demanders: Individual buyers converge to

purchase

Suppliers: Individual sellers converge to

sell

( What is the outcome?

Collective actions of buyers and sellers

lead to a price and a quantity that together

are the market “outcome” or “equilibrium.”

Both buyers and sellers are necessary for

the outcome.

The equilibrium results from the interplay

of “demand” and “supply.”

Demand in a Market

( Individual demanders have preferences given

prices and their incomes. Individuals have

different opinions and preferences

( Market demand is the sum of all individuals’

demands.

( Application: The market for gasoline

( Illustrates the general result: As a price rises,

consumers generally demand less of a good.

Conditions that Affect Demand

( Demand depends on economic conditions

Mainly: Consumers’ incomes

Prices of other goods

Consumer preferences (they change)

( When these things change, demand changes

( Example: Sales of electric cars (a change in

preferences) will reduce demand for gasoline;

rising incomes which lead consumers to buy

more and bigger cars will increase demand.

Supply in a Market

( Individual suppliers (sometimes) differ in

their costs to produce (some farmers have

better land – some producers have patents and

trade “secrets”).

( Costs of production (sometimes) change when

producers try to expand.

( Application: Natural gas (similar to other

resource markets).

Market Supply

( Depends on “technology”

( Depends on prices for labor, materials, etc.

( Market supply is the sum of individual

supplies

( Application: The market for gasoline

( Slopes upward: Increased output is expensive

Higher prices attract high cost producers

Conditions that Affect Supply

( Changes in technology generally make

production less expensive, increasing supply

( Changes in prices for things needed for

production change costs of production, and

change supply – can go in either direction.

( Application: Rapid technological advance

is making it cheaper to find and extract oil;

this leads to lower costs to produce and sell

gasoline.

Equilibrium in a Market

( What is the equilibrium?

A price at which the amount buyers wish to

buy matches the amount which sellers wish

to sell.

( We place buyers and sellers together in the

market. Their interaction produces the

equilibrium.

( There is a single equilibrium price.

Computing the Equilibrium

( Using the gasoline market:

QD = quantity demanded = 31.525 - 1.25P

QS = quantity supplied = 23.9125 + 2.375P

( Equilibrium is defined by QD = QS.

31.525 - 1.25P = 23.9125 + 2.375P

(

P = (31.525 - 23.9125) / (2.375 + 1.25) = 2.1.

( Q = 31.525-1.25(2.1) = 28.9.

( See previous page for this solution in a

graph.

Shortages and Surpluses

( The Law of One Price: In a market, absent

any impediments, a commodity will trade at a single price. Where more than one price exists for a commodity, forces will be set in motion that have the tendency to erase the difference(s).

( Shortage: When quantity demanded exceeds

quantity supplied. The price is below the

equilibrium

Ticket scalping

Milk shortages at the advent of a storm

Consumers compete by bidding prices up.

( Surplus: When quantity supplied exceeds

quantity demanded. The price is above the

market equilibrium

After Christmas toy sales

Producers compete with each other by

offering lower prices – pushing prices down.

( The Law of One Price acts to eliminate

shortages and surpluses

Factors that Change the Equilibrium

( Equilibrium (the price) depends on both

supply and demand.

( If either supply or demand changes, the

equilibrium price will change also.

( When an economic factor changes, we can

predict how price will change based on what

we know about changes in supply and/or

demand.

A Change in Demand

( Factors that change demand:

Rising income ( higher (lower) demand

means a normal (inferior) good

Change in the price of another good

Increasing price of another good ( higher

(lower) demand means they are

substitutes (complements)

Changes in consumer preferences can increase

or decrease demand.

( Consider the market for roses on Valentine’s

Day. Preferences suddenly increase. Price

Rises from $15 to $50 per dozen.

A Change in Supply

( Factors that change supply

Rising prices of inputs to production (labor)

Changes in technology

( Example: A shortage of college teachers.

(Rising cost of labor to universities)

( Rising labor cost causes supply for education

to shift upward (decreased supply).

( Rising cost of labor (faculty) forces

universities to raise prices.

Elasticity

( A definition: Elasticity =

[pic].

( Economists prefer percentage changes to

describe covariation. Consider the demand on

page 20. Looks like a very strong relationship

between price and quantity. Is it? Not at all!

( This is (will be called) an “inelastic” demand.

Computing an Elasticity

( Various ways, depending on information

available. Simplest:

E = [pic]

( Application: Roses on Valentine’s Day

( Change from price = 20 to price = 8.

Quantities change from 5 to 20. Elasticity is

Ed = [pic].

Demand Elasticity

( Ed = Absolute value of

[pic].

( Gasoline market demand equation is

QD = 31.525 - 1.25P

equilibrium is P = 2.1 and Q = 28.9

Ed(Gasoline) = Abs[-1.25 ( (2.1/28.9)] = .091.

( ED < 1 ( Inelastic demand,

ED > 1 ( Elastic demand,

ED = 1 ( Unit elastic demand.

Gasoline demand is extremely inelastic.

( Other elasticities: Income elasticity

Cross price elasticity

( Elasticity effects are larger in the long run

than in the short run.

Other Elasticities

( Revenue = Price ( Quantity

As price rises, quantity falls. Since they move

in opposite directions, the product could rise

or fall. Some businesses (theaters) worry

more about revenue than about quantity.

Revenue elasticity = 1 + Demand Elasticity

(Demand elasticity keeps minus sign here.)

If demand is inelastic, revenue rises when

Price rises. If not, revenue falls.

( Supply elasticity

ES = [pic].

QS = 23.9125 + 2.375P. P = 2.1, Q = 28.9

ES = 2.375(2.1/28.9) = 0.1725.

Also quite inelastic.

Macroeconomics and

Money in the Economy

Topics

( Interesting Economic Variables

( Views of Macroeconomic Policy

( Measuring the Economy

( Prices and Interest Rates

( Fiscal Policy and the Deficit

( Monetary Policy, Interest Rates and Inflation

( The Money Stock and Money in the Economy

Interesting Economic Variables

( Variables that policy makers are interested in

Unemployment and economic activity

Inflation

Interest rates and investment

Exchange rates and world trade

Distribution of income and wealth

Overall well being of the society

( Policy

What tools are available?

How do they work?

Do they work?

Policy Tools

( Fiscal Policy: Taxes and Spending

( Monetary Policy: Money Supply (Interest

Rates)

[pic]

( Are the policies complementary?

Conflicting?

Do the Policy Tools Work?

( The Policy “Debate”

Keynesian: Fiscal policy is powerful

Monetarism: Monetary policy is (too)

strong. Fiscal policy is weak and imprecise.

Rational Expectations: Long run

equilibrium; neither policy works in the

long run.

( Contemporary view: Long run growth

equilibrium with short run fluctuations

Measuring Economic Activity

( Stocks and Flows

Stock = An amount at a point in time

Flow = A change in an amount over time

Application: Is Microsoft, capitalized value

$500 billion as large as Spain, GDP = $500

billion? (New York Times, July 17, 1999)

No (!) Compare MS revenue $20b (flow) to

Spain GDP, $500b. Or, Spain’s capital stock,

several trillion $ to MS $500b.

Compare stocks to stocks or flows to flows.

( Flows are the economic activity. Stocks are

the accumulated result of economic activity.

( Application: The debt vs. the deficit.

A Measure of Economic Activity

( Gross Domestic Product: GDP is the total

value of goods and services produced in the economy during a particular period, valued at current market prices in that period.

( GDP for the U.S. in 1998: $8.5 trillion.

( To avoid double counting, GDP includes only

final goods and services, not intermediate goods used as inputs in the production of other goods.

( Current market prices. If prices change from

one year to the next, this makes comparison of GDP in different years difficult. Does it increase, because more was produced or because the same amount was sold for higher prices?

( GDP includes only things that are made or

produced in the current year. Sale values of used cars counted as new before 1999, existing homes, antiques, do not count in 1999 GDP, but the salaries of salespeople who sell them do.

Computing GDP to Measure

Economic Activity

( Final Demands: Add up final purchases of

goods and services.

( Factor payments: Purchases of goods and

services are ultimately paid to factors of

production, labor (wages and salaries) and

capital (everything else, by definition).

( Value added: Add up values added at each

stage of production.

Value added? Approximately total revenue

minus costs of purchased intermediate

products.

Application: VAR in the computer business

is a “value added reseller.” Buys computers,

adds some software and parts, resells. Value

added is the revenue minus the cost of the

original computer

( All 3 methods give the same answer.

GDP vs. GNP

The International Economy

( GDP is the total value of goods and services

produced in the domestic economy

( GNP is the total value of goods and services

produced by the domestic economy. (Some

payments to U.S. labor may be made in

foreign countries

( Difference is net payments to foreign capital

and labor.

( Application for 1998: $billion

Gross domestic product..... 8,511.0

Plus: Receipts of factor income from

the rest of the world..... 269.2

Less: Payments of factor income to

the rest of the world..... 289.6

Gross national product..... 8,490.5

( Small for the U.S. Large for most countries.

Thinking About Economic Activity

( Where does GDP go? Y

=

Private consumption C

Consumption by the government + G

Net purchases by foreigners + X-M

Investment (real, e.g., factories) + I

( Society’s choices: Consumption (now) vs.

Investment (consumption later)

Y - T - C = “disposable income” minus

consumption. (T-Taxes)

= savings by individuals

+ T - G = savings by government

= the “deficit”

+ X – M = “savings” by export sector

= I = Investment. Savings is how

we pay for investment.

( Private savings. Low by world and historical

standards? Stock market gains may be a form

of wealth accumulation. (High risk if so.)

Price Indexes

( Measure how prices of “all goods” have

changed, on average.

( Price Index = Sum over goods in the index

100 ( weight of good i ([pic]

( [pic] ( 100

( Implicit Price Deflator for GDP

1992=100, Seasonally Adjusted Annual

Rate Source: U.S. Department of

Commerce, BEA, Quarterly

Year Deflator Real GDP Nominal GDP

1998.1 112.32 7749.0 8384.2

1999.1 113.47 ------ 8807.9

(Note, 8384.2/1.11232 = 7537.6. There

is a “seasonal adjustment.”)

( Consumer Price Index (CPI) does the same

computation for the goods consumed by

“consumers.”

Inflation

( Rate of inflation = percentage change in the

price index.

( Application: Depends on who you are and

where you are. The CPI for 1999. 1984=100

Consumer Price Index % Change to April

Jan. Feb. Mar. Apr. Jan. Feb. Mar.

U.S. city average

161.1 161.2 161.6 162.8 1.1 1.0 0.7

Northeast Urban

168.5 168.4 168.7 169.7 0.7 0.8 0.6

Midwest Urban

156.6 156.6 157.1 158.3 1.1 1.1 0.8

South Urban

158.0 158.1 158.5 159.5 0.9 0.9 0.6

West Urban

162.5 162.8 163.3 165.0 1.5 1.4 1.0

From 1984 to 1999, prices rose fastest in the

Northeast

From January to April, 1999, prices rose

fastest in the West

( Where are prices “highest?” Cannot tell.

Inflation in the U.S.

( The CPI: Lines show the base year, 1984.

( The rate of inflation. Note how low for 90s.

Real Output (Activity)

( Nominal GDP and Growth Rates:

Year Deflator Real GDP Nominal GDP

1998.1 112.32 7749.0 8384.2

1999.1 113.47 ------ 8807.9

From 1998.1 to 1999.1, nominal GDP rose

5.05%. The GDP deflator rose 1.01%. Using

our result for growth rates of products, Real

GDP rose 4.04%. (“Robust growth.”)

( How fast is the economy growing?

( Recession = Negative growth. 6 appear above

Real Interest Rates

( Nominal Interest Rate = “stated” or face

value.

( Real Interest Rate = nominal - inflation

( Ex-post vs. Ex-ante

Ex-post: Looking backward

Accounting for inflation, return

on asset was …

Ex-ante: Looking forward

Nominal interest rates include

a factor for anticipated inflation.

( When lenders lend money, or investors

put money in assets, they look forward to

their returns.

( Investors care about “real returns” which

are typically 3% to 7% in the U.S. economy.

Macroeconomic Policy

( Policy Objectives

Real economic activity

Employment

Output

Investment in productive capacity

Prices, the rate of inflation

( Policy Tools and Mechanisms

Fiscal Policy: Tax and Spending Policy

Affects demand for goods and services

Taxes affect markets through prices

Monetary Policy: Money Stock,

Interest Rates

Interest rates affect investment and

credit demand.

Monetary policy affects inflation

Fiscal Policy

( Taxes and spending directly affect demand

for goods and services

( The debt and the deficit:

National Debt =

Sum of the yearly deficits over all years we

have been a country

( When tax receipts exceed spending, a surplus

results, and the debt declines.

What is “debt reduction?” (1999-2000 budget)

( Can the government change spending or

taxes enough to affect total demand?

More than 75% of the federal budget is

not changeable – interest obligations and

entitlements. Taxes change only slightly.

Probably not.

( Keynesian style fiscal stimulation is not

realistic in the U.S. Possibly in other countries

Monetary Policy

( Controlled by a “central bank”

( Managing the money stock – the policy tool

is interest rates.

( The central bank loans money to the banking

system. When it changes the interest rates it

charges, these changes are passed on into the

banking system. This is the policy tool.

( Direct effects:

On demand and output:

Interest rates affect demand for

investment goods,

Interest rates affect consumer credit and

Consumer demand for goods

On prices: The amount of money in the

Economy affects the price level in the

economy. The central bank can cause the

price level to rise or fall by controlling the

amount of money in the economy.

Money in the Economy

( Definition: Defined by its functions:

Medium of exchange

Store of value

Unit of measurement

( How much money in the economy?

Money is a stock. At any point in time:

Cash plus other “assets” which add up to

the total of convenient means of exchange.

Cash plus checking accounts (broadly

Defined) = M1

Broader definitions include other kinds

of accounts = M2.

As of March, 1999,

Coin and currency: $300 billion

M1 $1.2 trillion

M2 $4.5 trillion

Creating Money

( The central bank lends money as currency and

funds in accounts to commercial banks. Note:

“Federal Reserve Note.”

[pic]

( The central bank is the ultimate source of the

monetary base.

( Commercial banks lend to other banks and

to their customers.

( Commercial banks “multiply” these injections

through “fractional reserve banking.”

( Additions to the money stock occur when the

central bank increases the amount of its loans

to the banking system.

The Banking System

and Monetary Policy

( The central bank controls monetary growth

by lending money to the banking system.

(Where does the central bank get the money

to lend? It “creates” it. That is what a central

bank does.)

( The central bank uses the banking system to

carry out its policy.

( The interest rates the bank charges control

how much money will be loaned. Thus, the

interest rate is the policy tool.

( The money stock must grow in concert with

real output in the economy.

Too fast: ===>> Inflation

Too slow ===>> Rising interest rates and

“a credit crunch.”

( Complication: International funds markets

The International Economy

Topics

( Two Branches of Study – Trade and Finance

( International Trade

Why nations trade

The patterns of trade

International trade policy

( International Finance

Markets for foreign exchange

Exchange rates

Balance of payments/balance of trade

( International Macroeconomics

International Trade

( Political borders, diversity and factor

immobility create a separate economics of

“trade.”

Cultural differences

Differences in resource endowments

Different national policy objectives

Different knowledge bases

( What is the benefit of trade?

Trade enables a nation (person) to achieve

greater economic output (consumption,

utility, growth, etc.) than it (they) could in

isolation

( A central principle: Comparative advantage.

Traders gain by specializing (to a degree)

in those activities at which they are most

skilled or can do most easily.

Patterns of Trade

( Nations tend to export those goods and

services that they can produce at lower cost

and import those that are expensive to make

at home.

U.S. exports education, computers

U.S. imports textiles, ships

( Goods are inexpensive to produce when they

are produced with inexpensive “factors,”

mainly labor, capital and natural resources.

(Low cost = factor abundance.)

U.S. exports education

China exports textiles

France exports wine

Cuba exports tobacco (but not to U.S.)

( Trade works in favor of the abundant factor:

Increase in demand for it tends to raise its

Price. (In U.S., wages of professors rise,

wages of textile workers fall and they lose

their jobs.)

International Trade Policy

( “Free trade” conflicts with national objectives

( Governments interfere with free trade, mainly

through prices and direct restriction on flows

of goods and services.

( Tariffs and quotas are the main policy tools

Tariff: A per unit tax imposed on imports

of a good.

Quota: A fixed physical limit on amounts

of a good that may be imported.

( A basic figure for analyzing these policies:

Tariffs and Quotas

( “World price:” Good is available from outside

at a price less than domestic equilibrium.

(1.60 vs. 2.10 in the figure.)

( Imports compete with domestic production

( Tariff forces foreign sellers to sell at a higher

price than they would otherwise. As a result,

they sell less.

.20 above 1.60 reduces imports

.50 above 1.60 eliminates imports

( Quotas reduce imports to less than they would

be otherwise. This creates a shortage, causing

the price to rise.

Free trade imports in figure = 2.40

Quota of 1.05 causes price to rise to 1.80

Quota of 0 (no imports) causes price of 2.10

( Foreign sellers prefer quotas to tariffs.

( Nations regularly negotiate reductions in

tariffs. (Free trade areas, European Union.)

International Finance

and Macroeconomics

( Foreign exchange markets: Traders buy and

sell currencies of different countries. Total

world volume over $1 trillion per day!

Why?

Trade in goods and services

Speculation (gambling)

Arbitrage (simultaneous trades at

different prices)

( Exchange rate is price of one currency for

another.

May 25, 1999, $1.00Aus = $0.6594US

L1.00UK = $1.6028US

Currency traders charge a commission to

convert one currency to another. A kind of

banking function.

( Exchange rates adjust to supply and demand,

and economic conditions. If many traders try

to buy a currency at once, its price (rate) will

rise – it will appreciate.

The Balance of Payments

( A set of accounts that suggests our financial

position with respect to the rest of the world.

( Trade surplus or deficit in a particular period:

Surplus = Value of Exports – Value of Imports

Balance of trade = the sum of these over time.

( Transactions take place in money as goods

are exchanged. When U.S. (a country) exports, the person they sell to must buy $. The seller of the $ accumulates the foreign currency, so their holdings of foreign currency rise.

Current account surplus or deficit = the value

of these transactions.

( Balance of payments on current account is

the sum of these amounts over time. (Not

necessarily an interesting number. Real

problems with prices changing over time.)

International Macroeconomics

In the “open” economy – that is, one which has

substantial interactions with the rest of the world:

( The international economy heavily influences

domestic variables of interest and interacts

with domestic macroeconomic policy.

( Exchange rate movements cause inflation

or deflation in economies that have large

import or export sectors. This may be

independent of domestic monetary policy.

( Foreign exchange (capital) movements may

make it difficult or impossible to have a

domestic monetary policy.

( Real output and employment may be helped

or hurt by the health of the economies of

trading partners to whom a country exports.

-----------------------

Masters Degrees Given in U.S. in 1990 and 1995

(Thousands. Source: Statistical Abstract)

195

180 1995

165

1995

150

135

120 1990 1990

==

0

Men Women

Costs ($1,000)

90

80

70

$.05/newspaper

60

50

Newspapers (100,000s)

0 1 2 3 4 5 6 7 8 10 12

[pic]

[pic]

[pic]

Property taxes

900 8 room house

700 7 room house

500 6 room house

Lot size in 1000 square feet

[pic]

[pic]

[pic]

Got Milk?

[pic]

[pic]

[pic]

Demand shifts “inward.” Less

gasoline is desired at any price.

Price and extraction cost in $/100 ft3

25

22

19

16

13

10

7

4

1

Capacity

Well 1 Wells 1&2 Wells 1,2,3 in ft3/year

15 mil 25 mil 30 mil

[pic]

[pic]

[pic]

[pic]

Price per dozen

Demand Valentines Day Demand

50

15

Supply

Quantity of roses per day

Price of Education

P_new

P_old

E’ E

Quantity of Education

[pic]

Price per dozen

24

20

16

12

8

4

0

0 5 10 15 20 30

Quantity

[pic]

[pic]

[pic]

[pic]

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