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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