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Published byValerie Cadwell Modified over 2 years ago

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MICROECONOMICS

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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.

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

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MATERIAL LEVEL Maslows Hierarchy of Needs

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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

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WHAT CAN SHIFT THE DEMAND CURVE? THE EXOGENOUS VARIABLES

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WHAT CAN CHANGE DEMAND CURVE SLOPE? POOR COUNTRY RICH COUNTRY

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Maslows Hierarchy of Needs ELASTICI- TIES

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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.

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

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

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

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

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

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SUPPLY AND DEMAND: THE MARKET BRAZILIAN CEMENT MARKET

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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

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GOVERNMENT INTERVENTION WHAT SUPPORTS THE PRICE LEVEL IS THE DEMAND

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ECONOMETRICS CASE STUDY: THE BRAZILIAN CEMENT MARKET

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DEMAND CURVE: D* t = 14.778 - 0.288 P* t + 33.735 F t - 2.979 D1 SUPPLY CURVE: Q* t = - 33.868 + 2.579 P* t - 3.140 W t - 2.982 D1 2SLS METHOD – SECOND STAGE THE BRAZILIAN CEMENT MARKET SUPPLIERS PRICE: P* t = 32.776 + 5.008 W t - 51.899 E* t - 20.858 D1 SUPPLIERS PRODUCTION DECISION: Q* t = - 25.515 + 2.428 M* t - 9.351 E* t - 6.740 D 1

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

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REDUCED MODEL – CONTROL PANEL P* t = CONSTANT + 1.098 W t + 12.050 F t Q* t = CONSTANT + - 0.308 W t + 31.083 F t BRAZILIAN CEMENT MARKET EXAMPLE: SOURCES OF VARIATIONS P* t = 1.098 W t + 12.050 F t - INFLATIONP* t = 1.098 W t + 12.050 F t - INFLATION Q* t = - 0.308 W t + 31.083 F t - GROWTHQ* t = - 0.308 W t + 31.083 F t - GROWTH ANALYSIS

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A MATHEMATICAL DEMONSTRATION OF WHY NEOCLASSICAL THEORY IS WRONG

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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...

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

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THE MATTER OF COMPETITION

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DEMAND PRICE ELASTICITY e INDIVIDUAL FIRM DEMAND PRICE ELASTICITY e i

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MONOPOLY PRICE MP versus ACTUAL PRICE P BRAZILIAN CEMENT MARKET

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OLIGOPOLY DEGREE Z versus PROFIT MARGIN M BRAZILIAN CEMENT MARKET

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THE PHILIPS CURVE

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THE END OF THE NEOCLASSICAL DOMINANCE? TO BE CONTINUED.

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