Presentation is loading. Please wait.

Presentation is loading. Please wait.

MARKET EQUILIBRIUM AND MORE ELASTICITY ECONOMICS REVIEW (PT. 2)

Similar presentations


Presentation on theme: "MARKET EQUILIBRIUM AND MORE ELASTICITY ECONOMICS REVIEW (PT. 2)"— Presentation transcript:

1 MARKET EQUILIBRIUM AND MORE ELASTICITY ECONOMICS REVIEW (PT. 2)

2 MARKET EQUILIBRIUM Marshall was the first to clearly establish the notion of market equilibrium-like two scissor blades establishing price and quantity traded. Solved a problem that had vexed (previously only economists)-were diamonds high-priced because they were hard to find or because people wanted to wear them? Integral to Marshall’s notion was time-over the short run demand asserted its upper hand, but over the long term production-supply-is stronger

3 Price ($/m3) Demand (m3/month) Supply (m3/month) SurplusPrice Effect 50040,000240,000+200,000 40080,000200,000+120,000 300140,000 0none 200220,00080,000-140,000 100320,00020,000-300,000 +120,000 +200,000 -140,000 -300,000

4 Market equilibrium after an increase in demand Firm equilibrium after an increase in demand PP P P P P p p p p* QQQ QQQ S SS S lr D DnDn D DnDn MC ATC

5 RESOURCE SCARCITY D1D1 D2D2 D3D3 S P2P2 P3P3 P Q

6 ECONOMIC ISSUES & FOREST TENURES Method of allocation Need to find their way to most productive use Scope of rights Exclude externalities and will be ignored-otherwise if included in maximizing value will internalize those Some can’t be easily internalized (biodiversity) Security Duration of rights; prospects for renewal; balanced against government need for flexibility

7 ECON. ISSUES & TENURE (CONT.) Scope of Intervention Balance against rights-holders ability to pursue economic gain versus government goal of maximizing societal value Allocation of management responsibilities Management planning Inventory reforestation Distribution of resource rent

8 INEFFICIENT MARKETS P QbQb p* qa*qa* DaDa S D S Use A Use B SaSa SbSb DbDb QaQa papa pbpb qb*qb*

9 ELASTICITY AND TOTAL REVENUE Total Revenue changes with a change in price If unit elastic (1), total revenue (price *quantity) will be the same If value is less than one, price increase will increase revenue If value is more than one, price increase will lead revenue to decline Elastic Demand D s

10 RELATIVE CHANGES FROM CHANGES IN SUPPLY Elasticities can influence industry behaviour D S2S2 S1S1 Q2Q2 Q1Q1 P2P2 P1P1


Download ppt "MARKET EQUILIBRIUM AND MORE ELASTICITY ECONOMICS REVIEW (PT. 2)"

Similar presentations


Ads by Google