Microeconomics Graphs Overview

Introduction

• Instructor: Jacob Clifford
• Course: Microeconomics, preparation for final/FAPE exam
• Comparing to macroeconomics: Micro has more graphs (~1200)

Key Concepts

Production Possibilities Curve (PPC)

• Shows production of two goods
• Points:
  • Outside the curve: Impossible
  • Inside the curve: Inefficient
  • On the curve: Efficient
• Introduces concept of efficiency and socially optimal/allocatively efficient quantity

Supply and Demand

• Most important graph in microeconomics
• Equilibrium and Disequilibrium:
  • Equilibrium: Balance between supply and demand
  • Disequilibrium: Shortage or surplus
• Surplus Concepts:
  • Consumer Surplus: Willingness to pay vs actual price
  • Producer Surplus: Price received vs willingness to sell
  • Total Surplus: Combined consumer and producer surplus
• Government Interventions:
  • Price ceiling: Causes deadweight loss due to inefficiency
  • Price floor: Causes deadweight loss
  • Excise Tax: Shifts supply, creates tax revenue and deadweight loss

International Trade

• Domestic vs international price
• Increase in consumer surplus, reduction in producer surplus
• Overall increase in total surplus

Elasticity

• Not a graph but crucial for understanding demand and supply changes

Unit 3: Cost Curves

Diminishing Marginal Returns

• As workers increase, additional output decreases
• Graph: Total Product

Cost Curves

• Per Unit Cost Curves:
  • Marginal Cost (MC)
  • Average Total Cost (ATC)
  • Average Variable Cost (AVC)
  • Average Fixed Cost (AFC)
• Total Cost Curves: Less important, but understand fixed and variable costs
• Short Run vs Long Run:
  • Short Run: Fixed resources
  • Long Run: All variable resources, economies of scale

Perfect Competition

• Market Setting: Price set by market, firms are price takers
• Graph: Horizontal demand/marginal revenue curve
• Key Concept: Produce where MR = MC
• Efficiency: Allocatively and productively efficient

Monopolies and Market Structures

Monopoly

• Graph: Downward sloping demand and marginal revenue
• Profit Maximization: MR = MC
• Efficiency: Not allocatively efficient, deadweight loss

Monopolistic Competition

• Similar to monopoly in short run
• In long run: No economic profit

Oligopolies and Game Theory

• Payoff Matrix: Dominant strategy, Nash equilibrium

Unit 5: Labor Markets

Perfectly Competitive Labor Market

• Graph: Horizontal supply/marginal resource cost
• Decision Rule: MRP = MRC for hiring

Monopsony

• Single employer, upward sloping supply and MRC
• Results in lower wages

Unit 6: Externalities

Negative Externalities

• Graph: Marginal social cost exceeds private cost
• Result: Overproduction, deadweight loss

Positive Externalities

• Graph: Marginal social benefit exceeds private benefit
• Result: Underproduction, deadweight loss

Lorenz Curve

• Not critical for exams but shows income distribution

Conclusion

• Emphasis on practice and understanding
• Additional resources: Ultimate Review Packet, YouTube videos