RI H1 Economics Lecture Notes 2 Price Mechanism and Its Applications

Year 5 H1 Economics 2018 Microeconomics Lecture Notes Price Mechanism and its Applications Raffles Institution 22 Economics Department RAFFLES INSTITUTION YEAR 5 H1 ECONOMICS 2018 PRICE MECHANISM AND ITS APPLICATIONS 1. Demand-Supply model 1.1 The Market System 1.2 The Price Mechanism 1.3 Market Equilibrium 1.4 Changes in Demand and Supply 2. Economic Efficiency and the Price Mechanism 2.1 Allocative Efficiency 2.2 Productive Efficiency 2.3 How desirable is the free market equilibrium 3. Demand Theory 3.1 The Definition of Demand 3.2 The Law of Demand 3.3 Factors Influencing Market Demand 3.4 Distinction btw changes in Quantity Demanded and changes in Demand 4. Supply Theory 4.1 Definition of Supply 4.2 The Law of Supply 4.3 Factors Influencing Market Supply 4.4 Distinction btw changes in Quantity Supplied and changes in Supply 5. The Labor Market: Application of Demand and Supply 5.1 Wage Determination 5.2 Non-Wage Determination of Demand and Supply of Labor 6. Elasticities of Demand and Supply 5.1 Price Elasticity of Demand (PED) 5.2 Price Elasticity of Supply (PES) 6. Government Intervention in the Market (Market Level Analysis) 6.1 Taxation 6.2 Subsidies 6.3 Applications of Elasticities of Demand & Supply to Primary Commodities and Manufactured Products 6.4 Problems with the Use & Application of Elasticity Concepts 6.5 Price Controls: Maximum Price/Minimum Price / Application to Factor Market 6.6 Quantity Controls – Quotas 6.7 Consequences of Government Intervention: Intended and Unintended Reference: Gillespie, Andrew. Foundations of Economics, 2nd Edition, New York: Oxford University Press Lecture Objectives: After this series of lectures and tutorials, students should understand how the demand and supply model can be applied in the real world context. They should be able to apply demand and supply analysis to various markets such as primary products, manufactured goods, housing, healthcare, education, and labour market (wages). @dream

Year 5 H1 Economics 2018 Microeconomics Lecture Notes Price Mechanism and its applications Raffles Institution 23 Economics Department 1. DEMAND-SUPPLY MODEL 1.1 The Market System In the free market system (free of government intervention), resources are allocated according to the market forces of demand and supply. It is the level of demand and supply of each factor of production or final good or service that determine their respective prices and quantities traded. A market is present wherever and whenever buyers and sellers interact. 1.2 The Price Mechanism • According to A