Principles of Microeconomics

(1) Income Elasticity of Demand

Steven E. Crane — Tue, 03 May 2011 11:11:11 PDT

This discusses the other types of demand elasticity. Particular attention is given to the Income Elasticity of Demand, and the concept of normal and inferior goods. The two pieces of information that can be extracted from an income elasticity value are emphasized.

(2) How Economists Think and Analyze I: General Framework

Steven E. Crane — Tue, 03 May 2011 11:10:16 PDT

This provides an overview of the general methodology used in economics. It discusses the "economic way of thinking," and how economists go about analyzing what goes on in the world. It discusses scarcity, simplification, self-interested maximizing behavior.

(3) How Economists Think and Analyze II: Role of Markets

Steven E. Crane — Tue, 03 May 2011 11:10:14 PDT

This provides an overview of the role of markets in an economy. It explains the concepts of specializaton and mutual gains from exchange. It discusses market exchange between self-interested maximizers with differing interests. It describes how competition constrains self-interested behavior.

(4) How Economists Think and Analyze III: Marginal Analysis

Steven E. Crane — Tue, 03 May 2011 11:10:12 PDT

This provides a summary of the general analytic methodology used in economics. It discusses the key assumptions associated with the "economic way of thinking." It discusses scarcity, simplification, maximizing behavior, market exchange and the concept of "marginalism." It introduces the key economic decision rule of balancing marginal benefits against marginal costs.

(1) Price Elasticity of Demand I: Concept & Calculation

Steven E. Crane — Tue, 03 May 2011 11:10:09 PDT

This introduces the general concept of elasticity as a measure or indicator of relative responsiveness. The focus in on changes measured as percentages. The more specific concept of Price Elasticity of Demand is introduced. The general approach to calculation of a price elasticity is identified. The interpretation of an elasticity index is explained.

(2) Price Elasticity of Demand II: Some Interesting Relations

Steven E. Crane — Tue, 03 May 2011 11:10:07 PDT

This extends the discussion of Price Elasticity of Demand. It explains how price elasticity is related to demand curves, both their general shapes and at different locations along a linear demand curve. The connection between price elasticity, price changes, and firm total revenues is explained.

(2) Cross Price Elasticity of Demand

Steven E. Crane — Tue, 03 May 2011 11:10:05 PDT

This discusses the other types of demand elasticity. Particular attention is given to the Cross Price Elasticity of Demand, and the concept of substitute and complement goods. The two pieces of information that can be extracted from a cross price elasticity value are emphasized.

(1) Intro To Utility Analysis: The Utility Function

Steven E. Crane — Tue, 03 May 2011 11:10:02 PDT

This begins the introduction of the simple model of consumer choice that underlies demand curves. It discusses going "behind the scenes of a demand curve" and introduces the concept of a Utility Function.

(2) Diminishing Marginal Utility

Steven E. Crane — Tue, 03 May 2011 11:10:00 PDT

(1) Short Run Cost I: Intro & Overview

Steven E. Crane — Tue, 03 May 2011 11:09:57 PDT

This introduces short run cost analysis. It notes how cost is just a dollar value reflection of production relations. It distinguishes the concepts of Total Cost, Total Fixed Cost, and Total Variable Cost. It notes some practical problems with appropriately measuring cost.

(2) Short Run Cost II: Standard Cost Relations

Steven E. Crane — Tue, 03 May 2011 11:09:55 PDT

This presents the short run cost relations, using both the totals and the average/marinal approaches. After a brief introduction, the concepts of Total Cost, Total Fixed Cost, and Total Variable Cost are introduced, including both linear and nonlinear graphical examples. Next, the same is done with Average Total Cost, Average Fixed Cost, Average Variable Cost, and Marginal Cost. The link between production and cost is reviewed next, with emphasis on the point that the shape of the production function determines the shape of the cost function.

(3) Short Run Cost III: Opportunity Cost

Steven E. Crane — Tue, 03 May 2011 11:09:52 PDT

This introduces and explains the concepts of Opportunity Cost and Economic Profits. Economic profits are distinguished from Accounting and Normal Profits.

(7) Economies of Scale I: The Concept

Steven E. Crane — Tue, 03 May 2011 11:09:50 PDT

This explores the concept of Economies of Scale, and how it relates to the shape of the Long Run Average Total Cost Curve (LRAC). It describes the notion of "scale" as a volume of output produced in a time period measure. It establishes the "Economies of Scale" are associated with a declining LRAC, and "Diseconomies of Scale" are associated with a rising LRAC.

(8) Economies of Scale II: Causes & Interplay with Market Size

Steven E. Crane — Tue, 03 May 2011 11:09:47 PDT

This explores and explains possible causes or sources of economies of scale. Then the interplay between scale and overall market size is discussed as a way of explaining the number and size distribution of firms in a market.

(1) Characteristics of Monopoly

Steven E. Crane — Fri, 18 Feb 2011 12:22:00 PST

This identifes the characteristics of the market structure of Monopoly. It explains why these characterisics are important and explains that these have implications for the revenue functions and decision making of the firm. Total, Average and Marginal Revenue Functions are described and graphed. Finally, these revenue functions are combined with cost functions to examine profitability, using both the totals and the average/marginal approaches.

(2) The Declining Marginal Revenue Curve in Monopoly

Steven E. Crane — Fri, 18 Feb 2011 12:21:59 PST

This explains why the Marginal Revenue firm for a Monopoly is different from price, and that the Marginal Revenue Curve Declines more rapidly than the Average Revenue (Demand) Curve

(3) Evaluating Profitability Using the Average/Marginal Approach

Steven E. Crane — Fri, 18 Feb 2011 12:21:58 PST

This shows how a graph of revenues and costs can be used to conduct profit-volume analysis. The average/marginal approach is used. The profit maximizing output level is identified, and the associated total revenue and total cost measures are shown. This leads to an evaluation of profitability at the profit maximizing output level. Three outcomes are reviewed: 1) the firm making money, 2) the firm losing money, and 3) the firm breaking even by earning zero profits.

(4) The Long Run Equilibrium Situation in Monopoly

Steven E. Crane — Fri, 18 Feb 2011 12:21:57 PST

This describes the Long Run Equilibrium for Monopoly. It explains why the adjustment process described for Perfect Competition does not apply, and so that outcome is not obtained.

(5) The Case Against Monopoly I

Steven E. Crane — Fri, 18 Feb 2011 12:21:56 PST

This describes the case against Monopoly, the economic reasons for preferring Perfect Competition to Monopoly. The desirable features of Perfect Competition are reviewed and compared to the Monopoly outcome.

(1) Monopolistic Competition

Steven E. Crane — Fri, 18 Feb 2011 12:21:55 PST

This covers the market structure of Monopolistic Competition. It presents the characteristics of this market structure by contrasting them to those of Perfect Competition and Monopoly. It explains why these characterisics are important and explains that these have implications for the revenue functions and decision making of the firm. Total, Average and Marginal Revenue Functions are described and graphed. Finally, these revenue functions are combined with cost functions to examine profitability, using both the totals and the average/marginal approaches. Next it explains the story of how Monopolistically Competitive markets adjust in response to profit and loss signals. It uses graphs to illustrate this process, and how in the long run a zero profit outcome is achieved, but without achieving allocative efficiency. More generally, the Long Run Equilibrium properties of Monopolistic Competition are contrasted with those of Perfect Competition.