Summary Notes

1
Summary Notes

• Economics 230
• Part II

2
Overview

• This section presents a picture of the perfectly
  competitive market economy
• In doing so, it examines the behavior behind
  demand and supply
• It shows how the market system coordinates the
  plans of consumers and firms
• It discusses the conditions under which the
  equilibrium of a market economy is socially
  efficient

3
Chapter 5

• Wants, satisfaction utility maximization
• The rational spending rule and the law of demand
• Effect of income and prices of other goods on
  demand
• Individual demands and market demand
• Measuring responsiveness rate of change and
  elasticity
• Expenditure and price elasticity of demand

4
Chapter 6

• The production decision in the short run
• Diminishing returns
• Profit maximization rule PMC
• Increasing opportunity cost and the slope of the
  supply curve
• Price elasticity of supply
• Determinants of supply

5
Chapter 7

• The efficiency of a perfectly competitive market
  system
• Maximizing the economic surplus
• Cost of price ceilings and price floors
• The effect of taxes on a competitive economy

6
Chapter 8

• Adjustment in a competitive economy
• Central role of economic profit
• The two functions of price
• The role of free entry and exit