Microeconomics Principles Lecture 2: Supply and Demand

This microeconomics lecture covers the hallmark framework of the field: the supply and demand model.

1  Overview

Welcome to your second module in Microeconomics Principles! This module we will cover the hallmark framework of the field: the supply and demand model. I am sure that if you knew any economics words before enrolling in this course those two words were supply and demand. This module you will finally learn what all the fuss is about.

By the end of this module, you will see that the beauty of the supply and demand model is that it is both simple and powerful. Nonetheless, it takes a little bit of work to develop it. And you want to make sure you understand it well because we will be using it quite a bit during the course. So we’ll build it step by step, first focusing on deriving the demand curve and then moving on to the supply curve. Finally, after explaining the idea of market equilibrium, I will show you how to use the model to make predictions about market changes.

2  Goals and Objectives

After you actively engage in the learning experiences in this module, you should be able to:

  • Identify what a market is.
  • Identify the determinants of demand and supply for a good and service.
  • Forecast what happens to equilibrium price and quantity as a result of a change in the market conditions.

3  Key Phrases/Concepts

Keep your eyes open for the following key terms or phrases as you complete the readings and interact with the lectures. These topics will help you better understand the content in this module.

  • Equilibrium
  • Supply shortage
  • Supply surplus
  • Difference between a change in quantity demanded/supplied and a change in demand/supply

4  Guiding Questions

Develop your answers to the following guiding questions while completing the readings and working through the module.

  • What is the difference between a change in quantity demanded and a change in demand?
  • What determinants of demand (supply) cause the demand (supply) curve to shift?
  • What happens to the market price when there is a supply shortage (surplus)?

5  Readings & Resources

  • Chapter 3, Microeconomics, Krugman and Wells, 3rd ed.

6  Lecture videos

6.1  Introduction

6.1.1  What is a Market? (00:01:39)

 

 

6.1.2  The Market for Romantic Relationships (00:07:46)

 

 

6.2  Demand 

6.2.1  The Determinants of Demand (00:04:00)

 

 

6.2.2  The Demand Function, Schedule, and Curve (00:07:24)

 

 

6.2.3  Introducing Comparative Statistics: Changes in the Price (00:04:51)

 

 

6.2.4  A Change in Demand, Part 1 (00:13:30)

 

 

6.2.5  A Change in Demand, Part 2 (00:10:28)

 

 

6.3  Supply

6.3.1  The Determinants of Supply (00:04:46)

 

 

6.3.2  The Supply Equation, Schedule, and Curve (00:07:09)

 

 

6.3.3  Price of an Input Changes (00:05:54)

 

 

6.3.4  A Change in Technology (00:04:39)

 

 

6.4  Equilibrium

6.4.1  Supply Surplus, Supply Shortage, and Equilibrium Price (00:12:28)

 

 

6.5  Using The Model of Supply And Demand

6.5.1  Changes in Demand: Price of Related Goods (00:10:01)

 

 

6.5.2  Changes in Demand: Consumer Preferences (00:04:28)

 

 

6.5.3  A Change in Supply (00:07:43)

 

 

6.5.4  Simultaneous Change in Supply and Demand (00:06:31)

 

 

6.6  Conclusion

6.4.1  Demand and Supply Conclusion (00:08:15)

 

 

 

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Microeconomics Principles Lecture 1: Introduction and Basic Principles

This lecture is an introduction to microeconomics, covering some basic principles.

1  Overview

Welcome to your first lesson in Microeconomics Principles! As you will quickly see, the things you learn in this class will probably help you see the world in a different way. Economics is not just about money, as you may have incorrectly assumed. On the contrary, as you will learn in this lesson, economics is about how society distributes scarce resources. And, since almost anything in the world is a scarce resource, from fossil fuels to nice guys, we can apply the rules of economics to pretty much anything. In this first lesson you will learn the 4 basic, yet important concepts that are at the center of modern microeconomics:

  • When people maximize their interest society wins.
  • The cost of doing something is the opportunity that is given up.
  • Trade makes people better off.
  • Rational people take an action only when the marginal net benefits of that action are positive.

Read more Microeconomics Principles Lecture 1: Introduction and Basic Principles

Microeconomics Principles: Syllabus

1  Instructor

Dr. José J. Vázquez-Cognet
Clinical Professor
Department of Economics
University of Illinois at Urbana-Champaign

vazquez-pictureDr. José J. Vázquez-Cognet is a Clinical Professor in the Department of Economics, and the Coordinator of e-Learning for the School of Liberal Arts and Sciences at the University of Illinois Urbana-Champaign (UIUC). During his tenure at Illinois he has received several teaching awards, including twice The Outstanding Teacher of Freshmen Award , a campus-wide award given every year by the Alpha Lambda Delta Honor Society. He also has been included in the List of Teachers Ranked as Excellent for four consecutive years. Before returning to Illinois, he was the Associate Director of the Teaching and Learning and Center at the University of Texas at San Antonio. Dr. Vazquez-Cognet specializes in developing technologies that can be used in large enrollment courses, particularly classroom simulation games and web-based assessments/activities. He has published this work in several academic journals including the International Journal of Economic Education, and has presented at numerous academic conferences. In addition to his teaching experience at UIUC, he has also taught at The College of Wooster in Wooster, Ohio and at Hamilton College, in Utica New York.

2  Course Description

This course offers an introduction to the functions of individual decision-makers—both consumers and producers—within the larger economic system. Emphasis is on the nature and functions of product markets, the theory of the firm under varying conditions of competition and monopoly, and the role of government in promoting efficiency in the economy.

Most people make the incorrect assumption that economics is ONLY the study of money. My primary goal in this course is to shatter this belief. During this course, we will be addressing the above questions as well as many more relating to:

  • the environment
  • love and marriage
  • crime
  • labor markets
  • education
  • politics
  • sports
  • business

The main goal is to show you the way economists think and how to use this analytical system to answer questions related not only to these and other important human issues, but to anything you end up doing with your life after this class. After all, as you will quickly find out, I believe that everything is economics!

 

3  Course Goals and Objectives

By the end of this course, students should be able to:

  • Understand consumer behavior.
  • Understand firm behavior.
  • Analyze different types of market structures (monopoly, oligopoly and a competitive market).
  • Understand how to apply economic principles to their daily lives.
  • Understand how to apply economic principles to solve a wide aspect of policy questions.

Students should also have the skills needed to:

  • Use supply and demand diagrams to analyze the impact of overall changes in supply and demand on price and quantity.
  • Analyze the behavior of firms in a perfectly competitive market in the short-run and the long-run.
  • Calculate producer and consumer surplus.
  • Analyze the behavior of firms in a monopoly or oligopoly, and calculate the resulting changes in producer or consumer surplus.
  • Use economic tools to analyze economic policies.

4  Textbook

Microeconomics
by Paul Krugman (Author), Robin Wells (Author)
Paperback: 608 pages
Publisher: Worth Publishers; Third Edition edition (April 20, 2012)
Language: English
ISBN-10: 1429283424
ISBN-13: 978-1429283427

5  Course Outline

The course consists of 8 modules.

Modules Topics Readings
Module 1: Introduction and Basic Principles  What is economics?
Opportunity costs
Cost-benefit principle
The invisible hand principle
Trade
Chapter 1
Module 2: Supply and Demand Introduction
Demand
Supply
Equilibrium
Using the model
Chapter 3
Module 3: Market Efficiency and Government Policies  Consumer surplus
Producer surplus
Market efficiency
Price controls
Chapter 4
Chapter 5
Module 4: Elasticities Own price elasticity of demand
Own price elasticity and total revenue
Other demand elasticities
Price elasticity of supply
An application: taxes
Chapter 6
Chapter 7
Module 5: Production and Costs The firm’s production function
The costs of production
Economic profits
Chapter 11
Module 6: Competitive Output Market structures
Short-run competitive output
Long-run competitive output
Chapter 12
Module 7: Firms with Market Power Monopoly
Monopolistic competition
Pricing with market power
Chapter 13
Chapter 15
Module 8: Public Goods Common Resources and Externalities
Public goods
Common resources
Externalities
Chapter 16
Chapter 17

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