output mean increased marginal At this stage, it might be useful to look at vertical and horizontal supply costs in the short run. curves to reinforce the idea of demand not creating supply. (Music downloads and fixed capacity events such as concerts can be used as clear examples). Big effort on shifts vs. extensions in supply. 4 The Illustrate, using diagrams, Equilibrium: determination equilibrium price and output Concept of equilibrium as a situation with no tendency to change. Reason of equilibrium situations in product markets. why market prices will tend towards equilibrium. Refer to concepts of price and excess demand (shortages) and excess supply (gluts). output in a freely Explain effects on price and output Detailed discussion of each possible disruption to equilibrium (shift left/right competitive of shifts in demand and supply in D/S) and exactly how a new equilibrium arises, again emphasising that market curves prices will not start to change until excess demand or supply has arisen. Use of real world case studies as exercises. Link back to market economies and the invisible hand show that markets – are efficient, and then link into consumer, producer and community surplus. 5 Consumer and Define, explain and illustrate, using Demonstrate that in principle those who are prepared to pay the most are producer diagrams, consumer surplus and those who get supplied, and that the most efficient firms are the ones who surplus producer surplus. do the supplying. Calculations to illustrate the concepts. 6 Price, income Understand the meaning of the General introduction to the idea of Elasticity (the responsiveness of one and cross price terms price, income and cross price variable due to a change in another variable) ensuring that learners – elasticities of elasticities of demand and price understand that it is %-based and therefore it will change for given - demand, price elasticity of supply. relationships and it is not the gradient. elasticity of 7 supply Explain the relationship between All elasticities to be covered in much the same way: price elasticity of demand and total Definition revenue. Formula
output mean increased marginal costs in the short run. At this stage, it might be useful to look at vertical and horizontal supply curves to reinforce the idea of demand not creating supply. (Music downloads and fixed capacity events such as concerts can be used as clear examples). Big effort on shifts vs. extensions in supply. 4 The determination of equilibrium price and output in a freely competitive market Illustrate, using diagrams, equilibrium price and output situations in product markets. Explain effects on price and output of shifts in demand and supply curves Equilibrium: Concept of equilibrium as a situation with no tendency to change. Reason why market prices will tend towards equilibrium. Refer to concepts of excess demand (shortages) and excess supply (gluts). Detailed discussion of each possible disruption to equilibrium (shift left/right in D/S) and exactly how a new equilibrium arises, again emphasising that prices will not start to change until excess demand or supply has arisen. Use of real world case studies as exercises. Link back to market economies and the invisible hand – show that markets are efficient, and then link into consumer, producer and community surplus. 5 Consumer and producer surplus Define, explain and illustrate, using diagrams, consumer surplus and producer surplus. Demonstrate that in principle those who are prepared to pay the most are those who get supplied, and that the most efficient firms are the ones who do the supplying. Calculations to illustrate the concepts. 6 - 7 Price, income and cross price elasticities of demand, price elasticity of supply Understand the meaning of the terms price, income and cross price elasticities of demand and price elasticity of supply. Explain the relationship between price elasticity of demand and total revenue. General introduction to the idea of Elasticity (the responsiveness of one variable due to a change in another variable) – ensuring that learners understand that it is %-based and therefore it will change for given relationships and it is not the gradient. All elasticities to be covered in much the same way: Definition Formula