Lecture 3
Microeconomics

Opening
Prayer

Quiz
1. What are the two questions
economists always ask?
2. What is always the correct answer in
economics?
3. What is opportunity cost?
4. What is Comparative Advantage?

Quizmaster
10 questions
4 answers
email to
mckytee@go.byuh.edu
1 Extra Credit Point

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Demand
Supply
Equilibrium

Demand

Price Quantity
$2
$5
$7
$10
$12
$15
$18
$20
$25

$0
$5
$10
$15
$20
$25
0 5 10 15 20 25
Quantity
Price

Value - Willing to Pay
Price
Consumer Surplus
$20
$15
$5

Consumer Surplus
Area above the price line
and below the demand
curve

$0
$5
$10
$15
$20
$25
0 5 10 15 20 25
Quantity
Price
Consumer
Surplus
($15 x 15 ) ÷ 2
= $112.50
$10 x 15
= $150

$0
$5
$10
$15
$20
$25
0 5 10 15 20 25
Quantity
Price
Consumer
Surplus
($20 x 20 ) ÷ 2
= $200
$5 x 20
= $100

$0
$5
$10
$15
$20
$25
0 5 10 15 20 25
Quantity
Price
($5 x 5 ) ÷ 2
= $12.50
$20 x 5
= $100

Change in Price
Change in Quantity
Demanded

Shift in Demand
Income
Population
Price of Substitutes
Price of Complements
Expectations
Tastes

Quantity
Price
Shift in Demand

Supply

Producer Surplus
Area below the price line
and above the supply
curve

$0
$5
$10
$15
$20
$25
0 5 10 15 20 25
Quantity
Price
Producer
Surplus
($9 x 15 ) ÷ 2
= $63

$0
$5
$10
$15
$20
$25
0 5 10 15 20 25
Quantity
Price
Producer
Surplus
($14 x 23 ) ÷ 2
= $161

Shift in Supply
Innovation
Taxes and Subsidies
Expectations
Entry or Exit of Producers
Changes in Costs

Quantity
Price
Shift in Supply