ECON 101 Tutorial: Week 1 Shane Murphy Office Hours: Monday 3:00-4:00 – LUMS C86

Outline Introduction Roll Call Problems Discussion

Exercise 10 Chocolate Bar demand and supply can be described: Qd = 1600 – 300p Qs = p Calculate the equilibrium price and quantity.

Exercise 10 Qd = 1600 – 300p Qs = p Equlibrium in supply and demand is where the supply and demand curves intersect. Set Qs = Qd p = 1600 – 300p p = p 1000p = 200 p = 0.2 Qs = p = (0.2) = = 1540 Check Qd = 1600 – 300p

Calculus: first derivative of polynomial The slope of a function can be calculated at any point y taking its first derivative and evaluating at that point. Remember the rule for taking the first derivative of a polynomial: y = x n => dy/dx = nx n-1 y = w + z => dy/dx = dw/dx + dz/dx So for example: y = 3x 2 + 5x + 2 dy/dx = 6x + 5

Exercise 10 Graph: Qd = 1600 – 300pQs = p

Exercise 10 Slope: Qd = 1600 – 300pQs = p Qd: Δy = Δp = 1 Δx = ΔQd = -300 So slope is Δy/Δx = -1/300 Using calculus, rewrite demand as: p = f(Q) = 1600/300 – Qd/300 dy/dx = dp/dQ = -1/300

Exercise 10 Slope: Qd = 1600 – 300pQs = p Qs: Δy = Δp = 1 Δx = ΔQd = 700 So slope is Δy/Δx = 1/700 Using calculus, rewrite demand as: p = f(Q) = 1400/700 + Qd/700 dy/dx = dp/dQ = 1/700

Exercise 9 Draw the Demand and Supply Curve: What is the equilibrium quantity and price? Q = 30,000 P = 30

Exercise 9 Your team plans to increase total capacity in its stadium by 5,000 seats. What admission price should it charge? Between 20 and 30 (probably 25)

Discussion Points What is economics? Is scarcity more important in today than in 1950? Give an example of an economic model?