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 : P=MC
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