1. Introduction:Webnote 104 1 Section 1.1 Markets 247 Overview of section 1.1 200 Dictionary 227 Price Mechanism: Advantages 228 SUPPLY FUNCTION: Changes to the Supply Curve 229 DEMAND FUNCTION: Changes to the Demand Curve 230 Exceptions to the law of demand: Veblen+Giffen247 Overview of section 1.1 200 Dictionary 227 Price Mechanism: Advantages 228 SUPPLY FUNCTION: Changes to the Supply Curve 229 DEMAND FUNCTION: Changes to the Demand Curve 230 Exceptions to the law of demand: Veblen+Giffen (HL) 231 Price Mechanism: Disadvantages Part 1 232 Price Mechanism: Disadvantages Part 2 251 Competitive Markets (SL Only) 267 Consumer-Producer-Society surplus 231 Price Mechanism: Disadvantages Part 1 232 Price Mechanism: Disadvantages Part 2 251 Competitive Markets (SL Only) 267 Consumer-Producer-Society surplus 247 Overview of section 1.1 200 Dictionary 227 Price Mechanism: Advantages 228 SUPPLY FUNCTION: Changes to the Supply Curve 229 DEMAND FUNCTION: Changes to the Demand Curve 230 Exceptions to the law of demand: Veblen+Giffen 231 Price Mechanism: Disadvantages Part 1 232 Price Mechanism: Disadvantages Part 2 251 Competitive Markets (SL Only) 267 Consumer-Producer-Society surplus Course notes: Webnote 110 Webnote 110 Please do not print this webnote. Class notes are available on webnotes in section 1.1 of website The BIG ideas!

2. Introduction:Webnote 104 2 Section 1.1 Markets Key concepts in section 1.1: 1.Demand 2.Supply 3.Evaluate market system 4.Exam question 5.Linear function (hl only) Webnote 722 Webnote 722 Please do not print this webnote. Class notes are available on webnotes in section 1 of website The BIG ideas!

3. Introduction:Webnote 104 3 Section 1.1 Markets Demand D 2 D1 D3 Webnote 722 Webnote 722 Please do not print this webnote. Class notes are available on webnotes in section 1 of website price quantity The BIG ideas! q D x f: (Px, Pc, Ps, Y, Taste/fashion, advertising, population etc ) 0

4. Introduction:Webnote 104 4 Section 1.1 Markets Supply S 2 S1 S 3 Webnote 722 Webnote 722 Please do not print this webnote. Class notes are available on webnotes in section 1 of website price quantity The BIG ideas! q S x f: ( Px, Pf, Ps, G, technology, weather etc) 0

5. Introduction:Webnote 104 5 Section 1.1 Markets Supply+Demand = Market S 2 S1 S 3 Webnote 722 Webnote 722 Please do not print this webnote. Class notes are available on webnotes in section 1 of website price quantity The BIG ideas! 9 D 1 D 2 D 3 1 2 3 4 6 7 8 5 10 11 12

6. Where to….the market allocates? Where to….the market allocates?  On a supply and demand diagram start at E 9+ show how the following statements will affect the market for mobile phones: Note the market is currently at E9 1.Government increases indirect taxation on mobile phones from 19 to 23% 2. incomes fall due to an economic slowdown 3.Consumer legislation forces firms to offer a 2 year guarantee of their products 4.Governement introduces laws to limit the use of mobile phones in public places 5.Micro chip design allow mobile pnone operators to reduce their input costs 6.Studies show that use of mobile phones can damage hearing and increase levels of concentration Introduction:Webnote 104 6

7. 7 Section 1.1 Markets Webnote 722 Webnote 722 Please do not print this webnote. Class notes are available on webnotes in section 1 of website 1.1: Evaluate market system 1.1: FOR: Efficiency ‘consumer sovereignty / consumer surplus Economic growth Against: 1.‘externalities’ 2.Public + merit goods 3.Monopoly 4.Income / wealth distribution 5.Factor immobility The BIG ideas!

8. Introduction:Webnote 104 8 Section 1.1 Markets 1.1: Exam question 1.1: Syllabus item 14: Explain, using diagrams, that price has a signaling function and an incentive function, which result in a reallocation of resources when prices change as a result of a change in demand or supply conditions. 1. (a) Explain the signalling and incentive functions of price in a market economy. [10 marks]. May 2007 SL paper 1. Webnote 722 Webnote 722 Please do not print this webnote. Class notes are available on webnotes in section 1 of website The BIG ideas!

9. Introduction:Webnote 104 9 Section 1.1 Markets Linear functions Webnote 722 Webnote 722 Please do not print this webnote. Class notes are available on webnotes in section 1 of website The BIG ideas! http://moodle.isdedu.de/file.php/483/Microeconomics/inde x.htmhttp://moodle.isdedu.de/file.php/483/Microeconomics/inde x.htm http://moodle.isdedu.de/file.php/483/Microeconomics/pag e_24.htmhttp://moodle.isdedu.de/file.php/483/Microeconomics/pag e_24.htm http://moodle.isdedu.de/file.php/483/Microeconomics/pag e_32.htmhttp://moodle.isdedu.de/file.php/483/Microeconomics/pag e_32.htm

10. Introduction:Webnote 104 10 Section 1.1 Markets Linear functions Webnote 722 Webnote 722 Please do not print this webnote. Class notes are available on webnotes in section 1 of website The BIG ideas! Qs = -20 + 20 P Qd = 80 - 5p Where Qs and Qd are quantities in thousands of kilos and P is the price per kilo in US$ answer the following questions: 1. calculate Qs and Qd at a price of 3 $ per kilo Ans = Qs = 40,000 kilos Qd = 65,000 kilos

11. Introduction:Webnote 104 11 Section 1.1 Markets Linear functions Webnote 722 Webnote 722 Please do not print this webnote. Class notes are available on webnotes in section 1 of website The BIG ideas! 2.Assuming the demand curve is defined as follows: Qd = 200 -2P Find the P intercept. Find the Qd intercept To find the P intercept we set Qd = 0 0 = 200 – 2 P 2 P = 200 P = 200/2 = 100 P = 100 Q d intercept we set P = 0 then Qd = 200