Problem set 1

ECONOMICS 1

Astrid Adam
 1. Theoretical Renmin dus

1.1 DEMAND = The

quuantity
demandera .

of a
good .

domand Priay good j # i

µ Demanda
'
d ↑

quant.ly ←
Qin
"
=
Dih ( Pi , Pj .si
,
Rh ,
. . . )
d d
of the
good i
brghousehdd
"
de
revenue of the house hold .

h "
price of
i
good

The learn
of demande :

if It pi
→ 1° Qdin
A ^

>

☐
,
q

Market Demand Q ! = Ê Qin

h =3

Shifts in the demand We -

p r

P n

→
p, - - -
- -

y
'
\ D
d P
à
-

i -
t
- -
- - - - - -
- - -

-
- -

|
tp {
Pa

j'
- - - - -
- - -

Y
-

" ☐
☐ D
, , i.
,

Qz 92 9 Qr Qz
→ q
Dim the price →
Shifts MONG the Curve I in other
factors →

of the cuivre
Substituts
shift .

Croods contre
f- complement]
inferior , normal , . . .
for a same price , ≠ .
nn
Supply = The
quuantity supplieront of a
good
tint
Â
ed "

Mpri by expectation '

Sif (
↑

quanhty
'Qif )
=

ᵈ
Pi
l
, Pj .si ,
Pe
↓
, Pk
t
,
E ,
Tech
&
)
bytjrm
+

Igo;D pria , labour capital technology

◦
t 90¥ go.ae
.

the bain
of supply It À Qin
if pi
→
:

A 5
,

'
q

Market
Supply = Qi = Ê Qsti
b-

Shifts in the
supply curve :

'
s charges in the price :

p
f changes
AWNUG THE CURVE

"
↑ S
other
Changes un all the

foulons :
Change of the
Curve

9
Market Equilibrium SUPER IMPORTANT

equilibrium Where demand

a 5 =
supply

1 p* =
equilibrium price

#
q
# =
equilibrium GH .

p q
- - -

-
-

I
,

À q

?
Finally : know to build the Curves

0 .

You usually get inverse demand

/ mrpply functions

P =
A
-

QE is an inverse demand
function .

1) First Q
ntep :

you transform your equation factoring out

-

A P
Qp
-

2) find limit i When

Q= ] really easy exemple
ahuays so easy
.

p=
When NOT .

P ^

A •

3 -

2 -

n -

o
! L
'
} ↑ sa
2) Exercises
-

1) Market for large famity saloon cars

S

Î
?
"

|
r '
is

a) →
change in preference / tarte → À Demand ! D
l
) q
q q
in the price &
qttecchanged si
' s
'

☐⊖
-
- -

b)
-

;
Steel puces production costs →
Supply
'

→ →

:
☐⊕ piece & soin
qltexchonged Iq P
,
q

New tech D'⊖ supply s s )

e)
→ →
production costs → P
n

À & D'⊖
price
quantityexchanged.pt - -
-
- -
-

, ☐

q
,
Sq
" s
"
d) Substitute
price ↑ → Swithin demand D'⊖ Demand P -
- - -
-
- -

; ,

stp ⊖ ☐
& D'
q i
D
:
j
q
'
q

P s
n
t' Demand
l) demand →

ppl
in
pour change
→
lire -

Ï
-

-0ps
pq
n
s s
-09

2)
Complementary goods ↑
→
equilibrium # 9 tish
are told that equilibrium alt of chips
you
:
→

is rt possible that it was due to :

1- fall in the
price of potatoes ?

IMPACT of I in
price of potatoes → A ① production vont → ☐⊕ Snuppyof chips .
→ p &
stop
F
Dope &
0f ppl Will
buy fish À Demand
'

→ more →
→
 ˢ
Pr S
g) [
Pp
-1 | §
P

|
9
| P
p
-
'

9 9 91
MARKET FISH MARKET
eltips
Demand Will q be
more chips consume d
It Supply be ↓ prod cops are

D -0 pc & qc stpf À
qf
⊖
s' &

Avouer is
yes .

2) is it due to a in the sahay of fishermen

?

Salary of Fishermen → production cost

of fish → de Supply of fish
de D
"" Ps
9KF Demond fun
'

BNT → lowen → lower chips →

S'
S
Pn g n

- -

y
-

¥
:|
p

P
Dg
D i
, q
' 9
q
MARKET FISH MARKET
eltips

AGE &
Hqe so
Supply meam stop & t' QF
↳ this WMKS
-

↓
this does not
wah .

↳
animer is no .
 b) Suppose
/ of fin
2 that :
equilibrium puce hors risen

equilibrium quuantity of chips has

taken .

?
a → is anise in the pouce of potatoes responsible

[ A
④
in production puces → DO Supply of chum
~
. A
-09 -0f chips
de

☐ ⊖ Demand for fin

S'
P P - S
-
-
S
'
P
PPÏ
-
-
-
- -
-
-

j
.

=
;
-
-
-
- -
-

*
'

§
t D
l : i
i D'
' ' ' , ,
)
q) q #
q q 9 #

Fish market
Chips Market

A -0
stop & 1-09 P & s
-09 -

t d

oh Not OK .

↳ the annule is no .

b) responsible ?
is na nte in the
malony of pneus
↳ ☐⊕ production cost
of FISH → DO Supply of fish
p ↳
☐⊖ in the demand for chips .

- P -
S'
s
^

iii.
① '
p p -
-
t
stp & ☐⊖
☐ q
-
-

}
=

Y
.

A -09 → ok P* -
-
-

tue .

| | D
i D
! i D'
'
,

à# '
/ a ' q q y
-

,
A
Fish Market
Chups Market
the amenais 4Es !
 3) Football match tickets .
Pⁿ-Ï
v0 50000
30000
20 dodo 30 000

ze Zoooo za ooo

Draw demand & Supply Curves no woooo

sooao

So toho 30 Ooo

;Î
se - a) the
supply uvweinherh.cat -

to
-
true be Malls in the Stadium

30
au
www.weeasu.a-y .

g. •

Demand
b) p
*
= 30 0*-30000
I I I I I
a

# À
global copauty
sooo
e) by →
p 25 3s ooo .

.
= =

d) Flats in Brussels ( here we consider a

oinelarrtic
supply ,

but
Will the like ?
not a
perfectly
perfect Competition ;
What
Supply ancre looks
)
indane
Supply
P
,
S a) What trappers it Dt
g) creating new
.

'
Demanda qoes up
p . -
-

- - - -
-

qt
-
-

pt
:
>
p -
- - -
-
- -
-

i
,

"
-
- -
-

T :* ,
pi
p '
Sooo flats !
l i b) it buiding
! ; ! D

" supply foes up

q q
"
9
Dop & At
q
 Eternise 5)

Bob's : P =
5- OÙ QB = S -
P
Ann's :
p = v0 - 20f QA = S -
P/2

2)
you Compute the max Mice for each
taming member :

]
Bob Q O when P ≥ 5
; =

'

Ann Q o when P ≥ no
; -

"
Q
if
O
p I to =

5 QD 5
if no s
p ≥ = -

plz
to
only Ann want
bug

QD (s p /2) (s p)
5 ° +
if
>
> p = -
-
.

then both at them want to

my QD = 10 -

3f12
demand
you aggregate their

as when 0 <
pas
3
Graphical representation D= no -
3f12

raf ↳ replace
find
Q &
the
D

limites
with
.
O to

9- aggregate

Ë÷÷÷÷
8- demande Q "

P_-2z0__-6@6d6-----.q
t
-
Qn = o when

S
-

l
a -
- t
1-
-
- - -

t QD S P /2
3
|
-
- =

!
p
I '
Q = O if
I
I
-
I

I , ⑤ I I I I I P I I

I L 3 4 5 67 8 9 tu 11 NL

?
what famity corrompt
.

is the if p =
&
94=4
↳ replace in Q
"
=
10 -
3012
v0 -

12/2 =
4

What No
fauily communion
if P -
G -

2
Q =

"
LA replace in Q = S -
P /2 5- 3 = 2
?⃝
 Exercice 6 .
① Maximum price
at which the fanilymenbq
is
Witting to Buy
D= QF
Freddy's
t A p =p
p
-
:
-
=

Amy's : P = 12 - QA Q
"
: 12 -

p p = 12

Chris 's : P =
8- Qe Q! 8 -

p p = 8

Son we know that :

② ③
we replace Q&p by
when PS 12 → QTOT = 0
Zeros to duan the cuve .

Q O Chen 0=12 -

P Q -
O & P =/2
J
-

12
When 8 12 ? p p
p
=
< <
→ 12 -

[
-

witting then 12 P Q 12 & P O

onty toamy is
p O Q -
= -
= =

buy = 12

4 Œ= (12 )
pc 8 pt Cs
When < → -
-
p Q = o them p = 10 Q = 0 & p = 10
,

Amy & Chris are with

"9
QTOT = 20 -

2ps
J 20 = ↳ & P °
to then
=

buy
=

z p - o

when d <
p LA
QTOT =
42 -

p) + ( 8- p) + ( d -

p)
,
Q- O 0 = 24 -
3P.es 3ps =
24 P =

2¥ ⇐ '

p = 8
AM
famille members TOT
24
3ps
2 & 8
= -

are
witting to
bug = 0 p =

]> &
p- o then a -24 . 0=24 p = 0
Pr

12.* demande
aggregate
-

la • tannli consomption when p =

3 ? →
☒ = 15

◦ +
⑤ 2e Jp
9 ↳ - .

- - -
→ =

8 •
QTOT = 24-9 = 15

when 9*0--3
-

p ,

TOI 3
-
QTOT =
12 -
P

3 -
- -
-
- -
_ .
- -
- - a - •

1 -

I I I I I I I I I I I P I I I I I I I ↑ I I I ↑>
q
3 12
'

⑤
O et
n 20