Introduces key microeconomic terms; the foundations of the market model, starting with the Law of Demand; the role and meaning of theory in the science of economics; and the difference between micro- and macroeconomics. Documentary segments from the automobile and computer industries illustrate the major points of the lesson, while interviews with top managers from the Wolfgang Puck Food Company (including Puck himself) explore the importance of microeconomic analysis to successful business management.
Scarcity and Resource Allocation #102
Explains the role of opportunity cost and incentives in the allocation of resources and in the making of business decisions; defines comparative advantage and the law of diminishing product; examines the impacts of non-market institutions, such as the government and the family, on resource allocation; and looks at resource allocation in situations of perfect competition, monopoly, and monopolistic competition. Examples from Rickenbacker Guitars illustrate how the problem of scarcity (including scarcity of time) affects decision making.
Market Analysis and Demand #103
An in-depth examination of markets and the Law of Demand. Examples from a produce market, the metals market, the stock market, and a police department illustrate output, input, labor, capital, and black markets. After a look at how to apply formal graphical analysis to changes in the demand side of the market model, a Hollytron Electronics executive discusses how businesses use the Law of Demand.
Market Analysis and Supply #104
Focuses on the supply side of the market, including the role of the upward-sloping supply curve, the determinants of market supply, production costs, the concept of productivity, the importance of strong labor-management relations, and the impact of a change in the number of firms on an industry. Visits to copper, aircraft, and automobile manufacturers illustrate various concepts, and executives from the Wolfgang Puck Food Company and Southwest Airlines talk about how they are applied in the business world.
Equilibrium analysis unites the supply and demand curves in the market model to determine equilibrium price and quantity; a market that is out of equilibrium will automatically move toward it. This demonstration of how to use equilibrium analysis defines income, price, and cross-price elasticities and explores their uses in business decision making. A Hollytron executive talks about the problem of maintaining equilibrium in business, while examples from the car market illustrate other concepts.
Analyzing Household Choices #106
Candid documentary footage of one American family illustrates concepts in household economics, including how utility, preference, and budget constraints define and limit choices and the tradeoffs between labor and leisure and between saving and consumption. Interest paid on debt is defined as the opportunity cost of current consumption.
Analyzing Business Choices #107
Builds a careful model of production costs by defining cost, revenue, and profit; defining a production function based on the law of diminishing marginal product; and using this function to examine the concepts of marginal product, marginal cost, average variable cost, and average total cost. The impacts of capital levels, labor cost, and improved technology on the marginal cost curve are emphasized.
Firm Profit Maximization and the Market #108
Shows how marginal revenue and marginal cost help determine a firm's optimal output, how this output is related to market-wide conditions, and how it can be affected by changes in the firm's cost structure; models economic profit or loss graphically; and explores investor behavior in response.
Long-Run Analysis of Firm and Market #109
Expands the analysis of firms and markets to cover the long run, in which a company has the time to enter or exit an industry or alter its scale of operations.
Analyzing Monopoly #110
An examination of monopoly using graphical analysis defines the marginal revenue curve, explores profit-maximizing behavior by monopoly holders, analyzes pricing and economic profits under monopoly, shows the impact of changes in cost or demand, compares monopoly to monopolistic competition, introduces the concept of consumer surplus, and explores the social costs of monopoly.
Analyzing Market Failures #111
Uses the concept of marginal external cost to graphically analyze the sources and effects of market failure—a market outcome that does not reflect an optimal allocation of resources—and how property rights relate to these problems; compares tax policy with other, more direct regulatory responses; and examines information-related sources of market failure, such as adverse selection and moral hazard.
International Economic Analysis #112
A look at international trade examines the impact of resource endowments on trade patterns, explores comparative advantage, and relates this concept to the gains that are possible from trade; analyzes the effect of import quotas on the consumer; and shows how the impacts of such quotas can reach far beyond the immediate industry.