Volkswirtschaftslehre und Volkswirtschaftspolitik

1966: 1987-1993 1997-1999 1998-2002 2002-2004 2005- 2007 2007- 2011 2009- now 2011- now 2011

born in Regensburg Studies of Economics at the Universitt Regensburg Studies of Business Administration at the Universitt Hagen g Research assistant at the Universitt Eichsttt Assistant p professor at the Universitt Bozen Lecturer at the Hochschule Mnchen Lecturer at the Universitt der Bundeswehr, , Mnchen Lecturer at the Fachhochschule Kufstein Professor at the Universitt der Bundeswehr, Mnchen

Advanced Economics

Prof. Dr. Manfred Sargl

Volkswirtschaftslehre und Volkswirtschaftspolitik

Robert S. Pindyck/ Daniel L. Rubinfeld: f Microeconomics; eighth edition. 2012 Pearson P bli hi Publishing.

Advanced Economics

Prof. Dr. Manfred Sargl

Volkswirtschaftslehre und Volkswirtschaftspolitik

1 1. 2. 3. 4 4. 5. 6. 7 7.

Basics of Supply and Demand Consumer Behaviour Individual and Market Demand Production Competition Market Power Externalities

Advanced Economics

Prof. Dr. Manfred Sargl

Volkswirtschaftslehre und Volkswirtschaftspolitik

1 1. 2.

Give a brief definition of economics! Explain the difference between micro- and macroeconomics! i ! Explain the connection of scarcity and resource allocation! Name the trade off and the constraint of the following economic units: consumers, firms, workers, investors

3.

4 4.

Advanced Economics

Prof. Dr. Manfred Sargl

Volkswirtschaftslehre und Volkswirtschaftspolitik

Economic unit Consumers Firms Workers Investor

Goal Max utility Max profit Max utility Max profit

Constraint Trade Trade-off off Budget Price Time Money Consume one good or another Consume now or later Produce one good or another Use one factor or another Education or working Leisure or consumption Investments alternatives

Advanced Economics

Prof. Dr. Manfred Sargl

Volkswirtschaftslehre und Volkswirtschaftspolitik

Example: Utility function: u = A0,4 * B0,6 pA = 3,00 ; pB = 6,00 Budget: 120 What would be the best combination of A and B?

Advanced Economics

Prof. Dr. Manfred Sargl

Volkswirtschaftslehre und Volkswirtschaftspolitik

Microeconomics describes how prices are determined.

In a centrally planned economy, prices are set by the government. In a market economy, prices are determined by the interactions of consumers, workers, and firms. These interactions occur in marketscollections of buyers and sellers that determine the price of a good.

Advanced Economics

Prof. Dr. Manfred Sargl

Volkswirtschaftslehre und Volkswirtschaftspolitik

Theory y

In economics, explanation and prediction are based on theories. Theories are developed to explain observed phenomena in terms of a p set of basic rules and assumptions. Model A model is a mathematical representation, based on economic theory of a firm, theory, firm a market, market or other entities entities. Positive Analysis Analysis describing relationships of cause and effect. Normative Analysis Analysis examining questions of what ought to be.

Advanced Economics

Prof. Dr. Manfred Sargl

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Volkswirtschaftslehre und Volkswirtschaftspolitik

Which of the following g statements involves positive p economic analysis and which normative? a. Gasoline rationing is poor social policy because it interferes with the workings of the competitive market system.

b. Gasoline rationing is a policy under which more people are made worse off than are made better off off. c.

d. Microeconomics should be required for all city majors in order to have a solid foundation for economic decisions. e e.

The minimum wage should not be increased because this action would increase unemployment. .

b s bonds, bonds interest rates fall and When the Central Bank buys private investment is increased.

Advanced Economics

Prof. Dr. Manfred Sargl

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Volkswirtschaftslehre und Volkswirtschaftspolitik

Market Collection of buyers and sellers that, through their actual or potential interactions interactions, determine the price of a product or set of products. Market definition Determination of the buyers, sellers, and range of products that should be included in a particular market. Arbitrage Practice of buying at a low price at one location and selling at a higher price in another.
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Advanced Economics

Prof. Dr. Manfred Sargl

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Volkswirtschaftslehre und Volkswirtschaftspolitik

Perfectly Competitive Market Market with many buyers and sellers, so that no single buyer y or seller has a significant g impact p on p price (p (price taker). Some markets contain a small number of producers but may be treated as competitive for purposes of analysis. Some markets contain many producers but are i i ; that h is, i individual i di id l fi ff h noncompetitive firms can affect the price.
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Advanced Economics

Prof. Dr. Manfred Sargl

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Volkswirtschaftslehre und Volkswirtschaftspolitik

1 1. 2. 3. 4 4. 5.

Many buyers and sellers No entry and exit barriers Perfect information No transaction costs Homogeneous product

Advanced Economics

Prof. Dr. Manfred Sargl

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Volkswirtschaftslehre und Volkswirtschaftspolitik

Market price Price prevailing in a competitive market In markets I k t th that t are not t perfectly f tl competitive, titi different diff t firms charge different prices for the same product. This might happen because one firm is trying to win customers from its competitors, or because customers have brand loyalties that allow some firms to charge hi h prices higher i than h others. h The market prices of most goods fluctuate over time, and df for many goods d the h fluctuations fl i can be b rapid. id Thi This is particularly true for goods sold in competitive markets markets.
Advanced Economics Prof. Dr. Manfred Sargl

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Volkswirtschaftslehre und Volkswirtschaftspolitik

In 1990 1990, the Archer-Daniels-Midland Archer Daniels Midland Company (ADM) acquired the Clinton Corn Processing Company (CCP). The U.S. Department p of Justice ( (DOJ) ) challenged g the acquisition on the grounds that it would lead to a dominant producer of corn syrup with the power to push prices above competitive levels. ADM fought the DOJ decision, and the case went to court. The basic issue was whether corn syrup represented t d a distinct di ti t market. k t ADM argued that sugar and corn syrup should be considered part of the same market because they are used interchangeably to sweeten a vast array of food products.
Advanced Economics Prof. Dr. Manfred Sargl

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Volkswirtschaftslehre und Volkswirtschaftspolitik

Are there two different markets for bicycles, bicycles identified by the type of store in which the bicycle is sold.
TYPE OF BICYCLE Mass Market Bicycles: Sold by mass merchandisers such as Target Wal Target, Wal-Mart, Mart Kmart, Kmart and Sears. Sears Dealer Bicycles: Sold by bicycle dealers stores that sell only (or mostly) bicycles and bicycle equipment. COMPANIES AND PRICES (2011) Huffy: $90$140 Schwinn: $140$240 Mantis: $129$140 $129 $140 Mongoose: $120$280 Trek: $400$2500 Cannondale: $500 $500$2000 $2000 Giant: $500$2500 Gary Fisher: $600$2000 Mongoose: $700$2000 Ridley: $1300$2500 Scott: $1000$3000 Ibis: $2000 and up

Advanced Economics

Prof. Dr. Manfred Sargl

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Volkswirtschaftslehre und Volkswirtschaftspolitik

Nominal Price Absolute price of a good, unadjusted for inflation Real Price Price of a good relative to an aggregate measure of prices; price adjusted for inflation. Consumer Price Index Measure of the aggregate price level level. Producer Price Index Measure of the aggregate price level for intermediate products and wholesale goods.
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Advanced Economics

Prof. Dr. Manfred Sargl

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Volkswirtschaftslehre und Volkswirtschaftspolitik

The following g table shows the average g retail price of butter and the Consumer Price Index (CPI) from 1980 to 2010, scaled so that the CPI = 100 in 1980.

1980

1990 158 56 158.56 $1.99

2000 208 98 208.98 $2.52

2010 218 06 218.06 $2.88

CPI
Retail price of butter
a. b. c. d.

100 $1.88

Calculate the real price of butter in 1980 dollars. Has the real price increased/decreased/ stayed the same from 1980 to 2000? From 1980 to 2010? What is the percentage change in the real price (1980 dollars) from 1980 to 2000? from 1980 to 2010? Convert the CPI into 1990 = 100 and determine the real price of butter in 1990 dollars. What is the percentage change in the real price (1990 dollars) from 1980 to 2000? Compare this with your answer in (b). What do you notice? Explain.

Advanced Economics

Prof. Dr. Manfred Sargl

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A farmer is offering eggs at a rural market. Supply and demand are determined by the price mechanism.

At tap price ce is s 10 0 ce cent t the t e farmer a e is s willing g to o offer e 100 00 eggs eggs. If t the ep price ce is s be below, o , he e will not ot o offer e anything but stay at home. For each cent above it, he would bring 100 more eggs to the market. At a price of 33 cent the costumers at the market would buy 100 eggs. If the price is above it, they prefer to buy no eggs at all. For each cent below it, they would buy 100 more eggs. Formulate the supply and demand function graphically and mathematical (X = a + b*p). The farmer decides to bring 1.500 eggs. What price would he charge per egg? How many eggs is he able to sell? D we have Do h an excess demand d d or supply? l ? What is the equilibrium price and quantity? What would be the profit of the farmer at the equilibrium, if the fix costs of the market stand are 35 and there are no variable costs for the eggs? The government wants to increase the consumption of eggs and therefore fixes the price of eggs to 20 cent. What would be the result of such a regulation? What would be the optimal price, if the farmer wants to maximize his profit? What would be his profit (price for stand 35 and no variable costs)? Should he change his decision compared to i) if the costs per egg would be 4 cent?
Prof. Dr. Manfred Sargl 20

a. b. c. d d. e. f. g. h. i i. j.

Advanced Economics