Prepared by Tran Duc Thanh – TA Microeconomics

CHAPTER 1. TEN PRINCIPLES OF ECONOMICS

Scarcity: the limited nature of society’s resources
Economics [Nhiệm vụ của economics là cách xã hội có thể manage được scare resources]
PRINCIPLE 1. PEOPLE FACE TRADE OFFS
Trade-off: Sự đánh đổi giữa thứ này với thứ khác
[Ví dụ thời gian để đi làm thêm đánh đổi với việc dùng thời gian đó làm những việc khác
như học tập, bảo vệ môi trường cần resources mà resources này có thể được sử dụng để
sản xuất hang tiêu dung=> Bảo vệ môi trường tang->tiêu dung giảm].
- Efficiency: Hiệu quả, năng suất làm cách nào để đạt được lợi ích tối đa từ tài
nguyên khan hiếm (scarce resources) => determine the size of economic pie.
- Equality: Chia đồng đều (distributed uniformly) => determine how to divide the
economic pie
=> Trade - off: Increase Efficiency=> Decrease Equality.
PRINCIPLE 2. THE COST OF SOMETHING IS WHAT YOU GIVE UP TO GET IT
Opportunity cost: giống như câu principle [The cost of some is what you give up to get it]
Opportunity cost = Cost (chi phí phải trả) + Forgone cost (chi phí đánh đổi)
Ex: Opportunity cost of going to college:
- Tuition and fees
- Books
- The foregone wages: đi làm
[Ví dụ khá giống trade - off: oppo. Cost của việc đi học đại học là tiền học phí, tiền sách
ngoài ra còn có đi làm, thay vì học đại học thì để đi làm kiếm tiền, có kinh nghiệm,...]
Accounting cost: liên quan đến tiền (real cost)
Opportunity Cost > Accounting Cost
(Real cost + Expected cost) (Real cost)
PRINCIPLE 3. RATIONAL PEOPLE THINK AT THE MARGIN
Rational people: make decisions by comparing marginal costs and marginal benefits.
[MC>MB=> Không làm, MC<MB=> làm]
Marginal change: small incremental adjustment in an existing plan.
∆𝑇𝑅 |TR2 − TR1|
𝑀𝑎𝑟𝑔𝑖𝑛𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 (𝑀𝑅) = ==
∆𝑄 |Q2 − Q1|
∆𝑇𝐶 |TC2 − TC1|
𝑀𝑎𝑟𝑔𝑖𝑛𝑎𝑙 𝑐𝑜𝑠𝑡 (𝑀𝐶) = ==
∆𝑄 |Q2 − Q1|
PRINCIPLE 4. PEOPLE RESPOND TO INCENTIVE
Incentive: something that induces a person to act [Ex: reward or punishment]
Make decision by comparing the costs and benefits. [Ex: higher cigarette taxes,
lower number of teen smoking].
PRINCIPLE 5. TRADE CAN MAKE EVERYONE BETTER OFF
Mọi người có thể tập trung sản xuất một thứ gì đó (specialize) và đem đi trao đổi với
những món hàng khác.
ALL countries can get benefits from trade [Cho dù hai country đều sản xuất chung
một món hàng mà thằng kia sản xuất nhiều hơn thằng này thì cả hai vẫn có thể better off
from trade]
- Sell a higher price in a foreign country.
- Buy something from a foreign country with lower price.
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PRINCIPLE 6. MARKET ARE USUALLY A GOOD WAY TO ORGANIZE ECONOMIC

ACTIVITY
Market: a group of buyers and sellers
Trên thị trường, households (buyers) và firms (sellers) tương tác qua lại với
nhau, hành động của họ dựa trên price và self-interest
Invisible hand (Adam Smith): cho rằng tất cả households và firms đều được dẫn đường
bởi một bàn tay vô hình, để dẫn tới kết quả mong muốn (maximize the size of the economic pie)
=> Phương tiện của invisible hand chính là PRICE.
[Buyers: See price=> make decision how much to buy.
Sellers: consider price => make decision how much to sell]
PRINCIPLE 7. GOVERNMENT CAN SOMETIMES IMPROVE MARKET
OUTCOMES.
Ngoài invisible hand thì government sẽ điều khiển market outcome bằng các cách sau:
o Tax.
o Welfare policies [Chính sách phúc lợi]
o Property rights [Quyền sở hữu tài sản]
Market failure: failed to allocate society’ resources efficiently.
Externality: when the production or consumption of a good affects bystanders [Ex:
pollution]
Market power: a single buyer or seller has substantial influence on market price [Ex:
monopoly]
PRINCIPLE 8. A COUNTRY’S STANDARD OF LIVING DEPENDS ON ITS ABILITY
TO PRODUCE GOODS & SERVICES
Productivity => quyết định standard of living => Q/L => Phụ thuộc vào máy móc, thiết
bị, công nghệ và trình độ lao động
PRINCIPLE 9. PRICES RISE WHEN THE GOVERNMENT PRINTS TOO MUCH
MONEY.
Inflation [lạm phát]: increases in the general level of prices => from the increase in the
number of money in the market=> value of money decreases.
The faster the government/ central bank creates money, the greater the inflation rate.
PRINCIPLE 10. SOCIETY FACES A SHORT – RUN BETWEEN INFLATION AND
UNEMPLOYMENT
Inflation increase => Price of product increases => Producers want to produce more output =>
Hire more employees => Unemployment rate decreases.
QUICK QUIZ
1. Economics is best defined as the study of
a. how society manages its scarce resources.
b. how to run a business most profitably.
c. how to predict inflation, unemployment, and stock prices.
d. how the government can stop the harm from unchecked self-interest.
2. Your opportunity cost of going to a movie is
a. the price of the ticket.
b. the price of the ticket plus the cost of any soda and popcorn you buy at the theater.
c. the total cash expenditure needed to go to the movie plus the value of your time.
d. zero, as long as you enjoy the movie and consider it a worthwhile use of time and money
3. A marginal change is one that
 Prepared by Tran Duc Thanh – TA Microeconomics

a. is not important for public policy.

b. incrementally alters an existing plan.
c. makes an outcome inefficient.
d. does not influence incentives.
4. Adam Smith’s “invisible hand” refers to
a. the subtle and often hidden methods that businesses use to profit at consumers’ expense.
b. the ability of free markets to reach desirable outcomes, despite the self-interest of market
participants.
c. the ability of government regulation to benefit consumers, even if the consumers are unaware
of the regulations.
d. the way in which producers or consumers in unregulated markets impose costs on innocent
bystanders
5. Governments may intervene in a market economy in order to (tham khảo)
a. protect property rights.
b. correct a market failure due to externalities.
c. achieve a more equal distribution of income.
d. All of the above.
6. If a nation has high and persistent inflation, the most likely explanation is (tham khảo)
a. the central bank creating excessive amounts of money.
b. unions bargaining for excessively high wages.
c. the government imposing excessive levels of taxation.
d. firms using their monopoly power to enforce excessive price hikes.
CHAPTER 2. THINKING LIKE AN ECONOMIST
2 roles of economists:
- Scientists: Explain the world [giải thích thế giới]
- Policy advisors: Improve the world [cải thiện thế giới]
ð Tools economists use:
o Assumption: Simplify the real world and make it easier to understand =>
Building 2 models below.
2 models:
1. Circular – flow diagram:
 Prepared by Tran Duc Thanh – TA Microeconomics

- 2 actors:
o Households.
o Firms.
- 2 markets:
o Market for Goods & Services.
o Market for factors of production.
Flow of inputs and outputs.
Flow of dollars.
2. The Production Possibilities Frontier (PPF):
- Thể hiện sự kết hợp của 2 mặt hàng mà nền kinh tế có thể sản xuất được với nguồn
lực sẵn có.
- Biểu thị được:
o Tradeoff và oppo. Cost.
o Efficiency và inefficiency.
o Unemployment.
o Economic growth.
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+ Điểm A, B, C: feasible (có thể sản xuất được) and efficient (đạt hiệu quả
cao).
+ Điểm D: feasible (có thể sản xuất được) but inefficient (không hiệu quả)
+ Điểm E: infeasible (không thể sản xuất được.)
- Without trade: chỉ có thể tiêu thụ tối đa ở những điểm trên đường PPF => lúc
này PPF cũng chính là CPF (consumption possibilities frontier)
- With trade: có thể tiêu thụ cả những điểm bên ngoài đường PPF
Micro Vs macro: interaction between households and firms in the markets.
- Micro: Only one household and firm.
- Macro: economy – wide phenomena (inflation, unemployment, economic growth…)
QUICK QUIZ
1. An economic model is
a. a mechanical machine that replicates the functioning of the economy.
b. a fully detailed, realistic description of the economy.
c. a simplified representation of some aspect of the economy.
d. a computer program that predicts the future of the economy.
2. The circular-flow diagram illustrates that, in markets for the factors of production,
a. households are sellers, and firms are buyers.
b. households are buyers, and firms are sellers.
c. households and firms are both buyers.
d. households and firms are both sellers.
3. A point inside the production possibilities frontier is
a. efficient but not feasible.
b. feasible but not efficient.
c. both efficient and feasible.
d. neither efficient nor feasible
4. An economy produces hot dogs and hamburgers. If a discovery of the remarkable health
benefits of hot dogs were to change consumers’ preferences, it would
a. expand the production possibilities frontier.
b. contract the production possibilities frontier.
c. move the economy along the production possibilities frontier.
d. move the economy inside the production possibilities frontier
5. All of the following topics fall within the study of microeconomics EXCEPT
a. the impact of cigarette taxes on the smoking behavior of teenagers.
b. the role of Microsoft’s market power in the pricing of software.
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c. the effectiveness of antipoverty programs in reducing homelessness.

d. the influence of the government budget deficit on economic growth
CHAPTER 3. INTERDEPENDENCE AND THE GAIN FROM
TRADE
• Absolute advantage: khả năng sản xuất một hàng hóa nào đó dùng inputs [Ex: labor,
working hours,] ít hơn người khác.
ð Nếu cả 2 bên đều có absolute advantage đối với cùng một loại hàng và đều specialize mặt
hàng đó thì trade với nhau vẫn có lợi [Trade can make everyone better off].
• Comparative advantage: Khả năng sản xuất một hàng hóa với oppo. Cost thấp hơn
người khác.
ð Do sự khác nhau về oppo. Cost và comparative advantage => the gain from trade.
ð Khi lựa chọn mặt hàng để specialize=> so sánh comparative advantage.
Example:

Ex: The opportunity cost of 1 yard of cloth for Nancy [sản xuất 1 yard of cloth (C) tương đương
với bao nhiêu bottle of perfume (P)]
Cách 1: Dựa vào labor hours needed to make one unit (Cột 2):
1 P cần 6 hours
1 C cần 8 hours.
! # %
Vậy trong 8 hours sản xuất C thì có thể sản xuất ra: " = $ => 𝐶 = & 𝑃
Cách 2: Dựa vào amount produced in 120 hours (Cột 3):
trong cùng một khoảng thời gian:
20P cần 120t
15C cần 120t
'(! '( %
=> )*" = 1 => 20𝑃 = 15 𝐶ó1𝐶 = )* 𝑃 = & 𝑃

Opportunity cost của cả Nancy và Roger:

Opportunity cost of Perfume Cloth
Nancy 𝟑/𝟒 C 𝟒/3 P
Roger 𝟏/2 C 2P
• Xác định absolute advantages:
Nancy có thể sản xuất ra 1 yard of cloth trong vòng 8 hours, nhỏ hơn 10 hours của Roger
=> absolute advantage của Nancy là cloth.
Roger có thể sản xuất ra 1 bottle of perfume trong vòng 5 hours, nhỏ hơn 6 hours của
Nancy => absolute advantage của Roger là perfume.
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• Xác định comparative advantage:

Opportunity cost của Nancy khi sản xuất cloth thấp hơn Roger (4/3 < 2) => comparative
advantage của Nancy là cloth.
Opportunity cost của Roger khi sản xuất perfume thấp hơn Nancy ( ½ < ¾) => comparative
advantage của Roger là perfume.

QUICK QUIZ
1. In an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler can wash 3 cars or mow 1
lawn. Who has the absolute advantage in car washing, and who has the absolute advantage
in lawn mowing?
a. Mateo in washing, Tyler in mowing.
b. Tyler in washing, Mateo in mowing.
c. Mateo in washing, neither in mowing.
d. Tyler in washing, neither in mowing.
2. Once again, in an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler can wash 3
cars or mow 1 lawn. Who has the comparative advantage in car washing, and who has the
comparative advantage in lawn mowing?
a. Mateo in washing, Tyler in mowing.
b. Tyler in washing, Mateo in mowing.
c. Mateo in washing, neither in mowing.
d. Tyler in washing, neither in mowing.
3. When two individuals produce efficiently and then make a mutually beneficial trade
based on comparative advantage,
a. they both obtain consumption outside their production possibilities frontier.
b. they both obtain consumption inside their production possibilities frontier.
c. one individual consumes inside her production possibilities frontier, while the other consumes
outside hers.
d. each individual consumes a point on her own production possibilities frontier.
4. Which goods will a nation typically import?
a. those goods in which the nation has an absolute advantage
b. those goods in which the nation has a comparative advantage
c. those goods in which other nations have an absolute advantage
d. those goods in which other nations have a comparative advantage
5. Suppose that in the United States, producing an aircraft takes 10,000 hours of labor and
producing a shirt takes 2 hours of labor. In China, producing an aircraft takes 40,000
hours of labor and producing a shirt takes 4 hours of labor. What will these nations trade?
a. China will export aircraft, and the United States will export shirts.
b. China will export shirts, and the United States will export aircraft.
c. Both nations will export shirts.
d. There are no gains from trade in this situation.
6. Kayla can cook dinner in 30 minutes and wash the laundry in 20 minutes. Her roommate
takes half as long to do each task. How should the roommates allocate the work?
a. Kayla should do more of the cooking based on her comparative advantage.
b. Kayla should do more of the washing based on her comparative advantage.
c. Kayla should do more of the washing based on her absolute advantage.
d. There are no gains from trade in this situation.
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CHAPTER 4. THE MARKET FORCES OF SUPPLY AND

DEMAND
1. Markets and Competition:
- Market: a group of buyers and sellers of a particular product
o Buyers: determine the demand for the product
o Sellers: determine the supply for the product

Perfectly Monopolistic Oligopoly Monopoly

competitive competitive
(important)
# of firms Many Many Few large Single
Type of Same/ Identical Slightly Identical or unique
products differentiated differentiated
Substitutes Perfect Many close differentiated No close
goods (Càng có substitutes substitutes substitutes substitutes
nhiều loại hàng
giống nhau sẽ
càng có nhiều
substitutes)
Entry Very easy Easy Hard Very hard
Pricing power None, price Little Little to Significant
takers (No affect significant
market price)
Examples Ice-cream, Clothes, Coffee Automobiles, air Electricity,
vegetables, travel. Microsoft invention
agricultural Word vs GG certificate,
products docx Diamond – field
(mỏ kim cương)
2. Demand:
Demand curve: Slope downward
Law of demand: other things being equal, when the price of a good rises, the quantity
demanded of the good falls, and when the price falls, the quantity demanded rises: giá tăng thì
số lượng bán ra của 1 sản phẩm giảm, ngược lại giá giảm thì số lượng bán ra tăng.
The market demand:
INCOME:
- Normal good: a good for which, other things being equal, an increase in income
leads to an increase in demand: hàng hoá bình thường: tiền nhiều thì mua nhiều
- Inferior good: a good for which, other things being equal, an increase in income
leads to an decrease in demand: hàng hoá thứ cấp: tiền ít thì mua nhiều
[Ex: instant noodles, bus rides]
SUBSTITUTION:
- Substitutes: two goods for which an increase in the price of one leads to an increase
in the demand for the other: hàng hoá thay thế: nếu giá của sản phẩm A tăng thì người
mua sẽ chuyển sang mua sản phẩm B vì 2 cái tương tự nhau.
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[Ex: ice cream and frozen yogurt, hot dogs and hamburgers, sweaters and
Sweatshirts]
- Complements: two goods for which an increase in the price of one leads to an
decrease in the demand for the other: hàng hoá bổ sung: mua A thì phải mua luôn B
vì A và B được sử dụng song hành.
[Ex: Goods that are used together: gasoline and automobiles, computers and software]
3. Supply:
Supply curve: Slope upward
Law of Supply: other things being equal, when the price of a good rises, the quantity
supplied of the good also rises, and when the price falls, the quantity falls as well: giá tăng thì
số lượng sản xuất ra của 1 sản phẩm tăng, ngược lại giá giảm thì số lượng sản xuất ra giảm.
4. S & D together:

Surplus: a situation in which quantity supplied is greater that quantity demanded

=> should decrease the price: dư thừa: sản phẩm sản xuất ra nhiều hơn so với nhu cầu
của người tiêu dùng
Shortage: a situation in which quantity demanded is greater that quantity supplied
=> should increase the price: thiếu hụt: sản phẩm sản xuất ra ít hơn so với nhu cầu của
người tiêu dùng.

Changes Variables affect Buyers Variables affect Sellers

(Demand) (Supply)
Move along/ Demand slopes downward: Price of Supply slopes upward: Price of this
Slope this good good
+ Income [increase] + Inputs: Wages, Land, Labor,
(normal goods [increase] + inferior Capital, …
goods [decrease]) + Technological advancement.
+Prices of the related goods: + Government action (taxes,
(substitute goods [increase] + subsidies)
Shift complement goods [decrease]) + Natural disasters
+Tastes and preferences. + Transportation cost
+ Consumers’ expectations + Inflation
+ Number of buyers. + Number of sellers.
+ Expectations of future profit.
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QUICK QUIZ
1. A change in which of the following will NOT shift the demand curve for
hamburgers?
a. the price of hot dogs
b. the price of hamburgers
c. the price of hamburger buns
d. the income of hamburger consumers
2. An increase in ________ will cause a movement along a given demand curve,
which is called a change in ________.
a. supply, demand
b. supply, quantity demanded
c. demand, supply
d. demand, quantity supplied
3. Movie tickets and film streaming services are substitutes. If the price of film
streaming increases, what happens in the market for movie tickets?
a. The supply curve shifts to the left.
b. The supply curve shifts to the right.
c. The demand curve shifts to the left.
d. The demand curve shifts to the right.
4. The discovery of a large new reserve of crude oil will shift the ________ curve for
gasoline, leading to a ________ equilibrium price.
a. supply, higher
b. supply, lower
c. demand, higher
d. demand, lower
5. If the economy goes into a recession and incomes fall, what happens in the
markets for inferior goods?
a. Prices and quantities both rise.
b. Prices and quantities both fall.
c. Prices rise and quantities fall.
d. Prices fall and quantities rise.
6. Which of the following might lead to an increase in the equilibrium price of jelly
and a decrease in the equilibrium quantity of jelly sold?
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a. an increase in the price of peanut better, a complement to jelly

b. an increase in the price of Marshmallow Fluff, a substitute for jelly
c. an increase in the price of grapes, an input into jelly
d. an increase in consumers’ incomes, as long as jelly is a normal good

CHAPTER 5. ELASTICITY
Elasticity: how much suppliers and demanders respond to changes in market
conditions: a measure of the responsiveness of quantity demanded or quantity supplied
to a change in one of its determinants [độ co giãn là thước đo độ nhạy của lượng cầu
hoặc lượng cung trước sự thay đổi của 1 trong những yếu tố khác (vd: giá, lương,...)]

Price elasticity of demand: a measure of how much the quantity demanded of a good
responds to a change in the price of that good, computed as the percentage change in
quantity demanded divided by the percentage change in price [Độ co giãn của cầu: độ
nhạy của lượng cầu trước thay đổi về giá của hàng hoá].
Note: ED<0.
+ Elastic: the quantity demanded responds substantially to changes in the price: lượng
cầu thay đổi đáng kể khi có sự thay đổi ở giá
+ Inelastic: the quantity demanded responds only slightly to changes in the price: lượng
cầu thay đổi rất ít hoặc không thay đổi khi có sự thay đổi ở giá
Percentage
% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑄+
𝑃𝑟𝑖𝑐𝑒 𝑒𝑙𝑎𝑠𝑡𝑖𝑐𝑖𝑡𝑦 𝑜𝑓 𝑑𝑒𝑚𝑎𝑛𝑑 =
% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑃+
Midpoint method:
𝑄' − 𝑄)
(𝑄 + 𝑄) )/2
𝑃𝑟𝑖𝑐𝑒 𝑒𝑙𝑎𝑠𝑡𝑖𝑐𝑖𝑡𝑦 𝑜𝑓 𝑑𝑒𝑚𝑎𝑛𝑑 = '
𝑃' − 𝑃)
(𝑃' + 𝑃) )/2
- ΙƐΙ > 1: elastic: có tính co giãn
- ΙƐΙ < 1: inelastic: không co giãn
- ΙƐΙ = 1: unit elastic: đơn vị co giãn
For every 1% change in price, the quantity demanded would change ΙƐΙ%: cứ 1% thay
đổi ở giá thì lượng cung sẽ thay đổi ΙƐΙ% tương ứng

Deviation method: (dùng trong tự luận hoặc đề chỉ cho 1Q hoặc 1P và hàm Q=aP+b)
𝑑𝑄 𝑃
𝑃𝑟𝑖𝑐𝑒 𝑒𝑙𝑎𝑠𝑡𝑖𝑐𝑖𝑡𝑦 𝑜𝑓 𝑑𝑒𝑚𝑎𝑛𝑑 = ×
𝑑𝑃 𝑄
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Determinants of Price elasticity of demand:

+ Elastic
- Substitute goods
- Narrowly defined goods
- Luxury goods
- In the long run: more elastic than in the short run
- The proportion of income
+ Inelastic:
- Necessities (rice, medicines, etc.)
- Broadly defined goods (food, gasoline)
- Brands with loyal customers: inelastic
- Cost of switching suppliers (B2B goods)
- Habitual demand (addictive goods like cigarettes)
General rules:
- When demand is inelastic, price and total revenue move in the same direction: if the price
increases, total revenue also increases: khi lượng cung không hoặc ít co dãn, giá và tổng
doanh thu đều cùng tăng hoặc cùng giảm => khi giá tăng, doanh thu cũng tăng theo.
[|E|< 1 => P increases=> TR increases]
- When demand is elastic, price and total revenue move in the opposite direction: if the price
increases, total revenue decreases: khi lượng cung có tính co dãn, giá tăng thì tổng doanh thu
giảm và ngược lại => khi giá tăng, doanh thu giảm. Nếu muốn tăng doanh thu thì nên giảm
giá.
[|E|>1 => P increases=> TR decreases]
- When demand is unit elastic, total revenue remains constant when the price changes: khi
lượng cung đơn vị co giãn, giá tăng hay giảm thì tổng doanh thu vẫn như cũ, không đổi.
[|E|=1 => P increases=> TR unchanges]

The Income Elasticity of demand: Độ co giãn thu nhập của cầu: đo sự thay đổi của lượng
cầu khi có sự thay đổi của thu nhập
% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑄+
𝐼𝑛𝑐𝑜𝑚𝑒 𝑒𝑙𝑎𝑠𝑡𝑖𝑐𝑖𝑡𝑦 𝑜𝑓 𝑑𝑒𝑚𝑎𝑛𝑑 =
% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐼
 Prepared by Tran Duc Thanh – TA Microeconomics

Ɛ > 0: normal goods

Ɛ < 0: inferior goods
The cross-price elasticity of demand: a measure of how much the quantity demanded of
one good responds to a change in the price of another good, computed as the percentage
change in quantity demanded of the first good divided by the percentage change in price of
the second good. [Độ co giãn theo giá chéo của cầu: đo sự thay đổi của lượng cầu của sản
phẩm 1 khi có sự thay đổi ở giá của sản phẩm 2]
% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑄+)
𝐶𝑟𝑜𝑠𝑠 − 𝑝𝑟𝑖𝑐𝑒 𝑒𝑙𝑎𝑠𝑡𝑖𝑐𝑖𝑡𝑦 𝑜𝑓 𝑑𝑒𝑚𝑎𝑛𝑑 =
% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑃'
Ɛ > 0: substitutes
Ɛ < 0: complements
Price elasticity of supply: a measure of how much the quantity supplied of a good responds
to a change in the price of that good, computed as the percentage
Tương tự Price elasticity of demand

Determinants of price elasticity of supply:

- Time period: more elastic in the long run
- Productive capacity: higher => more elastic
- Mobility of factors of production: higher=> more elastic
- The size of the firm/ industry: higher=> more elastic
- Ease of storing stock/ inventory: higher => more elastic
Rule of thumb:
- Flatter curve=> Bigger Elasticity (Luxury goods)
- Stepper curve=> Smaller Elasticity (Necessary goods)
Ep EI EA
Percentage %𝚫 𝑄 %𝚫 𝑄+ %𝚫 𝑄)
𝐸𝑝 = 𝐸, = 𝐸- =
% 𝚫 𝑃 % 𝚫 𝐼 % 𝚫 𝑃'
Mid-point 𝑄 ' − 𝑄) 𝑄' − 𝑄) 𝑄′) − 𝑄)
(𝑄 + 𝑄) )/2 (𝑄 + 𝑄) )/2 (𝑄′) + 𝑄) )/2
𝐸𝑝 = ' 𝐸, = ' 𝐸- =
𝑃' − 𝑃) 𝐼' − 𝐼) 𝑃′' − 𝑃'
(𝑃' + 𝑃) )/2 (𝐼' + 𝐼) )/2 (𝑃′' + 𝑃' )/2
 Prepared by Tran Duc Thanh – TA Microeconomics

Deviation 𝑑𝑄 𝑃 x x
𝐸𝑝 = ×
𝑑𝑃 𝑄
Mixed %𝚫 𝑄
𝐸𝑝 =
𝑃' − 𝑃)
(𝑃' + 𝑃) )/2
%𝚫 𝑄
=
𝑃' − 𝑃)
(𝑃' + 𝑃) )/2
Comparison ΙƐΙ > 1: elastic Ɛ > 0: normal goods Ɛ > 0: substitutes
ΙƐΙ < 1: inelastic Ɛ < 0: inferior goods Ɛ < 0: complements
ΙƐΙ = 1: unit elastic

Ɛp Demand D curve S curve If P increase -> TR

0 Perfect inelastic Vertical Vertical Increase
<1 Inelastic Steep Steep Increase
=1 Unit- elastic Intermediate Intermediate Unchange
>1 Elastic Flat Flat Decrease
+∞ Perfect elastic Horizontal Horizontal Decrease to 0

QUICK QUIZ

1. A life-saving medicine without any close substitutes will tend to have

a. a small elasticity of demand.
b. a large elasticity of demand.
c. a small elasticity of supply.
d. a large elasticity of supply.
2. The price of a good rises from $8 to $12, and the quantity demanded falls from 110 to
90 units. Calculated with the midpoint method, the price elasticity of demand is
a. 1/5.
b. 1/2.
c. 2.
d. 5.
3. A linear, downward-sloping demand curve is
a. inelastic
b. unit elastic.
c. elastic.
d. inelastic at some points, and elastic at others.
4. The ability of firms to enter and exit a market over time means that, in the long run,
a. the demand curve is more elastic.
b. the demand curve is less elastic.
c. the supply curve is more elastic.
d. the supply curve is less elastic.
5. An increase in the supply of a good will decrease the total revenue producers receive
if
a. the demand curve is inelastic.
 Prepared by Tran Duc Thanh – TA Microeconomics

b. the demand curve is elastic.

c. the supply curve is inelastic.
d. the supply curve is elastic.
6. Over time, technological advance increases consumers’ incomes and reduces the
price of smartphones. Each of these forces increases the amount consumers spend on
smartphones if the income elasticity of demand is greater than ________ and if the price
elasticity of demand is greater than ________.
a. zero, zero
b. zero, one
c. one, zero
d. one, one

CHAPTER 6. SUPPLY, DEMAND AND GOVERNMENT

POLICIES
Price ceiling (giá trần): a legal maximum on the price at which a good can be sold: giá trần:
giá bán cao nhất và hợp pháp của một sản phẩm

In response to this shortage, some mechanism for rationing: Khi xảy ra việc thiếu hụt sản
phẩm thì người ta thường làm những việc sau:
- Long lines (waiting list): time consuming: cho vào danh sách chờ, tốn thời gian
- Discriminatory selling (race): [seller bias]: người bán muốn bán cho ai thì bán
- Parallel market (black market): chợ đen: những người mua được sẽ bán lại cho người
khác với giá cao hơn (vd: vé đi coi idol,…)

Rent Control Law (Price ceiling):

 Prepared by Tran Duc Thanh – TA Microeconomics

Policymakers are led to control prices because they view the market’s outcome as unfair.
Price controls are often aimed at helping the poor. For instance, rent-control laws try to make
housing affordable for everyone, and minimum-wage laws try to help people escape poverty.
Similarly, rent-control laws try to make housing affordable for everyone. Rent control may
keep rents low, but it also discourages landlords from maintaining their buildings and makes
housing hard to find.
[Những quy định về cho thuê nhà giúp giá thuê nhà rẻ hơn cho mọi người nhưng sẽ làm
những người chủ nhà không có động lực để bảo trì nhà cửa và giảm lượng người cung cấp
dịch vụ thuê nhà vì giá thuê nhà không còn cao như trước.]
- Instead, wage subsidies raise the living standards of the working poor without discouraging
firms from hiring them. Eg: earned income tax credit: a government program that
supplements the incomes of the low-wage income. [Thay vì vậy thì chính phủ có thể cung
cấp trợ cấp để giúp người nghèo thay vì đặt những chính sách về lương và thuê nhà]

Price floor (giá sàn): a legal minimum on the price at which a good can be sold: giá sàn: giá
bán thấp nhất và hợp pháp của một sản phẩm
 Prepared by Tran Duc Thanh – TA Microeconomics

Minimum wage (price floor):

When the minimum wage is above the equilibrium level, the quantity of labor supplied
exceeds the quantity demanded => Unemployment.
The minimum wage raises the incomes of those workers who have jobs, but it lowers the
incomes of workers who cannot find jobs.
*Highly skilled and experienced workers are not affected because their equilibrium wages
are well above the minimum, the minimum wage laws can only affect the least skilled and
least experienced members of the labor force.
[Khi mức lương thấp nhất phải trả cho nhân viên nằm trên mức cân bằng, lượng nhân công
đang có sẽ nhiều hơn lượng nhân công mà thị trường cần => Dẫn đến thấp nghiệp. Chính
sách này tuy sẽ tăng lương cho những người đang có công việc sẵn nhưng những người thấp
nghiệp sẽ không nhận được nhiều tiền.]
*Những người giỏi và có kinh nghiệm sẽ không bị ảnh hưởng bởi chính sách này vì lương
của họ đã cao hơn nhiều so với mức lương tối thiểu, chỉ ảnh hưởng đến những công nhân ít
kinh nghiệm trong lực lượng lao động.
 Prepared by Tran Duc Thanh – TA Microeconomics

Taxes on sellers affect market outcomes. (Đọc thêm)

 Prepared by Tran Duc Thanh – TA Microeconomics

Taxes on buyers affect market outcomes.

Elasticity and tax incidence: A tax burden falls more heavily on the side of the market that
is less elastic: thuế sẽ rơi vào nhiều hơn ở phần kém co dãn hơn ở trong thị trường.
 Prepared by Tran Duc Thanh – TA Microeconomics

QUICK QUIZ

1. When the government imposes a binding price floor, it causes

a. the supply curve to shift to the left.
b. the demand curve to shift to the right.
c. a shortage of the good to develop.
d. a surplus of the good to develop.
2. In a market with a binding price ceiling, an increase in the ceiling will ________ the
quantity supplied, ________ the quantity demanded, and reduce the ________.
a. increase, decrease, surplus
b. decrease, increase, surplus
c. increase, decrease, shortage
d. decrease, increase, shortage
3. A $1 per unit tax levied on consumers of a good is equivalent to
a. a $1 per unit tax levied on producers of the good.
b. a $1 per unit subsidy paid to producers of the good.
c. a price floor that raises the good’s price by $1 per unit.
d. a price ceiling that raises the good’s price by $1 per unit.
 Prepared by Tran Duc Thanh – TA Microeconomics

4. Which of the following would increase quantity supplied, decrease quantity

demanded, and increase the price that consumers pay?
a. the imposition of a binding price floor
b. the removal of a binding price floor
c. the passage of a tax levied on producers
d. the repeal of a tax levied on producers
5. Which of the following would increase quantity supplied, increase quantity
demanded, and decrease the price that consumers pay?
a. the imposition of a binding price floor
b. the removal of a binding price floor
c. the passage of a tax levied on producers
d. the repeal of a tax levied on producers
6. When a good is taxed, the burden of the tax falls mainly on consumers if
a. the tax is levied on consumers.
b. the tax is levied on producers.
c. supply is inelastic, and demand is elastic.
d. supply is elastic, and demand is inelastic.

CHAPTER 7. CONSUMERS, PRODUCERS AND THE

EFFICIENCY OF MARKETS
Consumer surplus: thặng dư tiêu dùng: phần tiền dư còn lại sau khi mà người mua đã mua 1
sản phẩm
- Willing to pay (WTP): the maximum amount that a buyer will pay for a good: số tiền tối
đa mà người mua sẵn sàng trả cho một sản phẩm
CS = WTP – Price = 𝟏/𝟐 x (𝐏𝐦𝐚𝐱 – 𝐏𝐨) × 𝐐𝐨
 Prepared by Tran Duc Thanh – TA Microeconomics

Producer surplus: thặng dư sản xuất: phần dư còn lại sau khi mà người bán đã lấy phần tiền
được trả cho 1 sản phẩm trừ đi chi phí sản xuất của sản phẩm đó
PS = Price – Cost = 𝟏/𝟐 x (𝐏𝐨 − 𝐏𝐦𝐢𝐧) × 𝐐𝐨

Total surplus: tổng thặng dư: bao gồm thặng dư tiêu dùng và thặng dư sản xuất.
Có 2 cách tính:
Cách 1:
𝑻𝑺 = 𝑪𝑺 + 𝑷𝑺 = (𝐖𝐓𝐏 – 𝐏𝐫𝐢𝐜𝐞) + (𝐏𝐫𝐢𝐜𝐞 – 𝐂𝐨𝐬𝐭) = 𝑾𝑻𝑷 − 𝑪𝒐𝒔𝒕
Cách 2:
𝑻𝑺 = 𝑪𝑺 + 𝑷𝑺 =𝟏/𝟐 x (𝐏𝐦𝐚𝐱 – 𝐏𝐨) × 𝐐𝐨 + 𝟏/𝟐 x (𝐏𝐨 − 𝐏𝐦𝐢𝐧) × 𝐐𝐨
=𝟏/𝟐 x (𝐏𝐦𝐚𝐱 − 𝐏𝐦𝐢𝐧) × 𝐐𝐨
QUICK QUIZ
1. Jen values her time at $60 an hour. She spends 2 hours giving Colleen a massage.
Colleen was willing to pay as much at $300 for the massage, but they negotiate a
price of $200. In this transaction,
a. consumer surplus is $20 larger than producer surplus.
b. consumer surplus is $40 larger than producer surplus.
c. producer surplus is $20 larger than consumer surplus.
d. producer surplus is $40 larger than consumer surplus.
2. The demand curve for cookies is downward-sloping. When the price of cookies is $2,
the quantity demanded is 100. If the price rises to $3, what happens to consumer
surplus?
a. It falls by less than $100.
b. It falls by more than $100.
c. It rises by less than $100.
d. It rises by more than $100.
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3. John has been working as a tutor for $300 a semester. When the university raises the
price it pays tutors to $400, Jasmine enters the market and begins tutoring as well. How
much does producer surplus rise as a result of this price increase?
a. by less than $100
b. between $100 and $200
c. between $200 and $300
d. by more than $300
4. An efficient allocation of resources maximizes
a. consumer surplus.
b. producer surplus.
c. consumer surplus plus producer surplus.
d. consumer surplus minus producer surplus.
5. When a market is in equilibrium, the buyers are those with the ________ willingness
to pay and the sellers are those with the ________ costs.
a. highest, highest
b. highest, lowest
c. lowest, highest
d. lowest, lowest
CHAPTER 13. THE COST OF PRODUCTION
Ø Total revenue: The amount a firm receives for the sales.
TR = P x Q
Ø Total cost: The market value of the inputs in the production.
- Explicit costs: require money.
- Implicit costs: Ignore money (accounting).
TC = Explicit costs + Implicit costs.
Ø Profit:
- Economic profit:
Profit = TR – TC.
- Accounting profit:
Accounting Profit = TR – Explicit costs.
ð Accounting profit > Economic profit.
Ø Production function: Relationship between:
- Quantity of inputs.
- Quantity of outputs.
Ø Margnal product:
- Add 1 unit => Increase Quantity of outputs.
- Slope of the production function.
∆𝑜𝑢𝑡𝑝𝑢𝑡
𝑀𝑃 =
∆𝑙𝑎𝑏𝑜𝑢𝑟
Ø Diminishing marginal product:
- Marginal product declines when the Quantity of outputs increases.
Ø Total cost curves:
 Prepared by Tran Duc Thanh – TA Microeconomics

- Fixed costs (chi phí cố định): costs do not vary with the quantity of output produced,
unaffected by production. Ex: House renting, Land renting…
- Variable costs (chi phí thay đổi): costs vary with the quantity of output produced.
Produce nothing=> VC=0.
TC = FC + TVC = FC + VC x Q
."
- Average fixed cost (Chi phí cố định bình quân): 𝐴𝐹𝐶 = /
0"
- Average variable cost (Chi phí thay đổi bình quân): 𝐴𝑉𝐶 = /
1"
- Average total cost (Chi phí sản xuất bình quân từng sản phẩm): 𝐴𝑇𝐶 = /
∆1"
- Marginal cost (Chi phí sản xuất tăng thêm khi sản xuất thêm 1 sản phẩm): 𝑀𝐶 = ∆/
Ø Shapes:

- ATC: u -shaped.
- AFC: shaped falling.
- AVC: shaped rising.
- MC: shaped rising.
Ø Efficient scale: Quantity of output that minimizes ATC.
- MC < ATC: ATC is falling.
- MC > ATC: ATC is rising.
- MC = ATC: ATC is min: The intersect between ATC and MC.
 Prepared by Tran Duc Thanh – TA Microeconomics

Ø Relationships between short-run and long-run ATC

- Many decision:
Fixed in short run.
Variable In the long run.
- Firms- greater flexibility in the long run
Long – run cost curves: flatter than short – run cost curves.
Short – run cost curves: Lie on or above long – run cost curves.
- Economies of scale: a long – run ATC decreases when Q increases.
- Diseconomies of scale: a long run ATC increases when Q increases.
- Constant returns to scale: a long run ATC unchanges when Q changes.
Quiz
1. Xavier opens up a lemonade stand for two hours. He spends $10 for ingredients and
sells $60 worth of lemonade. In the same two hours, he could have mowed his neighbor’s
lawn for $40. Xavier has an accounting profit of _____ and an economic profit of ____.
a. $50, $10
b. $90, $50
c. $10, $50
d. $50, $90
2. Diminishing marginal product explains why, as a firm’s output increases,
a. the production function and total-cost curve both get steeper.
b. the production function and total-cost curve both get flatter.
c. the production function gets steeper, while the total-cost curve gets flatter.
d. the production function gets flatter, while the total-cost curve gets steeper.
3. A firm is producing 1,000 units at a total cost of $5,000. If it were to increase
production to 1,001 units, its total cost would rise to $5,008. What does this information
tell you about the firm?
a. Marginal cost is $5, and average variable cost is $8.
b. Marginal cost is $8, and average variable cost is $5.
c. Marginal cost is $5, and average total cost is $8.
d. Marginal cost is $8, and average total cost is $5.
 Prepared by Tran Duc Thanh – TA Microeconomics

4. A firm is producing 20 units with an average total cost of $25 and a marginal cost of
$15. If it were to increase production to 21 units, which of the following must occur?
a. Marginal cost would decrease.
b. Marginal cost would increase.
c. Average total cost would decrease.
d. Average total cost would increase.
5. The government imposes a $1,000 per year license fee on all pizza restaurants. As a
result, which cost curves shift?
a. average total cost and marginal cost
b. average total cost and average fixed cost
c. average variable cost and marginal cost
d. average variable cost and average fixed cost
6. If a higher level of production allows workers to specialize in particular tasks, a firm
will likely exhibit ________ of scale and ________ average total cost.
a. economies, falling.
b. economies, rising.
c. diseconomies, falling.
d. diseconomies, rising.