Because I watched the online version of class as I went home early for break, it was difficult for me to see all the graphs/tables clearly on the board. So in this post, I will describe the concepts went over in class.
The first thing he put on the board was "How Markets Use Knowledge." One of the markets was that of titanium and Rizzo wrote that EQ= P*=$20 with Q*10 billion pounds of titanium bought, which represented last year's amount sold).
Next, he put up a graph of 2 demand curves and one supply curve. One of the demand curves was for previous buyers of titanium, the other was for the demand of the consumer who desires 6 billion pounds of titanium at $20 per pound. Rizzo explained that there was a shortage of titanium so the producers had to raise the price to account for the low supply.
We then learned that you can assume what happens as you move away from an equilibrium point. For example, if the price rises, producers have more of an incentive to dig more titanium up because titanium is thus more valuable. You can also say that people use less of an item as prices increase (law of demand), so depending on how much consumers consume allows producers to know how much they can raise the price.
Some other concepts disclosed in this class are as follows:
- When more people are added to a market, the demand curve will shift out because there will be more demand. More people almost always means more demand.
- As a result, current consumers might cut back their own consumption as a result.
- The next graph basically showed that the elasticity is greater when there is an increase to the price of titanium.
- The final graph showed that the supply curve was more elastic than before.
- Prior consumption patterns don't change that much if we only increase/decrease the price of an item by a little. If there is a little price change, people may get some titanium from the original place and get the rest they need from other sources that are more cost effective.
No comments:
Post a Comment