Michael R. Hammock
Middle Tennessee State University
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Chapters | 2014
Michael R. Hammock; Art Carden
Economists often need practical examples of the propositions discussed in class. Many such examples are provided in Trading Places, which, in addition to being an entertaining movie, illustrates a number of important points about economics, including the role of property rights, the costs of discrimination, the importance (and definition) of profit and the role of expectations and information in determining resource allocation across space and time. The movie is rich in lessons about basic economics and would make a valuable addition to any economists pedagogical toolkit for its illustration of commodities and futures markets. A summary and explanation of the movies economic content is given as well as implications for natural resources and the role of property rights.
Archive | 2013
Michael R. Hammock; J. Wilson Mixon
This chapter introduces the budget constraint and combines the budget constraint with the preferences developed in the preceding chapter to provide a model of rational consumer choice.
Archive | 2013
Michael R. Hammock; J. Wilson Mixon
This chapter illustrates two models using Maxima. The first model is the production possibilities curve, which is a simple model of economy-wide production. The second model is that of competitive markets, where demand and supply determine the equilibrium price and quantity of a good. We also extend this model to examine disequilibrium and the effects of shifts in demand or supply, along with the relevance of elasticities, the impact of taxes, and the value that markets generate.
Archive | 2013
Michael R. Hammock; J. Wilson Mixon
This chapter extends the analysis in the preceding two chapters in two directions. First, it focuses on shifts in demand and supply. Then it addresses allocative efficiency which, combined with the productive efficiency the previous chapters have introduced, generates economic efficiency. Economic efficiency is realized when resources are used in a way that results in the highest-valued set of goods and services being produced. This chapter also addresses the distorting effects of taxes placed on the exchange of specific goods or services.
Archive | 2013
Michael R. Hammock; J. Wilson Mixon
This chapter develops the long-run supply curve for a competitive industry. It begins with the simplest case, in which the industry consists of identical firms whose cost curves are not affected by the number of firms. Next it allows for these identical firms’ costs to be influenced by the number of firms. Then it analyzes the case in which each firm has unique cost curves. Finally, it addresses the implication of allocative efficiency.
Archive | 2013
Michael R. Hammock; J. Wilson Mixon
This chapter and the next two examine price-searching firms. Such firms inhabit one of the three types of industries: simple monopoly (one firm constitutes the industry), monopolistic competition (many firms inhabit an industry for which each firm’s product differs slightly from those of other firms), and oligopoly (a few firms inhabit an industry, and the firms’ products may be either identical or similar). This chapter addresses the first two cases.
Archive | 2013
Michael R. Hammock; J. Wilson Mixon
This chapter analyzes the output of a competitive industry in the short run. “Competitive” refers to the market structure in which each firm in the industry is a price taker. No single firm’s output level appreciably affects the market price. The chapter begins by combining the implications of the firm’s output selection for cost with the implications for revenue. We assume that the firm’s goal is to earn maximum profit per time period, and we examine the conditions necessary for achieving this goal.
Archive | 2013
Michael R. Hammock; J. Wilson Mixon
The economic analysis of consumer behavior begins with a model of rational behavior. The consumer is assumed to have a well-defined utility function that, coupled with a specification of the constraints facing the consumer, implies a specific action. This chapter develops and illustrates the nature of a utility function. The next two chapters add specifications of the constraints that face the consumer and derive the model’s implications.
Archive | 2013
Michael R. Hammock; J. Wilson Mixon
Chapter 4 analyzes optimization and its implications for utility maximization subject to one or more constraints, and it develops the relationship between money income and the quantity consumed of a good. This chapter addresses the effects of changes in the good’s price. Such a change causes both the relative prices of the goods consumed and the consumer’s real income to change. Initially, analysis is based on the CES utility function. Then the analysis turns to the case of a Giffen good. A large amount of time is spent on the latter, not because of its inherent importance, but because it provides added insights into the nature of the consumer’s reaction to price and income changes.
Archive | 2013
Michael R. Hammock; J. Wilson Mixon
Chapter 12 shows how a price-searching firm maximizes profits if its product faces a well-defined downward-sloping demand curve, given that the firm must sell all units of its product for the same price and that the per-unit price is the only charge that the seller can impose on the product’s buyers. This pricing regime is often called linear pricing. This chapter analyzes deviations from linear pricing, which potentially increase the seller’s profit.