fnr 407 forest economics
DESCRIPTION
FNR 407 Forest Economics. William L. (Bill) Hoover Professor of Forestry 494-3580 743-4120 [email protected]. Economics. Allocation of scarce resources to unlimited wants Market Other, e.g.?. Supply (S). Price (P). Demand (D). Quantity (Q). Demand Curve. - PowerPoint PPT PresentationTRANSCRIPT
FNR 407 Forest Economics
William L. (Bill) Hoover
Professor of Forestry
494-3580
743-4120
Economics
• Allocation of scarce resources to unlimited wants– Market– Other, e.g.?
Quantity (Q)
Pri
ce (
P) Demand (D)
Suppl
y (S)
Demand Curve
• Schedule of amounts consumers are willing and able to buy at various prices– Why is curve
negatively sloped• Declining marginal utility• Substitution effect
– Not same as consumption
P
Q
P1
Q1
P2
Q2
Price Elasticity of Demand(Ep)
% change in quantity demanded % change in price
∆Q/Q = ∆Q
x P
= ∆ Q P
∆ P/P Q ∆P ∆ P x Q
Ep is function of (1) inverse of the slope of the demand curve and (2) the point on the demand curve
Relationship of Ep to Total Revenue
• When Ep > |1|, decreasing price increases total revenue (the elastic range of the demand curve)
• When Ep = 1, total revenue is maximized
• When Ep < |1|, decreasing price decreases total revenue (the inelastic range of the demand curve)
Marginality
• Given the function Y = f(X), – Marginal change is change in Y per unit
change in X– ∆Y/ ∆X, or – dY/dX (first derivative of Y with respect
to X• Example
– Y ≡ yield, X ≡ year– dY/dX = current annual increment– Y/X = mean annual increment
Supply Curve
• Schedule of amounts producers are willing and able to supply at various price levels– Marginal cost curve
above average total cost
P
Q
Supply Curve
• Marginal cost (MC) curve above average total cost (ATC)
• Can’t cover all costs in long-run with price below ATC
P1
MCATC
Price (P)
P2
Q2 Q1