Paul Palleys Economics Seminars

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• Paul Palleys Economics Seminars
• EconomicSeminars.com

We are dedicated to creating highly
individualized economics seminars.
The following is a Principles of Economics
Sample Course
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• Course Description

This course provides basic theories, concepts,
terminology, and uses of microeconomics and
macroeconomics as they relate to your
organization. Students learn practical
applications for microeconomics and
macroeconomics in the markets that your
organization operates in through the assimilation
of fundamental concepts and analysis of actual
economic events. The impact of changing economic
conditions and changes in fiscal and monetary
policies on the economy and exchange rates will
also be assessed.
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• Economics of the Marketplace
• How your company will benefit from this course
  Your employees will better understand the impact
  of changes in the markets you compete in on the
  prices you can charge, your sales, and profits.
• Upon completing this course, students will be
  able to
• Apply the concept of opportunity cost to the
  decision making process.
• Illustrate market equilibrium using supply and
  demand curves.
• Analyze changes in supply and demand on the
  equilibrium price and quantity of a good or
  service.
• Analyze the impact of changes in supply and
  demand on the equilibrium price of a good or
  service produced by your organization.

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• Economics of the Price Elasticity of Demand
• How your company will benefit from this course
  Decision makers will more efficiently evaluate
  the impact of varying pricing and competitive
  strategies on your revenues.
• Upon completing this course, students will be
  able to
• Explain how the price elasticity of demand
  explains why firms use either price or non-price
  competitive strategies to market their product.
• Apply the concept of price elasticity of demand
  to an analysis of the price of the good or
  service produced by your organization.
• Explain the different amounts of price leverage
  that exist between seller and purchaser.

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• Economics of Competitive Markets
• How your company will benefit from this course
  Your organization will be able to anticipate the
  impact of varying pricing and competitive
  strategies made by your competitors.
• Upon completing this course, students will be
  able to
• Identify examples of firms that operate in
  monopolistic competition (example retail).
• Identify examples of firms that operate in the
  oligopoly market structure (example
  automakers).
• Identify examples of firms that operate in the
  monopoly market structure (example selected
  utilities).
• Explain how different market structures affect
  the competitive practices of your firm and your
  competitors.

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• Economic Indicators
• How your company will benefit from this course
  The analysis of changes in economic conditions
  and economic forecasts will more effectively
  inform the development of your profitable
  strategic plans.
• Upon completing this course, students will be
  able to
• Define Real Gross Domestic Product (Real GDP),
  the inflation rate, the
• unemployment rate, interest rates, exchange
  rates, retail sales, housing
• starts, and other important economic indicators.
• Explain the relationship between economic
  indicators and their impact on your
  organization.
• Identify and apply sources of historical economic
  data.
• Identify and apply easily accessible sources of
  economic forecasts.

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• Fiscal Policy
• How your company will benefit from this course
  Your staffs ability to understand the impact of
  the governments fiscal policies on your firm
  will be enhanced.
• Upon completing this course, students will be
  able to
• Explain the assumptions that underlie competing
  macroeconomic theories.
• Evaluate the impact of changes in fiscal policies
  using Keynesian and Classical models on the
  economy and the markets your organization
  competes in.
• Describe a model that better adapts to current
  economic conditions to illustrate the impact of
  changes in government spending and taxes and the
  market your firm competes in.

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• Monetary Policy
• How your company will benefit from this course
  Your staffs ability to understand the impact of
  the Federal Reserves monetary policies on your
  firm will be improved.
• Upon completing this course, students will be
  able to
• Analyze the impact of the factors that contribute
  to the establishment of interest rates.
• Explain what the yield curve says about current
  and future economic conditions, inflation, and
  interest rates.
• Analyze the impact of changes in interest rates
  on the market your firm competes in.
• Analyze the impact of the Federal Reserves
  monetary policy tools on the economy and the
  market your firm competes in.

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• International Trade
• How your company will benefit from this course
  The impact of changes in the global economy and
  international financial markets on your markets
  will be anticipated.
• Upon completing this course, students will be
  able to
• Analyze the factors that facilitate trade between
  nations.
• Explain how foreign exchange rates are determined
  and affect the value of the dollar.
• Explain the interrelationship between domestic
  monetary and fiscal policy and their effect on
  exchange rates and international trade.
• Evaluate the impact of changes in exchange rates
  and trade policies your firm and the market your
  firm competes in.

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• Supply and Demand
• The demand for a good or service is based on our
  wants, needs, desires, and having the income or
  means to act on them.
• A demand curve illustrates the quantity of a good
  or service that will be bought per unit of time
  at various prices.

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Supply and Demand Demand Curve
P
P1
P2
D
Q
Q1
Q2
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Supply and Demand Increase in Demand
P
D
D
Q
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Supply and Demand Decrease in Demand
P
D
D
Q
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Supply and Demand Increase in Supply
P
S
S
Q
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Application of Economics to Discover Network

• Economics of the Marketplace

Supply and Demand Decrease in Supply
P
S
S
Q
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• Supply and Demand
• Factors That Affect Demand For Kitchen
  Household Appliances
• Income.
• The price of other goods.
• complements.
• substitutes.
• Population.
• Tastes and preferences.
• Expectations.
• Other factors.

Changes in these factors lead to a change in
demand or a shift of the demand curve. In other
words, higher incomes will lead to an increase in
the demand for a good or service regardless of
the price. On the other hand, lower incomes will
lead to a decrease in the demand for a good or
service regardless of the price.
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• Supply and Demand
• Factors That Affect the Supply of Kitchen
  Household Appliances
• The price of inputs.
• The price of other goods.
• Taxes and subsidies.
• Technology.
• Expectations.
• Other factors.
• Number of firms.

Changes in these factors lead to a change in
supply or a shift of the supply curve. In other
words, positive expectations will lead to an
increase in the supply of a good or service
regardless of the price. On the other hand,
negative expectations will lead to a decrease in
the supply of a good or service regardless of the
price.
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Supply and Demand Increase in Demand Stable
Supply
P
S
P2
P1
D
D
Q
Q1
Q2
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Supply and Demand Decrease in Demand Stable
Supply
P
S
P1
P2
D
D
Q
Q2
Q1
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Supply and Demand Increase in Supply Stable
Demand
P
S
S
P1
P2
D
Q
Q1
Q2
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Supply and Demand Decrease in Supply Stable
Demand
P
S
S
P2
P1
D
Q
Q2
Q1
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Supply and Demand Increase in Demand Increase
in Supply
P
S
S
P
D
D
Q
Q1
Q2
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Supply and Demand Increase in Demand Decrease
in Supply
P
S
S
P2
P1
D
D
Q
Q
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• The price elasticity of demand (e)
• the percentage change in quantity demanded
• divided by the percentage change in price
• The demand for a good/service is price elastic
  if e gt 1
• The demand for a good/service is price inelastic
  if e lt 1

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The demand for a good/service is price elastic
if e gt 1
P
P1
P2
Q2
Q
Q1
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• The demand for a good/service is price elastic
  if e gt 1
• Examples
• Grocery items.
• Retail.
• Cars.
• Household appliances.
• Gasoline sold at the gas station.
• Airline tickets (vacation travelers)
• What does this mean for Discover Network?

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The demand for a good/service is price inelastic
if e lt 1
P
P1
P2
Q1
Q2
Q
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• The demand for a good/service is price inelastic
  if e lt 1
• Examples
• Agricultural commodities.
• Pharmaceuticals.
• Cigarettes.
• Gasoline as a commodity.
• Airline tickets (business travelers)
• What does this mean for Discover Network?

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• There are Four Market Structures
• Pure competition.
• Monopoly.
• Monopolistic Competition.
• Oligopoly.

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• Pure Competition
• Characteristics of Pure Competition
• The firms are price takers.
• Many buyers.
• Many sellers producing identical substitutes.
• The goal of the firm is to maximize profits.
• Average or unit costs increase as production
  increases.
• There are no barriers to entry into or exit from
  the industry.
• The firms are very small relative to the size of
  the industry.
• What are examples?

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• Pure Monopoly
• Characteristics of Pure Monopoly
• The firm is a price maker.
• Many buyers.
• There is one seller.
• The goal of the firm is to maximize profits?
• Average or unit costs increase as production
  increases?
• There are barriers to entry into or exit from the
  industry.
• The firm is free to control their price, the
  quantity they produce, their promotional efforts,
  distribution channels, and the quality of their
  product.
• What are examples?

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• Monopolistic Competition
• Characteristics of Monopolistic Competition
• The firm is a price maker.
• Many buyers.
• There are many sellers producing similar
  substitutes.
• The goal of the firm is to maximize profits.
• Average or unit costs increase as production
  increases.
• There are no barriers to entry into or exit from
  the industry.
• The firm is free to control their price, the
  quantity they produce, their promotional efforts,
  distribution channels, and the quality of their
  product.
• What are examples?

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• Oligopoly
• Characteristics of Oligopoly
• The firm is a price maker.
• Many buyers.
• There are few sellers producing similar
  substitutes.
• The goal of the firm is to maximize profits?
• Average or unit costs increase as production
  increases?
• There are barriers to entry into or exit from the
  industry.
• The firm is free to control their price, the
  quantity they produce, their promotional efforts,
  distribution channels, and the quality of their
  product.
• What are examples?

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• Firms That Compete Using Price Competition
• Price elasticity of demand.
• Impact on the price charged for the good or
  service.
• Impact on profit margins.
• Real world examples.
• What does this mean for your organization?

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• Firms That Compete Using Non-Price Competition
• Price elasticity of demand.
• Impact on the price charged for the good or
  service.
• Impact on profit margins.
• Real world examples.
• What does this mean for your organization?

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• Economic Indicators and Definitions
• Real GDP.
• Unemployment rate.
• Inflation rate.
• Interest rate.
• Exchange rate.
• Housing starts.
• Employment.

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Economic Indicators and Definitions Real
GDP Gross Domestic Product (GDP) the final
value of the goods and services produced in the
borders of the United States. Real Gross
Domestic Product GDP adjusted for inflation.
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Economic Indicators and Definitions Real GDP
Source Federal Reserve Bank of St. Louis
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Economic Indicators and Definitions Exchange
Rate EF - foreign exchange rate (cost of one
unit of foreign currency in U.S. dollars). ED -
dollar exchange rate (cost of one U.S. dollar in
foreign currency). EF (1/ED)
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Economic Indicators and Definitions Exchange
Rate Dollars and Yen Suppose EF .0090 Then
ED 110.00 yen Prices and Theory of Purchasing
Power Parity PUS PF x EF PF PUS x ED PUS
dollar price PF foreign price Suppose a
television costs 2,000 in the U.S. and ED
110.00 yen. This implies that the same computer
should cost 220,000 yen.
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Economic Indicators and Definitions Exchange
Rate Dollars and Yen
Yen/
S
D


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• Economic Indicators and Definitions Exchange
  Rate
• Factors that affect exchange rates
• Income.
• Inflation rate.
• Productivity.
• Money supply.
• Interest rate.
• Demand for foreign made goods and services.

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Economic Indicators and Definitions Exchange
Rate
Source Federal Reserve Bank of St. Louis
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• Fiscal Policy Tools
• Changes in the level of government spending.
• Changes in the level of taxes.
• Combination of changes in government spending and
  taxes.

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Classical Economics Classical economists believe
that the economy possesses a self regulating
mechanism that always returns all markets to
equilibrium. At this point the economy will
produce a level of output that is consistent will
the full employment of all resources. They
believe that the rate of growth of real GDP and
the unemployment rate varies, but this is due to
a changing social, political, or a technological
environment. These economists argue that fiscal
policy is ineffective in the long-run.
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Keynesian Economics Keynesian economists believe
that the economy does not possess a self
regulating mechanism and can get stuck in a
period of high unemployment and lost output.
These economists argue that fiscal policy is
effective in the long-run.
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• Monetary Policy Tools
• Changes in the reserve requirement.
• Changes in the discount rate.
• Open market operations.

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• Monetary Policy Tools Discount Rate
• If the discount rate increases
• Then the money supply decreases
• Then interest rates increase
• Then spending decreases

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• Monetary Policy Tools Discount Rate
• If the discount rate decreases
• Then the money supply increases
• Then interest rates decrease
• Then spending increases

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• Monetary Policy Tools Open Market Operations
• If the Federal Reserve sells bonds to commercial
  banks
• Then the supply of Federal Funds decreases
• Then the Federal Funds rate increase
• Then short-term interest rates increase
• Then spending decreases
• Note The impact on long-term interest rates can
  be uncertain.

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Source Federal Reserve Bank of St. Louis
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• Factors That Contribute To Increasing Trade and
  Globalization
• Communications technology.
• Communications infrastructure.
• Computer software.
• Open capital markets.
• Trade agreements and alliances.
• Open natural resource markets.
• Open foreign exchange and securities markets.

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