ECON130 Week 10: Monopoly

In the first six weeks we described models of individual and firm choice, and given many individuals and many firms we were able to describe a competitive market.

In doing so we found that the outcomes in a competitive market allowed gains from trade – buyers who valued the products more than the sellers were trading with each other. But there were issues:

  • It assumed there were lots of potential sellers of a homogenous product whose choices have no influence on the choice of other sellers.
  • It assumed there were no systematic biases in consumer choices and ignored agency problems in production.
  • It took for granted full, or at least symmetric, information about the product and the market.
  • It didn’t incorporate the way the choice to produce or consume could impact upon a third party (externalities).
  • It assumed that the institutional structure ensured the product was excludable.

These assumptions do hold in some circumstances – and even when they don’t there could be a good reason we start with it (eg assuming a systematic bias without evidence is just assuming people are stupid – which isn’t a good starting point for trying to objectively understand their choices).

But we would like to think about other types of market structures we observe.

Since then we have built some more tools to think about choice – comparative advantage, finance, game theory, and emergent macro-phenomenon.

Armed with these tools we can return to our original market model and ask “what happens when there is only one firm – with the same motives and desires as the many firms before”. This is the case of monopoly.

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ECON130 Week 9: Finance

This week was a topic that a lot of students take the course for – finance.

Finance seems like an exciting topic, with a lot of the economic metrics we see flashed around day to day related to financial markets rather than the abstract markets we’ve been talking about so far.

However, what do we mean when we talk about finance here, and how does it fit into what we’ve talked about so far? For the murky details of how we “do” finance I will leave you to work through the lectures (and slides here and here) – this post is just about motivating why we do those calculations.

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ECON 130: Week 8(b) Game theory

One week, two big topics! Today we’re discussing Game Theory.

This topic is awesome, and really wish we could give it more space – in future economics you will.

So what are we thinking about here.

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ECON130 Week 8: Macroeconomics

Hi all,

As you know this is a course on microeconomics … so it is a bit random to teach macroeconomics. However, as this is the only economics course many students do we think it is a good idea to introduce some of the jargon you will see a lot in your work life!

Usually this is a week of lectures, but given the semester is a week shorter we teach this in a single lecture – and it will be assessed as such.

So what is macroeconomic, why do we care, and what are we measuring?

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ECON 130 Week 7: International Trade and Comparative Advantage

This weeks discussion is something a bit different. For the first six weeks we were building up models of producer and consumer choice, and finished with our market model of “perfect competition”. Given this we were able to discuss gains from trade where all producers were the same – but consumers were a bit different.

What we have done this week is actually quite similar – we have asked about gains from trade when the production possibilities were actually a bit different. Given that we have noted that, with different productive opportunities specialisation can generate gains from trade!

The example we use for this is international trade – and that is what we have done in the lectures here and here.

As a practice exercise, can you describe the current shock associated with COVID in terms of a Production Possibility Frontier diagram based on the Australia and NZ trade example in lectures. Graphically what does the shock look like? Could the shock increase New Zealand’s comparative advantage in making Wool? What does this mean?

I’ll put up an answer to this after you test on Monday – as this content is not in this test.

ECON130 Week 6: Markets and equilibrium

Hi all. As you will have noticed from the lecture videos there is a lot of content in this week – more than in any other single week. But it is because we are tying all the prior weeks together, and trying to make sure we are clear regarding what we are saying! The lecture slides can be found here and here.

Furthermore, we are focusing on a set of assumptions – so lets start with those:

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