Wanted contributions

HI,

this is my Wanted 2 project of graphing economics curve on GC, it s quite simple, with some explanatory notes of how the shapes of graph is like that

I find it is easier to deduce relationship between cost, revenues, profits, demand, supply through curves. Additionally, drawing by GC lets you see the real function of the graph, thus you can then make sense of the relationship. More is to be elaborated below. Sorry for not being able to include the graph, i dunno how. Anyway, pls visit yahoo group(if you are interested haha) in the board game and the complete version of the GC application

GC=Graphing Calculator

Supply-Demand-Total Revenue-Price elasticity of demand

Set window to the following default:

X min=0

Xmax=20

Xschl=0.02

Ymin=0

Ymax=20

Yschl=0.02

To draw a typical supply curve: draw y₁=x-10 curve

To draw a typical demand curve: draw y₂=-x+10

Total revenue, instead of being represented by the area under the curve, we can draw a third curve y₃= y₂ *x( showing this is in relation to elasticity of demand rather than supply), the curve will take the shape of an inverted parabola

Note: to recall y₂ press VARS,(arrowleft) to FUNCTION and then press 2(for y₂₎

DEMAND CURVE

This means of representation also misspells the misconception that the elasticity of demand is dependent on how steep the demand curve. It is rather the portion we are looking at (above or below midpoint that dictates the nature of elasticity). Above midpt, price elasticity of demand is more than 1 (price-elastic) while below midpt, price elasticity of demand is less than 1(price-inelastic). Revenue is the maximum at the quantity traded corresponding the midpt of the demand curve(unit elastic). Thus, the strategy taken by producer to increase or decrease price is merely to approach closer to this acme.

In particular:

-when demand is price-elastic(portion above the md point), revenue will increase if price is lowered

-when demand is price-inelastic(portion below mid-point), revenue will decrease if price is increased

Personally, I always prefer this type of graphical representation of total revenue to apply price-elasticity of demand

Note: to represent a shift in the curve, using GC is very convenient to shift graph and find new intersection between supply and demand curve(equilibrium pt)

How about the confusing cost curves:

To my delight, I discovered that GC is very helpful when it comes to understanding the cost curve relationship. In particular, understanding the mathematical basis of the economic curves is greatly aided by the convenience of graphing calculator:

Let us try:

Still at the default mode of window

X min=0

Xmax=20

Xschl=0.02

Ymin=0

Ymax=20

Yschl=0.02

The values below are not fixed, you can always adjust as you wish(these are just values I experimented with and deemed suitable)

Let us draw:

Total variable cost(TVC): y₁=(x-4)^3/8+9

Total fixed cost(TFC) y₂=7(a straight horizontal line)

Total cost(TC)=TVC+TFC= y₃= y₁ + y₂ (just key in the graphàyou ‘ll see for yourself a curve with a similar shape as TVC but higher up, press VARS,à,Enter,choose y₁, y₂)

Average variable cost(AVC)=TVC/Qàdraw y₄= y₁/x

Average fixed cost(AFC)=TFC/Qàdraw y₅= y₂/x

Average cost= TC/Qàdraw y₆= y₃/x

Marginal cost is the gradient of tangent of the TC curveàThe derivative curve of y₃

We can differentiate y₃ with respect to x and key in equation for M so for mc: y=3/8(x-4)^2

Result will be something you see in the lecture note

Where to maximize profit???(the total approach)

Reset window so that ymin=-10(so that we can see the losses made by producer)

Draw y₁ as total cost(as instructed above)

Draw curve for total revenue say y₂=2x

Draw curve for profit: y₃= y₂ (total revenue)- y₁ (total cost)

We can see it at quantity Q it is the max profit

The portion of the profit curve below the x-axis denotes loss(negative profit)

SIGNIFICANCE:

-help student visualize the relationship as well as understand the mathematical relationship between the different type of cost since student s are more familiar with maths graph

-We bring GC everywhere, so anytime we can revise economic concepts without sketching inaccurate, wobbly curves on test pad ourselves

posted by Anonymous @ 5:24 PM