1. Next Exam
!
Exam 6
Thursday December 26
!
Chapters 18, 19, 20 and 21

2. Microeconomics
Lecture 18
!
Factors of Production

3. Price Discrimination
!
Charging different people
a different price for the
same product

4. Price Discrimination
!
Make more money
by capturing buyer surplus
!
Very hard to do
!
Keep buyers from buying low and
reselling higher to other customers

5. Riyadh Pizza Company
Saudi Style Supreme
40
Perfect Competition
40
38
36
Keep selling as long as marginal
revenue is more than marginal cost
34
30
32
30
28
26
Price
Marginal Revenue
30
Marginal Cost
29
Profit Per Pizza
30 -29 = 1
20
Total Profit
6x1=6
10
0
Total Revenue
6 x 30 = 180
Ali
Abdullah
Ahmed
Faisal
Mohammed
Mahmood
Sultan
Turki
Cannot charge more than 30 or buyers go to competitor
Total Cost
6 x 29 = 174
Total Profit
180 - 174 = 6

6. Riyadh Pizza Company
Saudi Style Supreme
40
Monopoly with Price Discrimination
40
38
36
Keep selling as long as marginal revenue
is more than marginal cost
34
30
32
30
28
26
Marginal Cost
29
Profit Per Pizza
Varies
20
Total Profit
Add each profit
10
0
Total Revenue
210
Ali
Abdullah
Ahmed
Faisal
Mohammed
Mahmood
Sultan
Turki
Charge different prices to different customers
Total Cost
6 x 29 = 174
Total Profit
210 - 174 = 36

7. Riyadh Pizza Company
Saudi Style Supreme
Price
Perfect
Competition
30
Monopoly
Price
Discrimination
30 - 40
Difference
up to 10
Qty
6
6
6
Total Revenue
180
210
30
Total Cost
174
174
174
6
36
30
Profit

8. Creating Value with the Five Capitals
trust
knowledge
skills
Human
personality
health
relationships
Physical
Cultural
trust
values
institutions
infrastructure
rules
!
Intellectual
ideas
technology
methods
Value Creator
entrepreneur
innovator
team
organization
natural resources
time
buildings
equipment
things than make things
Financial
money and risk
savers - borrowers
time is money
(1+r)n
insurance
limited liability corporations

9. Factors of
Production
Labor market

10. Innovation - Productivity

11. Wage
Level
Professional
Soccer
Players
$36 million
135 million SAR
School
Teachers
Quantity
of Labor

12. Derived Demand
Depends on demand for
another good the factor
produces

13. Marginal Product of
Labor
How much more output
with one more worker

14. Revenue
not
Output

15. Marginal Revenue
Product of Labor
How much more revenue
with one more worker

17. Employees
Total
Output
Marginal
Output
Product
Marginal
Revenue
$1 each
Marginal
Cost
$10
Marginal
Profit
0
0
-
-
1
19
19
$19
$10
$9
2
40
21
$21
$10
$11
3
57
17
$17
$10
$7
4
72
15
$15
$10
$5
5
80
8
$8
$10
-$2

18. Marginal Revenue
Product of Labor
versus
Cost of Wage

19. Demand for Labor
Human Capital
Technology
Price
Inputs
Firms

20. Supply for Labor
Population
Demographics
Alternatives

21. Wage
Level
Supply
$15
$10
Demand
L1
Increase in Demand
L2
Quantity
of Labor

22. Wage
Level
Supply
15
10
Demand
Q1 Q2
Increase in Supply
Quantity
of Labor

23. Economic
Discrimination
Difference due to
irrelevant characteristic

24. Wage Gap
Education
Experience
Preferences

25. Discrimination
is
Expensive

26. Compensating
Differentials
95% of job-related
deaths are men.

27. America’s 10 Most Dangerous Jobs
Per 100,000
Average
3.3
Fishing
200
Logging
62
Pilot
57
Farm & Ranch
36
Roofers
35
Ironworkers
30
Sanitation
25
Machinist
19
Truck Driver
18
Construction
18
Source: Bureau of Labor Statistics