Market Efficiency-Market Failure Recall that: Adam Smith’s “invisible hand” of the marketplace leads self-interested buyers and sellers in a market to maximize the total benefit that society can derive from a market

Revisiting the Market Equilibrium Do the equilibrium price and quantity maximize the total welfare of buyers and sellers? Market equilibrium reflects the way markets allocate scarce resources. Whether the market allocation is desirable is determined by welfare economics

Importance of Supply-Demand Analysis A little knowledge goes a long way: Price Control, Taxation and other policies. Market welfare: Normative Analysis International Trade Externality (Market Failure) Market Power (Market Failure) Other markets: Financial Market, Labor Market. Macroeconomics

Elasticity… … is a measure of how much buyers and sellers respond to changes in market conditions … allows us to analyze supply and demand with greater precision

The Market Forces of Supply and Demand Supply and Demand are the two wordsthat economists use most often. Supply and Demand are the forces thatmake market economies work. Modern microeconomics is about supply,demand and equilibrium

Interdependence and Trade Consider your typical day: – You wake up to a alarm clock made in Wenzhou – You put on some clothes made of cotton grown in Xinjiang and sewn in factories in Fujian Province

Outline The Economist as Scientist The Economist as Policy Adviser Why Economists disagree

A firm, using two inputs K and L to produce one product, whose production function is 2 / 5 3/ 5 Q = 25L K

Outline The economics of asymmetric information Political economics Behavioral economics

对外经济贸易大学：《金融经济学导论》课程教学资源（课件讲稿）第一章 金融经济学的研究主题