Changes

Consider this question:  why doesn't the government simply order people to provide more of the medical services, so there is no shortage?  If government is powerful enough to limit and control the price, which causes a shortage, then why doesn't the government increase the supply by ordering people to provide more of the services at the lower price?

Consider this question:  why doesn't the government simply order people to provide more of the medical services, so there is no shortage?  If government is powerful enough to limit and control the price, which causes a shortage, then why doesn't the government increase the supply by ordering people to provide more of the services at the lower price?

Think about that for a while.  The answer is in this footnote.<ref>The Thirteenth Amendment to the U.S. Constitution, which was passed to ban slavery, generally prohibits compeling people to work.</ref>

Think about that for a while.  The answer is in this footnote.<ref>The Thirteenth Amendment to the U.S. Constitution, which was passed to ban slavery, generally prohibits compelling people to work.</ref>

In this course we have already learned about the supply and demand curves, and examined the economic concept of “elasticity”.  Recall that elasticity measures the sensitivity of the quantity demanded to a change in price, as we discussed in the last lecture.   

In this course we have already learned about the supply and demand curves, and examined the economic concept of “elasticity”.  Recall that elasticity measures the sensitivity of the quantity demanded to a change in price, as we discussed in the last lecture.   

The graph below is for a typical set of three indifference curves (I₁, I₂ and I₃) for someone for two goods X and Y.  Note that this graph does not compare Price and Quantity, but compares the Quantity of good X (on the x-axis) with the Quantity of good Y (on the y-axis).  As one goes down a specific curve, the person is "indifferent" with giving up Quantity of good Y in exchange for more of good X.  The person becomes more satisfied or happier when he shifts to an entirely new curve, as in moving from I₁ to I₂.   

The graph below is for a typical set of three indifference curves (I₁, I₂ and I₃) for someone for two goods X and Y.  Note that this graph does not compare Price and Quantity, but compares the Quantity of good X (on the x-axis) with the Quantity of good Y (on the y-axis).  As one goes down a specific curve, the person is "indifferent" with giving up Quantity of good Y in exchange for more of good X.  The person becomes more satisfied or happier when he shifts to an entirely new curve, as in moving from I₁ to I₂.   

[[File:IndifferenceCurve3.gif|550px]]

[[File:IndifferenceCurve3.gif|500px]]

The next graph below is for two goods X and Y that '''''are perfect substitutes for each other''''' (like our example above of a chocolate bar and a peanut butter candy bar).  In the case of perfect substitutes, the person is happy to substitute one good for the other on a one-for-one basis, and hence the slope of the curves is a perfect negative one.

The next graph below is for two goods X and Y that '''''are perfect substitutes for each other''''' (like our example above of a chocolate bar and a peanut butter candy bar).  In the case of perfect substitutes, the person is happy to substitute one good for the other on a one-for-one basis, and hence the slope of the curves is a perfect negative one.

[[File:IndifferenceCurve1.gif|550px]]

[[File:IndifferenceCurve1.gif|550px]]