Econ Unit 4 Review: Supply, Prices and Market Structures

Supply

the amount of good or service that is available 

Law of Supply

producers offer more of a good or service as its price increase and less as its price falls

Quantity supplied

 the amount of a good or service that a producer is willing and able to supply at a specific price

Supply Schedule

a chart that lists how much of a good or service a supplier will offer at various prices 

Variable

factor that can change

Market Supply Schedule

a chart that lists how much of a good or service all suppliers will offer at various prices

Supply Curve

a graph of the quantity supplied of a good or service at various prices

Market Supply Curve

a graph of the total quantity supplied of a good or service by all suppliers at various prices

Elasticity of Supply

a measure of the way quantity supplied reacts to a change in price 

Equilibrium

the point of balance at which the quantity demanded equals the quantity supplied 

Disequilibrium

 occurs when quantity supplied is not equal to quantity demanded in a market 

Excess demand

aka shortage, exists when the quantity demanded in a market is more than the quantity supplied

Excess supply

aka surplus, exists when quantity supplied exceeds quantity demanded and the actual price of a good is higher than the equilibrium price

Price ceiling

a maximum price that can be legally charged for a good or service, imposed by the government

Price floor

a minimum price, set by the government, that must be paid for a good or service 

Rent control

price ceiling placed on apartment rents to prevent inflation during a housing crisis

Minimum wage

a well-known price floor which sets a minimum price employers can pay for one hour of labor

Surplus

when quantity supplied is more than quantity demanded

Shortage

when the quantity demanded is more than quantity supplied

Search costs

the financial and opportunity cost that consumers pay when searching for a good or service

Supply shock

a sudden shortage of a good

Rationing

a system of allocating scarce goods and services using criteria other than price

Black market

a market in which goods are sold illegally, without regard for government controls on price or quantity

Spillover costs

the negative effects of an economic activity that impact third parties who are not directly involved in the transaction

Marginal product of labor

the change in output that results from hiring one additional unit of labor

Increasing marginal returns

the level of production in which the marginal product of labor increases as the number of workers increases

Diminishing marginal returns

the level of production in which the marginal product of labor decreases as the number of workers increases

Negative marginal returns

when the addition or a unit of labor actually reduces total output

Fixed cost

a cost that does not change no matter how much of a good or service is produced

Variable cost

a cost that rises or falls depending on the quantity provided

Total cost

the sum of fixed costs and variable costs

Marginal cost

the extra cost of adding one unit

Marginal revenue

the additional income from selling one more unit of a good or service, sometimes equal to the price

Output

a quantity of goods or services produced in a specific time period

Operating cost

the cost of operating a facility, such as a factory or a store

Perfect competition

a market structure in which a large number of firms all produce the same product and no single seller controls supply or prices

Commodity

a product, such as petroleum or milk, that is considered the same no matter who produces or sells it

Barrier to entry

any factor that makes it difficult for a new firm to enter a market

Imperfect competition

a market structure that fails to meet the conditions of pure competition

Start-up costs

the expenses a new business must pay before it can begin to produce and sell goods

Monopoly

a market in which a single seller dominates

Economies of scale

characteristics that cause a producer's average cost per unit to drop as productions rises

Natural monopoly

a market that runs most efficiently when one large firm provides all of the output

Government monopoly

a monopoly created by the government

Patent

a government license that gives the inventor of a new product the exclusive right to produce and sell it

Franchise

a contract that give a single firm the right to sell its good within an exclusive market

License

a government-issued right to operate a business

Price discrimination

the division of consumers into groups based on how much they will pay for a good

Market power

the ability of a company to control prices and total market output

Monopolistic competition

a market structure in which many companies sell products that are similar but not identical

Differentiation

making a product different from other, similar products

Non-price competition

a way to attract customers through style, service, or location rather than a lower price

Oligopoly

a market structure in which a few large firms dominate a market

Price war

a series of competitive price cuts that lowers the market price below the cost of production

Collusion

an illegal agreement among firms to divide the market, set prices, or limit production

Price fixing

an agreement among firms to charge one price for the same good

Cartel

a formal organization of producers that agree to coordinates prices and production

Predatory pricing

selling a product below cost for a short period of time to drive competitors out of the market

Antitrust laws

laws that encourage competition in the marketplace

Trust

an illegal grouping of companies that discourages competition, similar to a cartel

Merger

when two or more companies join to form a single firm

Deregulation

the removal of government controls over a market

Subsidy

a government payment that supports a business or market

Excise tax

a tax on the production or sale of a good

Regulation

government intervention in a market that affects the production of a good

Influences on supply

price of the product or service, price of related good or service, price of production inputs, productivity of labor, technological improvements, producers' expectations, government policies and other factors

Global economy

all the economic activity going on in the world

Future expectation of prices

consumers' and producers' anticipations about how prices will change in the future

Number of suppliers

the quantity of producers offering a specific good or service in a particular market