Unit 3 Microeconomics

micro

the part of economics concerned with single factors and th individual.

private goods

goods that are both excludable and rival in consumption (phone, clothing, food)

rival

the amount consumed by one person is unavailable (private good- excludable and common resources- non excludable)

non-rival

the amount consumed by one person does not limit consumption by another person (quasi-public goods- excludable and public goods- non-excludable)

exclusive

the customer can be made to pay for a good

non-exclusive

customers is cannot be made to pay

public goods

once produced are available to all but non payers are easily excluded (air, education)

Quasi-public goods

goods that are once produced are available to all but nonpayers are easily excluded (public transportation, tunnels with tolls, bridges, water)

Open Access goods

goods that are rival (the amount consumed by one person is unavailable) in consumption but exclusion is costly (lakes)

free riders/free loaders

people who benefit from the group but give little in return

negative externalities

by-products of production or consumption that impose costs on third parties

positive externalities

benefits created by a public good that are shared by the primary consumer of the good and by society more generally

elasticity of demand

a measure of how consumers react to a change in price
percent change in quantity demanded/percent change in price

demand elasticity

> 1.0

elastic

responsiveness to a price if 1.0 or more

unit elastic

responsiveness to a price if 1.0 exactly

Inelastic

responsiveness to a price if less than 1.0

total revenue

the total amount of money a firm receives by selling goods or services

determinants of demand elasticity

are there substitutes, can the purchase be delayed, does the purchase represent a large income

elasticity of supply

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

Productive efficiency

occurs when a firm produces at the lowest possible cost per unit

allocative efficiency

occurs when firms produce the poutput that is most valued by customers

price floor

A minimum legal price below which a product cannot be sold

price ceiling

a maximum legal sellling price above which a product cannot be sold

Disequilibrium

a mismatch between quantity demanded and quantity supplied

consumer surplus

the most that consumers are willing and able to pay for a given quantity of a good and what they actually pay

State vs. federal minimum wage

Either the states have a minimum wage for the state or hey go through the federal minimum wages ($ 7.25/hour).

market structure

including the number of buyers and sellers, product uniformly across sellers, ease of entering the market and forms of competition

perfect competition

a market structure with many fully informed buyers and sellers of an identical product and ease of entry

commodity

a product that is identical across seers, such as a bushel of wheat

market price

The point where supply and demand are equal

Monopoly

the sole supplier of a product with no close substututies

barriers to entry

restrictions on the entry of new firms into an industry
- Legal Restrictions
-Economies of Scale
-Control of Essential Resources

economies of scale

factors that cause a producer's average cost per unit to fall as output rises

Wal-Mart

Labor Costs
Monopoly Power
-force suppliers to sel to them at certian prices
-"feature an item" at a low price-- all other items at a higher price

Economists' views on minimum wages

rasie wages? --> increase
lower inflation? --> not increase

Democrates view on minimum wages

They would want to increase

Republican view on the minimum wages

They would want to oppose an increase