not having enough resources to supply everyone's wants and needs
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labor
who can work and how one can allocate resources
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two kinds of products
goods and services
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opportunity cost
is the next best use of a resource
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idle resources
when resources could be used, but are not being used
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marginal analysis looks at
the cost of adding one more product
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variable cost
is a cost that changes with production example: how much materials will cost
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what causes quantity supplied to change?
price
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law of demand
states that as the price goes up the quantity supplied goes down. they are inversely related
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marginal utility
satisfaction of each additional unit of something
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fixed cost
a cost that does not change with production example: electricity
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elastic demand
smaller change in price generates a larger change in quantity demanded. example: something like a house it is nonessential
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elasticity
elasticity is when a small change in price results in a large change in the quantity demanded
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substitutes
are similar alternatives. two goods for which an increase in the price of one leads to an increase in the demand for the other
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compliments
are two goods that are bought and used together. two goods for which an increase in the price of one leads to a decrease in the demand for the other
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factors that impact demand
substitutes, consumer taste, expectations, more people and consumer income
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on an elastic demand graph, what happens to price and quantity when a normal supply curve increases?
price will decrease & quantity will increase
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quantity supplied changes due to
price
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price
monetary value at an exchange
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substitute effect
prices are relative example: if jiffy goes up, then skippy will look cheaper
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income effect
you feel like you have more money resulting in you more. example: buy 10 tacos get 7 free, makes you feel like you are spending less
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two causes of supply change
productivity and cost of production
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wage
price of labor
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what do imposed benefits do to the employer
increase the cost of employing someone
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minimum wage creates a
price floor
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largest labor union in USA
public employees union
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a price floor for wages above equilibrium means
fewer people are hired than otherwise would be
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productivity
amount of product being produced relative to the worker
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consumer
when income goes up so does demand
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unit elasticity
demand or supply for which the elasticity coefficient is equal to 1; means that the percentage change in the quantity demanded or supplied is equal to the percentage change in price
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inelastic on graph
steep slope/more vertical
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elastic on graph
more horizontal
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inelastic demand
a change in price will not significantly affect the demand for product example: more essential things; foods
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demand
is the desire, the willingness and the ability to buy a product
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diminishing marginal utility
decrease in satisfaction or usefulness from having one more unit of the same product (less willing to buy each additional item)
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causes of elasticity
how essential
can it be delayed
portion of income it uses
substitutes
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more essential
inelastic
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less essential
elastic
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law of supply
there is a direct relationship between price and quantity supplied
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what cause a change in supply?
cost of production, productivity, technology, taxes, subsides, expectations, government regulations or number of sellers
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supply
the amount of product that would be offered for sale at all possible prices that could preval in the market
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rationing
governmental service of allocating goods and resources with out prices
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prices
are nuetral and convey information to both consumer and seller
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subsides
is a broad classification of things that behave the same way, it is a government incentive to allocate resources
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surplus
situation in which the quantity supplied is greater than the quantity demanded at any given price
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shortage
Situation in which the quantity supplied is less than the quantity demanded at any given price
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price ceiling
maximum legal price that can be charged for a product
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price floor
lowest legal price that can be payed for a good or service
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deficiency payment
cash payment making up the difference between the market price and the target price
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total revenue
price x quantity
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do income and wealth measure the same things?
no
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income
is the amount of money coming in usually in a year
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wealth
is the value that people possess in the things they have
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have the types of skills valued by employers changed little over the last 100 years?
yes they have
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household income
is the income every of everyone in houses income combined
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individual income
is the income of one individual person
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inequality of pay between men and women is because of
the differences in types of work and work habits between men and women
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is discrimination against women in competitive labor markets common?
no because it is costly
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minimum wage laws increase the cost of discrimination to the employer
false
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discrimination
is discriminating against someone due to race or sex is usually costly and not worth it. more likely to occur if you are not spending the money and someone else is.
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the growing importance of education and skills in a labor market has increased economic inequality between those with education and skills and those without
true
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growing economy causes an
increase in income inequality between employed & unemployed
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cheap labor
less capital to replace labor
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expensive labor
more capital to replace labor
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efficiency
is outputs to compared to inputs
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most common business form in USA, most freedom to make decisions, & easiest to start
sole proprietorship
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business with easiest managements
sole proprietorship & partnership
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can declare bankruptcy without owners being liable
a business that pays income taxes only with the individual who owns
partnership, sole proprietorship
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business with largest revenue in USA and has the most government regulation but is also the most expensive to start
corporation
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type of business that pays no taxes
non profit
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conglomerate
a business that owns a variety of individual firms that produce diverse products and services
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spans over many national borders
multinational
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partnership
business where if one owner fails the other owners are liable
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business established by a charter
non profit and corporation
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common stock
represents the basic ownership of a corporation. the significance of this is that shareholders received a vote which elects the board of directors.
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vertical merger
companies buy other companies unlike their own but are in the production process.
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horizontal merger
in a horizontal merger, a company buys a company that is similar.
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preferred stock
preferred stock represents non-voting ownership shares of the corporation.
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consumer cooperative
is a voluntary association that buys bulk amounts of goods such as food or clothing on behalf of its members one example of this is electric companies or credit unions
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governments direct participation in economy
by producing and distributing goods and services to consumers
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governments indirect participation in economy
when it acts as an empire to help the market economy operate smoothly and efficiently.
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market
place where exchange happens
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what's the primary factor of a market?
competition
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perfect competition
when it's functioning at equilibrium
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factors of competition
Number of buyers and sellers
Independence of buyers and sellers
Similarity of product
Knowledge of buyers and sellers
Freedom to enter and exit
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more buyers =
more competition
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more similar product =
more competition
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product differentiation
the difference between products in the same industry example: brand lima beans vs. kroger brands
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competition
is efficient allocation of resources
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monopoly
market with a single seller of a particular product, example: water treatment
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oligopoly
market structure in which a few large sellers dominate an industry
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natural monopoly
when a market is best served by a monopoly bc it doesn't make sense for it to have more then one producer
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economy of scale
when a company functions better at a larger scale because the cost of production gets cheaper as the business grows
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