Unit 3: Market & Labor Economics (Entire Unit)

market structure

Organization of a market based mainly on the degree of competition.

perfect competition

a market structure in which many producers supply an identical product. This is the most efficient structure, with prices set by supply and demand.

monopoly

a market structure in which a single producer supplies a unique product that has no close substitutes. If this is unregulated, the producer sets prices.

oligopoly

a market structure in which a few firms dominate the market and produce similar or identical goods. This structure is more competitive than a monopoly.

monopolistic competition

a market structure in which many producers supply similar but varied products. This structure is closest to perfect competition.

market failure

a situation in which the market fails to allocate resources efficiently.

externality

a cost or benefit that arises from production or consumption of a good or service that falls on someone other than the producer or consumer.

public goods

goods and services that are used collectively and that no one can be excluded from using. These are not provided by markets. Examples include national defense and clean air.

market equilibrium

the point at which the quantity of a product demanded by consumers in a market equals the quantity supplied by producers.

equilibrium price

the price at which the quantity of product demanded by consumers equals the quantity supplied by producers.

equilibrium quantity

the quantity of a good or service demanded by consumers equals the amount supplied by producers

price controls

government-imposed limits on the prices that producers may charge in the market.

price floor

a minimum price set by the government to prevent prices from going to too low.

price ceiling

a maximum price set by the government to prevent prices from going too high.

rationing

the controlled distribution of a limited supply of a good or service.

black market

an illegal market in which goods are traded at prices or quantities than those by law.

demand

the quantity of a good or service that consumers are willing and able to buy at various prices.

law of demand

an economic law stating that as the price of a good or service increases, the quantity demanded decreases, and vice versa.

substitute good

a product that satisfies the same basic want as another product.

complementary good

a product that is used or consumed jointly with another product.

supply

the quantity of a good or service that producers are willing and able to offer for sale at various prices.

law of supply

an economic law stating that as the price of a good or service increases, the quantity supplied in creases, and vice versa.

revenue

the amount of money a firm receives in the course of doing business. It is calculated by multiplying the quantity sold by the price.

elasticity

a measure of the degree to which the quantity demanded or supplied of a good or service changes in response to a change in price.

regulation

rules, established by the government, aimed at influencing the behavior of firms and individuals. Examples include setting prices, establishing product and workplace standards, and limiting entry into an industry.

eminent domain

the power of a government to take an individual's property for public use if the owner is fairly compensated.

regulatory agency

a unit of government created to set and enforce standards for a particular industry or area of economic activity.

merger

the combining of two or more separately owned firms into a single firm.

deregulation

the process of removing government restrictions on firms in order to promote competition or encourage economic activity.

common resource

a resource that everyone has access to and that can easily be overused or destroyed. examples include atmosphere and the oceans.

government failure

inefficient allocation of resources caused by government intervention in the economy.

poverty rate

the percentage of the population that has a family income below a government-defined threshold, or poverty line.