microeconomics study guide

Market: A place that allows buyers and sellers to come together. local, national, international.

  • local
  • national
  • international

Law of Demand: the willingness of consumers to buy a product at a specific cost. prices fall and demand rises, prices rise and demand falls.

  • as prices @@fall@@ the quantity demanded @@rises@@, and as prices @@rise@@ the quantity demanded @@falls@@!

Law of Supply: the availability of a product that producers are willing to make at a given price. prices rise and quatity supplied rise, prices fall and quantity supplied falls.

  • As prices @@rise@@ the quantity supplied @@rise@@, and as prices @@fall@@ the quantity supplied @@falls@@!

Equilibrium Price/Quantity: the price/quantity where the intentions of buyers and sellers match

Surplus: too much supply

Shortage: too much demand

Price Ceilings: sets a maximum price

Price Floor: sets a minimum price

Market Demand: the demand for a given product and who wants to purchase it

Price Elasticity: the response of consumers to a price change

Utility:  the want and/or satisfied power of a product or service (satisfaction or pleasure one gets from consuming)

Total Utility:

Fixed Cost: costs that do not vary with changes in output

Variable Cost: cost that changes with the level of output

Total Cost: total fixed costs + total variable costs = total cost

Pure Competition: large number or firms producing a product (easy for new firms to enter)

Pure monopoly:  market where one firm is the sole seller of a products and or service (easy to control the price)

 \n \n \n \n \n

Concepts:

Changes in Demand: tastes, number of buyers, income, prices of related goods, consumer expectations. Tastes, number of buyers, income, prices of related goods, consumer expectations.

  1. Tastes

   

  1. Example:  Apple vs Samsung
    1. Number of buyers

   

  1. Example:  assisted living homes - more popular
    1. Income

   

  1. Example:   super bowl tickets
    1. Prices of related goods

   

  1. Example: Nike vs Under Armor, similar products but one’s on sale
    1. Consumer expectations

   

  1. Example:  coffee, expect to have it in the morning

Changes in Supply: resource prices, technology, taxes and subsides, price of other goods, producer expectations, number of sellers. resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, number of sellers.

  1. Resource prices

   

  1. Example:  microchips made of metals (price of copper)
    1. technology

   

  1. Example:  cell phone service areas
    1. Taxes and subsidies

   

  1. Example:   alcohol taxes
    1. Prices of other goods

   

  1. Example: playing hockey, expensive
    1. Producer expectations

   

  1. Example: lumber
    1. Number of sellers

Elastic vs. Inelastic Demand

Diamonds vs. Water: Diamonds have HIGHER marginal utility, water has HIGHER total utility, MARGINAL UTILITY has higher impact on price

Why are diamonds more valuable? diamonds have a higher marginal utility

Marginal costs vs. Total costs (How to calculate)

Mind over Money

Rational vs. Behavioral Economics

rational economics: assume people always make the decision that makes them the most money.

behavioral economics: psychological/emotional effect on people as they make money decisions.

Individual vs. Market Demand

Individual demand: the demand for a good/service for an individual

market demand: the demand for a given product and who wants to purchase it.

Readings:

Supply and Demand (human organs) demand for human organs is high and supply for human organs is low.

Pros/cons of a legal market: pros: less illegal activity, compensation for those who donate. cons: make more expensive (only rich would have access)

Market Structures:

Four types of market structures: pure competition (large number of firms producing a product), pure monopoly (market where one firm is the sole seller of a product and or service), monopolistic competition (in between, competition), oligopoly (cereal, general mills vs kellogs)

Entrepreneurs

Boy or girl/why baby-boomers: male entrepreneurs have outnumber female entrepreneurs 2 to 1. entrepreneurship is the new mid life crisis, longer life spans.

 \n