Microeconomics

  1. Supply and Demand Shifts o Study how factors affecting supply (input costs, technology) and demand (consumer income, preferences, prices of substitutes) shift the curves, and how this changes equilibrium price and quantity.

  2. Price Ceilings and Floors o Understand that price ceilings (set below equilibrium) cause shortages and price floors (set above equilibrium) cause surpluses due to shifts in supply and demand.

  3. Shifts vs. Movements Along the Demand Curve o Know the difference: movements occur when the price changes, and shifts occur when factors like income, preferences, or market size change.

  4. Market Disequilibrium and Price Adjustments o Learn how shortages and surpluses lead to price adjustments that bring the market back to equilibrium.

  5. Simultaneous Shifts in Demand and Supply o When both demand and supply shift, the equilibrium quantity will always change, but the direction of the price change depends on which curve shifts more.

  6. Factors That Shift the Supply Curve o Factors include input costs, technology improvements, number of firms, and expectations of future prices, which can shift supply left (decrease) or right (increase).

  7. Income and Demand for Goods o For normal goods, demand decreases when income decreases, while for inferior goods, demand increases when income decreases.

  8. Short-Run Decisions in Perfect Competition o In the short run, firms in perfect competition decide how much to produce based on marginal cost and marginal revenue; they don’t adjust prices or engage in advertising.

  9. Economic Profit in Perfect Competition o In perfect competition, firms make zero economic profit in the long run, as entry and exit of firms drive the price to the point where total revenue equals total cost.

  10. Price Setting in Monopolistic Competition and Monopoly • In monopolistic competition and monopoly, firms set prices above marginal cost in the long run, with monopolies maintaining positive economic profits due to barriers to entry.

  11. Economies of Scale • Study how firms experience decreasing costs per unit as output increases, represented by the downward-sloping portion of the LRATC curve. Eventually, diseconomies of scale may cause costs to rise.

  12. Profit Maximization in Monopoly • A monopolist maximizes profit by producing where marginal cost (MC) equals marginal revenue (MR), unlike perfect competition where price equals marginal cost.

  13. Market Structures and Product Differentiation • Monopolistic competition involves significant product differentiation, allowing firms to have some market power, while perfect competition involves identical products.

  14. Monopoly Characteristics • A monopoly operates in a market with high barriers to entry and has significant market power to set prices above marginal cost, unlike perfect competition where firms are price takers.

  15. Marginal Revenue and Demand Curve • For firms with a downward-sloping demand curve, marginal revenue is always less than price because the firm must lower the price for all units to sell one more.

for each topic please create 2 flashcards, each flashcard should be a question and the answer to that question. Then also create 15 summary flashcards that explain each topic in short. Thank you