Microeconomics

4 types of goods

Microeconomics: focuses on the action of individual agents within the economy

Private goods: no one can be prevented from consuming them (ex. houses and cars)

Quasi-public goods: exclusive and nonrival (ex. cable channels, Netflix)

Open-Access Good: rival (only one person fish a fish) and non-exclusive, open access resources (ex. land, lakes for fishing, food pantry)

Public Good: non-rival and non-exclusive (ex. public schools, parks, public libraries)

Rival: one person’s consumption of the good makes it unavailable for others to consume

non-rival: one person’s consumption of the good does not make it unavailable for others to consume

exclusive: the consumer can be made to pay for the good

nonexclusive: the consumer is not, or cannot, be made pay

negative- externality: something that impacts a person or people who are not involved in a situation (ex. air pollution

positive- externality: (ex. charities and education)

externality: impact on a 3rd party ( not seller, not buyer)

Elasticity of demand

Elasticity of demand (aka price elasticity of demand): % change in quantity demanded/ % change in price

Responsive: the ability of consumers to control their energy expenditures by changing their electricity use in response to wholesale electricity prices.

Elastic: There is a large change in quantity demanded if there is a price change (greater than one)

unit elastic: An increase in price corresponds to a decrease in demand of the same percentage (equal to 1)

inelastic: There is very little or no change in demand if there is a price change (less than one)

Total revenue: the amount of money a company brings in from selling its goods and services

Determinants of demand elasticity:

Elasticity of Supply

Elasticity of supply: the percentage change in quantity supplied caused by a given percentage change in own price of the commodity

Price Floors and Price Ceilings

Productive efficiency: using of limited resources to their fullest

Allocative efficiency: when production is in line with consumer preferences

Disequilibrium: a situation where internal and/or external forces prevent market equilibrium from being reached or cause the market to fall out of balance.

Price floor: government control or limit on how low a price can be charged for a product or good. Must be higher than the equilibrium price in order to be effective

Price ceiling: the highest point at which goods and services can be sold. It is the maximum amount that can be charged for something. It often is set by government authorities

Consumer surplus: when the price that consumers pay for a product or service is less than the price they're willing to pay. It's a measure of the additional benefit that consumers receive because they're paying less for something than what they were willing to pay.

Minimum Wage

State minimum wage: $15.00/hr (State’s can create a higher minimum wage but it must be above federal wage)

federal minimum wage: $7.25

Economists’ views on minimum wage: minimum wage hikes have negative economic consequences including employment loss and business closure

Political parties’ views on minimum wage:

Perfect Competition and Monopoly

Market Structure: The way that firms and companies are categorized

Perfect Competition: a market structure with many fully informed buyers and sellers of an identical product and ease of entry (easy for firms to leave or enter the industry like fast food)

Commodity: A common good sold by multiple businesses

Market Price: The price of a commodity when sold in a given market

Monopoly: Where there is a single seller in the market that has complete control

Barriers to entry: The factors that keep one company in monopoly power and disallows others (Ex. Exclusive access to resources, predatory pricing, government contracts, licenses, permits, and patents)

Economies of scale: When an increased level of production leads to savings in cost of production  (Ex. A retail store buys products in bulk and lowers their cost per unit)

Wal-Mart: A one-stop store shopping experience combining grocery store fresh produce bakery, deli, dairy products and they also sell electronics, apparel goods toys and home furnishings