Scarcity & Demand
The fundamental economic problem that occurs because human wants are unlimited, but resources are limited.
What is scarcity?
The Law of Supply states that when prices go up, producers respond by doing this with their quantity supplied.
What is increasing it (or going up)?
Goods that are absolute necessities, like life-saving medicine or gasoline, have this type of price demand sensitivity.
What is inelastic demand?
Farmers selling identical products like corn operate in this market structure, where no individual seller has control over price.
What is perfect competition?
When a price increase reduces a consumer's purchasing power and makes them feel poorer, this specific demand effect is at work.
What is the Income Effect?
The value of the next best alternative that you give up when you make a choice.
What is opportunity cost?
A movement along an existing supply or demand curve is caused strictly by a change in this single variable.
What is price?
An elastic demand curve has a gentle, flatter slope that visually resembles this capital letter.
What is the letter "E"?
Fast-food burger chains with heavy advertising and similar, branded products belong to this market structure.
What is monopolistic competition?
Buying a dell laptop instead of Apple because Apple raised its prices to $250 is an example of this demand concept.
What is the Substitution Effect?
This economic rule explains why the fourth slice of pizza is never as satisfying as the first slice.
What is the Law of Diminishing Marginal Utility?
Rent control is an example of this legal maximum price set by the government, which often results in persistent shortages.
What is a price ceiling?
This business structure features a single owner who retains all profits but assumes 100% of the financial risk.
What is a sole proprietorship?
Cell phone carriers operate in this type of market, which is dominated by a tiny number of very large firms.
What is an oligopoly?
In the supply shifter acronym ROTTEN, the letter 'R' stands for this production cost.
What are Resource Costs?
This principle states that as price goes up, quantity demanded goes down, creating an inverse relationship.
What is the Law of Demand?
The "sweet spot" on an economic graph where Quantity Demanded equals Quantity Supplied.
What is Market Equilibrium?
Owned by stockholders, this business type shields owners from personal financial liability but faces double taxation.
What is a corporation?
A local water utility is a classic example of this market structure, where a single seller maintains total control over prices.
What is a monopoly?
Streetlights and national defense are public goods that suffer from this market failure, where people benefit without paying.
What is the Free-Rider Problem?
In the acronym TIMER, these two letters stand for factors involving buyer preferences and the number of consumers in an area.
What are Tastes & Preferences (T) and Market Size (M)?
Setting a minimum wage above the market rate creates a surplus of labor (unemployment) because it acts as this type of legal price boundary.
What is a price floor?
Buying the legal rights to operate a location of a proven brand name like McDonald's is known as purchasing this.
What is a franchise?
The two main classifications of monopolies listed in the microeconomics review.
What are Natural Monopolies and Government Monopolies?
A factory polluting a local river creates a third-party cost known by this economic term.
What is a negative externality?