Unit 2: Supply and Demand
Tastes and preferences, a change in income, the price of related goods, future expectation, and number of consumers
What are the shifters of demand?
Businesses that are perfect competition have sellers that have no control over the price- this means they are-
What is a price taker?
This type of business has one firm selling a unique product
What is a monopoly?
In the graph for the market of labor, this is who demands labor
What are firms?
This is a situation in which the free-market system fails to satisfy society's wants.
What is a market failure?
Number of sellers, change in technology, government actions, resource price and availability and expectations of future profit
What are the shifters of supply?
Since the perfectly competitive firm has a price set by the industry, the demand curve is-
What is horizontal? (or perfectly elastic)
This type of market structure has a few large firms that are interdependent.
What is an oligopoly?
In the supply for labor curve, as the wage increases, this happens to the quantity supplied of labor
What is quantity supplied increases?
The four types of market failures are: public goods, externalities, unfair distribution of income, and-
What are monopolies?
Goods for which the demand decreases when consumer income increases.
What are inferior goods?
The profit maximizing rule
What is MR = MC?
This type of market structure has many firms that are selling differentiated products, such as the fast food industry
What is monopolistic competition?
Changes in demand for the product, changes in productivity of the resource and changes in the price of other resources are all the shifters of-
What are the shifters of resource demand?
These are individuals who benefit from public goods without paying for them.
What are free riders?
When the elasticity for demand coefficient is zero, such as a diabetic's demand for insulin
What is perfectly inelastic?
If the ATC is below the MR = D curve, this business is making -
What is a profit?
In the graph for a monopoly, this price is where the demand curve hits the marginal cost curve
Number of qualified workers and personal values regarding leisure time are shifters of resource supply. This is the 3rd shifter-
What is government licensing and regulation?
The government determines what quantity of public goods to produce by producing where the marginal social benefit equals this
What is where MSB = MSC?
The effect on total revenue when the price for a product goes up with an elasticity coefficient that is greater than 1.
What is a decrease in total revenue?
The shut down rule is when the price falls below this curve
What is the AVC?
This is the range for a monopoly when the MR is below zero
What is the inelastic range?
This happens to the wage and quantity in the market and firm if new workers enter the industry.
What is a decrease in wage and an increase in quantity?
This type of externality is when the marginal social cost is greater than the marginal social benefit.
What is a negative externality?