Supply
What is the Law of Supply?
when price increases, supply increases
when price decreases, supply decreases
what is the law of demand?
when price increases, quantity decreases
when price decreases, quantity increases
What do monopolies take advantage of?
they take advantage of market power and charge high prices
what is scarcity?
limited quantity of resources to meet unlimited wants
what is the difference between individual supply schedule and market supply schedule?
individual is when only a firm will produce at each different price
market is when all firms will produce at each different price
what is the substitution effect?
consumer reaction to an increased price therefore consumes less of a good and more of other goods
what are technical monoplies?
these are created when the gov. issues a patent
provide an example of a traditional economy.
Tribes in Canada, villages in Africa, Asia, and South America
what are subsidies
Gov. payments that support a business or market
what is the income effect? what kind of relationship?
change in consumption resulting from change in real income; positive relationship (more income, more consumption)
why would the gov. want to help create monoplies?
some markets run better w/ only one supplier, this is an example of a natural monopoly
what is the difference between households and firms?
household: person/group of people living in same residence
firms: an organization that uses resources to produce a product
why would a supplier want to keep the supply low for a lower price?
potential for profit
how do you calculate elasticity?
elasticity= % change in quantity demand divided by % change in price
percentage change= OG # - New # divided by OG # then multiplied by 100
what is price discrimination?
when companies divide consumers into distinct groups and charge each group a differ price
what are the factors of production?
labor, land, capital, and entrepreneurship