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52 Cards in this Set
- Front
- Back
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When commodities are sold illegally at prices above official controlled prices
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Black Market
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Puts a lower limit or minimum values on profits
-designed to hold prices up (above equilibrium) |
Price Floor
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Causes a dead weight loss. (below equilibrium)
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Price Ceiling
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To left of supply/demand graph. Happens with a Price Ceiling
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Dead Weight Loss
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Demand curve is perfectly up and down
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Perfectly Inelastic Demand
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Demand Curve is perfectly horizontal
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Perfectly Elastic Demand
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Supply Curve is up and down
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Perfectly Inelastic Supply
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Supply Curve is Horizontal
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Perfectly Elastic Supply
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Market that has inelastic demand
-Supply Curve shifts frequently due to weather -Major impact felt on prices -prices fluctuate widely |
Agriculture Markets
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Satisfaction or pleasure
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utility
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The last bit of extra utility a consumer gets from consuming the last extra unit of the item.
-Determines the value of price of an item |
Marginal Utility (MU)
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The more you consume of a certain good, the less you value additional units of it
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Law of Dimishing Marginal Utility (diminishing marginal returns)
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Shows all attainable combinations of two goods given the price of the goods and the consumer income
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Budget Line
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When the price of one good changes in realtion to another price
-causees change or rotation in budget line |
Relative Price
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Resources bought on market
-money changes hand |
Explicit Cost
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No money Changes hand
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Implicit Cost
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Total Revenue- Total Cost
TR-TC |
Profit (P)
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-Unlimited liability
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Proprietorship
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-Joint unlimited liability
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Partnership
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-Limited Liability
-Can be sued as a legal entity |
Corporation
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Measure of market power
-fraction of total market sales controlled by industrys largest firms -4 firm ratio |
Concentration Ratio
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-also measures market power
- square of the percentage market share of each firm, summed over top 50 firms |
Herfindahl-Hirshman Index
(HHI) |
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Ones that can be varied quickly and easily to increase or decrease output within a production unit of a given size
-Ex- Labor |
Variable Resources
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-Ones that cannot be varied quickly or easily
-quantity determines size ex- capital |
Fixed Resources
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-Long enough to alter the variable, but not the fixed resources for production
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Short Run
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Long enought to alter both the variable and fixed resources for production
-no fixed resources |
Long Run
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All firms in one line of business
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Industry
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an asset that has no resale value, no used market
-so it has no opportunity cost |
Sunk Cost
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CHARACTERISTICS
-many firms - no restrictions on entry or exit -established firms have no advantage over new firms -sellers and buyers are well informed about prices -are PRICE TAKERS -firms tend to be small -DEMAND CURVE HORIZONTAL - D=P=MR |
Perfect Competition
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-Stop in Short Run if:
AVC > Price -Expand production to point where: MC = MR |
Rules for profit maximazation
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-only one seller
-MR lies below D line -never produces in inelastic range |
Monopoly
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-Elasticity D horizontal
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Perfect Competition
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area above price line and under demand curve
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Consumer surplus
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Area below price line and under demand curve
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Producer Surplus
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Changing different price to different customers.
-Must have monopoly power -D=MR=P |
Perfect Price Discrimination
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an industry where economies of scale are so important that there is only room for one firm operating efficiently
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Natural Monopoly
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CHARACTERISTICS
-Lost of firms competing -free entry and exit -product diferentiation -steepness of demand depends on closeness of substitutes |
Monopolistic Competition
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CHARACTERISTICS
-few large firms account for majority of profit -close substitues -*most big brand names are it -have barriers to entry -are PRICE SETTERS not takers*** -Demand curve is KINKED |
Oligopoly
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outlawed
-a) all "combinations and conspiracies which are a restraignt on trade" - b) any attempt to monopolize trade |
Sherman Anti-Trust Act 1890
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-a) put limitations on price descrimination, interlocking directorates, and buy up stock of competitors when these practices are a monopoly threat
-b)excluded unions from antitrust prosecution |
Clayton Act of 1914
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Established the Federal Trade Commission to oversee antitrust investigations and make reccomendations to the justice department
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Federal Trade Commission Act of 1914
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temporarily setting prices low to drive out a competitor
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Predatory Pricing
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Things that do NOT go through the market
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Externalities
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lowest wage someone is willing to work at
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Reservation Wage
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When people work more as their wages go up.
-substitue leisure for income |
Substitution Effect
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At high wages, when people are richer and decide to buy more leisure
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Income Effect
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Insured rights of workers to bargain, organize and strike
-Pro Labor |
Wagner Act of 1935
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-Anti Labor
-outlawed "closed shop" but not "union shop" - |
Taft-Harley Act of 1947
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A single buyer of labor in a market
ex- a company town |
Monopsonist
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human made resource that is used to produce other commodities
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Capital
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If a factor of production gets paid more than is necessary to keep it from moving to another use
ex- tiger woods (sports) |
Economic Rent
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-45degree line represents equality
- Furthor away the curve is, less equal |
Lorenz Curve
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