Economics & Business Cycles Part II Flashcards
Elasticity has to do with
how sensitive the demand is to the price
Elasticity of demand is naturally
negative or less than one or Inelastic
Meaning as price goes up , demand goes down.
This is the nature of the demand curve
When it is less than one it is referred to as
Inelastic
When it is greater than one it is referred to as
Elastic. That means that as price goes up, demand also goes up.
When it is equal to one it is referred to as
Unit elastic. That means that the price does not affect the demand for the product.
Impact of price increase on total revenue
If Elastic then revenue decreases
If Inelastic then revenue increases
If Unit elastic then no effect on revenue
**Price decrease would have the opposite effect
Elasticity of supply is naturally
Elastic or positive or greater than one
Four market structures are…
Perfect competition
Perfect monopoly
Monopolistic competition
Oligopoly
Perfect competition is..
Large number of buyers and sellers
No one has control over the market price
Perfect monopoly is…
Single seller in the entire market
A natural monopoly is if the reason for that fact that there is only one seller is from economic and technical reasons. NOT if the government is the only supplier.
Monopolistic competition is..
Many sellers that sell different products
there are substitutes for these products
Easy entry in to the market
Oligopoly is..
A few sellers not a lot
Sell either different or the same products
Restricted entry in to the market
Sellers are large enough to influence market price
SWOT analysis is…
Evaluation of factors that make an organization successful
Marginal cost equals marginal revenue…
MC = MR
Only in markets that are not perfect competition
aka monopolistic, oligopoly, perfect monopoly
If minimum wage goes up…
Unemployment will go up
because employers will hire fewer people
