Lecture 5- 17 Sep 2013 Flashcards
What are the variables that can shift the supply curve?
Amount of capital stock (machinery, equipmen, etc),state of technology i.e, production techniques
What is occurs to variable in short-run ?
The variable is fixed.
What are the assumptions in analyzing supply and demand>
One of the dependent variables is fixed.
What is the requirement for equilibrium to occur?
If at a going price, quantity supplied equals quantity demanded.
What is the Law of Demand?
There is an inverse relationship between two variables and there is a cause and effect for them ie If price goes down, demand will go up ALL OTHER FACTORS BEING EQUAL or held constant: ceterus paribus Other factors are income level, credit conditions, technology
Three ways to think of equilibrium
- The relevant parties ie the buyers (demanders) and sellers (suppliers), Given the price bother are getting what they want
- Opposing forces balance/offset each other. There is no impetus for anything to change. The buyers and sellers, given the price balance each other. Contending parties are satisfied.
- What are the implications for the activities in the market with equilibrium? What will happen the next month? Firm can start making predictions. What predictions can be made? Prices, labor
DON’T SAY NOTHING HAPPENS - What if market is not in equilibrium? What are the implications? Hiring or firing labor for example. Have to no know where equilibrium is. You can conclude where demand will be and supply given a price. Can find out if there is excess demand for supply or a shortage.
If equilibrium exists, what can be said about next time period.
Repetitive Economic activity same level of output, labor, materials and supplies. going prices. There is a output level….
If equilibrium does not exist, what can be said about demand and supplies
Predictions can be made about the demand and supply labor, prices, production.
What ex-post?
A perspective of looking at the market, which include the supply and demand conditions, after the fact i.e. after transactions, the time frame. Recording what actually happended. How a bookkeeper looks at the market
What is ex-ante
Given a price what are buyers and suppliers hoping
What are the consequences if suppliers do not selling what they were hoping for at the given price (ex-post)
Suppliers are going to have an excess, which means they will cut back production which will affect labor
What is always true of ex-post analysis
Demand and supply will always balance
What is the relationship of monopolies an there profits
Their excess profits are present and will persist over time, but not forever
What is true of profits in a perfect competitive market structure
There will be average or normal profits will be seen over time. Firms have no pricing power in this market structure.
Describe an imperfect competition market structure.
The product or service is similar but NOT homogeneous. Firms have some pricing power but not to same degree as a monopoly.
