Lesson 26 - unit 6 Flashcards
What is a market?
Anywhere sellers offer goods and services and buyers purchase them
Give an example of how markets are interrelated.
Increased demand in the oil market can raise prices in the corn market
What are capital goods?
Things like machinery that produce other items
What are producer goods?
tools and raw materials used to make other products
What are consumer goods?
things purchased by the end user to meet his wants or needs
What are durable goods?
goods that are intended to last a long time. (like cars or fridges)
What are three functions that markets serve in the economy?
- They define the nature and extent of economic freedom
- They accomplish the allocation of resources and the distribution of goods and serves that most fairly reflect what buyers and sellers value
- They determine the amount of goods and services that are produced and the prices that are charged for those goods and services
What is perfect competition?
A situation in which there are many sellers and buyers and where each seller and buyer has a negligible effect on the price that is charged
What is monopoly?
A situation where there is one seller of a good or service without a close substitute
What is monopolistic competition?
When several producers offer different unique goods and services that still compete with each other.
What is natural monopoly?
A situation where economies of scale are such that production and distribution of a particular good or service is most efficiently accomplished by a single person
What is oligopoly?
Where there are only a few large providers and one provider can have an impact on the market
What is monopsony?
A market where there is only one buyer or only one significant buyer
What is oligopsony?
A market where there are only a few major buyers, any of which can exert a significant influence on the market.
What is collusion?
When sellers get together behind the scenes to influence the market
What is a cartel?
A group of providers that engage in collusion to increase profits
What is a boycott?
An organized action by buyers to bring attention to what they see as a wrong policy in an attempt to change it.
How does Walter Williams say that income is earned in a free society?
Through pleasing and serving one’s fellow man
What 2 factors determine whether an entrepreneur makes a profit?
- Whether he is producing a good that consumers value and are willing to pay for
- Whether he is using the scarce resources of a society in the most efficient manner to produce the good
What does “Williams law” say?
Whenever the profit incentive is missing, the probability that people’s wants can be is safely ignored is the greatest
