Micro Economics Flashcards
Demand rises while price falls
Law of demand
Price rises income stays the same, effect on demand ?
Fewer goods bought
To have a demand for a good
Willing and able to buy good at given price
Consumer act when price of good increases
Substitute for cheaper item
What causes demand curve to shift
Change in demographics
How elasticity effects business pricing policy
Increase in price, reduce total revenue
Elasticity demand measures
Consumers demand affected by price
How does consumer need vs. want of product affect purchase
Consumer will purchase needed good no matter the price
What does availability of substitutes have on elasticity of demand
More elastic
Which is inelastic: steak or medicine
Medicine
Ceteris Parbius
All things other than price hold constant
Owners of digital cameras have to buy memory cards in order to use cameras. Cameras and memory cards are.
Complements
elasticity of demand formula
% change in quantity/ % change in price
Paper plate factory make more paper plates when market price goes up on
Law or supply
Always rises from left to right
Supply curve
When price or product goes down producers
- Produce less
- leave market
A supply schedule shows
Supply for goods at different prices
How does technology affect production
- increases supply
- cheaper
Fixed costs
Cost don’t change no matter supply
If company makes product at 15$ for five of them and 16$ to make six of them the 1$ difference Is
Marginal cost
If supplier reports marginal revenue is at 5$ this means
Consumers pay market price of 5$
Subsidies
Government influence on supply
A minimum price for soybeans is an example of
Government subsidy
Cargo ships & haircuts, which is likely to be inelastic in short term
Cargo ships
Why does perfectly competitive market require many buyers/ sellers
So one individual can’t control price
Which market structure is easiest for newcomer
Perfect competition
Example of non price competition for business competing in monopolistic market
Advertising
2 to 4 business producing 70%-80% of output
Oligopoly
Why might government give drug company a patent
So they can pay to develope new drugs
Price discrimination
Charging different groups different prices of product
Why can monopolistic competition include some variety
They are in competition with businesses selling similar products
Why does government allow natural monopoly
Limit waste and maintain reasonable prices
How long are copyrighted works protected by law
70 years after author death
Consequences or plagiarism
- sued for fraud
Price of good when shortage occurs
Increase until quantity of demand equals quantity supplied
When market is disequilibrium and prices are flexible
Market pushes toward equilibrium
Why does government place price ceilings on essential goods
Limit impact of equilibrium pricing
In supply exceeds demand of product producer should
Lower price
Ways government controls markets
- price ceiling
- price floors
Demand for fad drops
Excess supply makes food easy to obtain
What most likely will create black market
Rationing
