Unit 12: Supply & Market Structures Flashcards
Negative Externalities (AKA: Resulting Harm)
the uncompensated harm, cost, or incovenience suffered by a third party because of others actions
Supply
the quantity of a product or service a producer would be willing to offer for sale at all possible prices in a market at a given point in time
Supply Schedule
a table that shows the various quantities of a particular product that a producer would supply at all possible prices in the market at a given point in time
Individual Supply Curve
a graphic representation that shows the quantities supplied of a particular good or service at each and every possible price in the market at a given time
Law of Supply
the principle that more will be offered for sale at higher prices than at lower prices
Market Supply Curve
the supply curve that shows the quantities offered at various prices by all producers that offer the same product for sale in a given market
Change in Quantity Supplied
is the change in the amount offered for sale in response to a change in price
Change in Supply
a situation where suppliers offer different amounts of a product for sale at all possible prices in the market
Supply Elasticity
a measure of the measure of the degree to which the quantity supplied responds to a change in price
three cases: elastic, inelastic, and unit elastic
Elastic Supply
when a change in price causes a proportionally LARGER change in quantity supplied
Inelastic Supply
when a change in price causes a proportionally SMALLER change in quantity supplied
Unit Elastic Supply
when a change in price causes a proportionate change in quantity demanded
Profit
the money a business has left over after it covers its cost
Marginal Cost
the extra cost incurred when producing one more unit of output
Marginal Revenue
the extra revenue a business receives from the production and sale of one additional unit of output
Break-Even Point
the level of production that generates just enough revenue to cover its total opening costs
Prices
act as a system of signals that help us make economic decisions
they function as incentives that affect the behavior of individuals, businesses, markets, and even industries
Equilibrium Price (AKA: Market Clearing Price)
the price at which the quantity supplied equals the quantity demanded
Surplus
a situation in which the quantity supplied is greater than the quantity demanded at a given price
quantity demanded at $$ < quantity supplied
Shortage
a situation in which the quantity demanded is greater than the quantity supplied at a given price
quantity demanded > quantity supplied at $$
Price Ceiling
the maximum legal price that can be charged for a product
Price Floor
the minimum legal price that a seller can change
Market Structure
a classification that describes the nature and degree of competition among firms in the same industry
Four Characteristics that Define the Market Structure of an Industry:
- number of producers
- similarity of producers
- ease of entry
- control over prices
Pure Competition
a theoretical market structure with 3 necessary conditions:
1. very large numbers
2. identical products
3. freedom of entry and exit from the market
Monopolistic Competition
the market structure that has all of the conditions of pure competition except for identical products
Oligopoly
a market structure in which a few very large sellers dominate the industry
Monopoly
a market structure with only one seller of a particular product (opposite of pure competition)
Market Failures
occurs whenever a flaw in the market system prevents an efficient allocation of resources (too much or too little production)
Five Main Causes of Market Failures:
- not enough competition
- not enough information
- resources that can’t/won’t move
- too few public goods
- externalities (spillover effects)
Externalities (AKA: Spillover Effects)
are side effects that either benefit or harm a third party not involved in the activity that caused it
Positive Externalities (AKA: resulting benefit)
an unreimbursed benefit received by someone who was not involved in the activity that generated the benefit
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```Negative Externalities (AKA: Resulting Harm)
the uncompensated harm, cost, or inconvenience suffered by a third party because of others actions
