10 points: (x2)
-http://quizlet.com/72681622/how-markets-work-vocabulary-flash-cards/
-Unit 2 Vocabulary
Chapter 4 Demand
Demand
Demand is the desire to own something and the ability to pay for it.
Example: students may demand a computer.
Law of Demand
Consumers buy more of a good when its price decreases and less when its price increases
Example: People will want more chocolate bars if the price goes down rather than if the price goes up.
Substitution effect
When consumers react to an increase in a good's price by consuming less of that good and more of other goods
Example: If the price of white chocolate went up people might start buying milk chocolate in its place.
Income effect
The change in consumption resulting from a change in real income.
Example: If the minimum wage in America went up consumers may be more willing to buy more goods because they have more money
Demand schedule
A table that lists the quantity of a good a person will buy at each different price.
Example: a table showing the price of pizza and the amount of slices a person would buy each day.
Market demand schedule
A table that lists the quantity of a good all consumers in a market will buy at each different price.
Example: A table showing the price of pizza and the total amount of slices a business would sell.
Demand curve
A graphic representation of a demand schedule
Example: a curve on a graph where the x-axis shows the slices of pizza per day and the y-axis shows the price per slice.
Change in demand vs. change in quantity demanded
Changes in demand would shift the whole demand curve but changes in quantity demanded would just move along the curve to a point of higher quantity.
Determinants of demand (reasons for shifts in the demand curve)
-income of buyers
-number of buyers
-expectations
-price of related goods
-taste/preference
Ceteris paribus
A latin phrase that means "all other things held constant"
Example: an increase in the price of a pizza slice will make the quantity demanded fall along the line to the exact location.
Normal good
A good that consumers demand more of when their incomes increase
Example: More people want to buy new cars when they have more money to.
Inferior good
A good that consumers demand less of when their incomes increase.
Example: Generic cereals because when people have more money they will buy more of that cereal.
Complementary goods
Two goods that are bought and used together.
Example: Skis and ski boots.
Substitute goods
Goods used in place of one another.
Example: Snowboards and skis.
Elasticity of demand – definition, formula
A measure of how consumers react to a change in price
Formula: (% change in quantity demanded) / (% change in price)
Inelastic Demand
Describes demand that is not very sensitive to a change in price.
Example: Goods that people need to buy like electricity.
Elastic Demand
Describes demand that is very sensitive to a change in price.
Example: Goods that people want but don't need, like pizza.
Unitary Elastic
Describes demand whose elasticity is exactly equal to 1.
Example: If a magazine costing $2 raises it's price by 50% to $3, they will self exactly half as many copies as before.
Total revenue vs. Total profits
Total Revenue: the total amount of money a firm receives by selling goods or services.
Total Profits: the amount of money left when you subtract total costs from total revenue.
Factors affecting elasticity
-availability of substitutes
-relative importance
-necessities vs. luxuries
-change over time
Chapter 5 Supply
Supply
The amount of goods available
Example: the amount of grapes at a grape farm
Law of Supply
Tendency of suppliers to offer more of a good at a higher price.
Example: If the price for grapes rises, suppliers will want to produce more so that they can make more money
Quantity supplied
The amount a supplier is willing and able to supply at a certain price
Example: Chocolate factories will offer more chocolate to the public at higher prices
Supply schedule
A chart that lists how much of a good a supplier will offer at different prices
Example: A table of how much a slice of pizza costs and how many slices suppliers will provide.
Variable
A factor that can change
Example: prices
Market supply schedule
A chart that lists how much of a good all suppliers will offer at different prices
Example: Bigger numbers than the supply schedule because it counts for all suppliers, so the price per slice of pizza and the amount of slices supplied per day but in bigger quantities.
Market supply curve
A graph of the quantity supplied of a good by all suppliers at different prices
Example: a curve on a graph where the x-axis shows the slices of pizza per day and the y-axis shows the price of a slice of pizza.
Elasticity of supply
A measure of the way quantity supplied reacts to a change in price
Example: When the price for pizza goes up, an elastic pizza company will produce more pizzas.
Costs of production
The amount of money companies would have to pay to produce their product
Example: the price for cheese, sauce, crust, and the ovens, and workers for making pizza are the costs of production for a pizza store.
Marginal product of labor
The change in output from hiring one additional unit of labor
Example: How many more pizzas would be produced if they hired one more pizza maker.
Increasing marginal returns
A level of production in which the marginal product of labor increases as the number of workers increases.
Example: hiring one more pizza maker increases the amount of pizzas being made.
Diminishing marginal returns
A level of production in which the marginal product of labor decreases as the number of workers increases.
Example: Hiring more than 3 beanbag makers increases the total output of beanbags but at a decreasing rate.
Fixed costs
a cost that does not change, no matter how much of a good is produced
Example: The property taxes on a factory
Variable costs
A cost that rises or falls depending on how much is produced
Example: the cost of raw materials for making computers
Total cost
fixed costs plus variable costs
Example: the total amount BMW pays to make a car after factoring in all of their fixed costs and variable costs.
Marginal cost
The cost of producing one more unit of a good
Example: If a firm decides to make just one more beanbag an hour its total cost rises by $8.
Marginal revenue
The additional income from adding one more unit of a good; sometimes equal to the price
Example: The amount of revenue made from selling one more beanbag
Operating costs
The cost of operating a facility, such as a store or factory
Example: The costs Target pays while its store is open
Determinants of Supply (reasons for shifts in the supply curve)
-profitability of other goods
-Input prices>factors of production
-Government regulations
-number of producers
-expectations
-technology
Subsidies
Government payments that support a business or market.
Example: The government will pay a meat factory because they support the business
Excise tax
A tax on the production or sale of a good
Example: In some states, the government puts a tax on clothes.
Regulations
Government intervention in a market that affects the production of a good
Example: Government requires car manufacturers to install technology to reduce pollution from auto exhaust.
Chapter 6 Prices
Equilibrium price
The point at which quantity demanded and quantity supplied are equal.
Example: the point on a graph where the supplies of slices of pizza per day meet the demand of slices of pizza per day.
Disequilibrium price
Describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market.
Example: Producing more slices of pizza than customers demand.
Excess demand
When quantity demanded is more than quantity supplied
Example: When the actual price of pizza on the market is below the equilibrium price.
Excess supply
When quantity supplied is more than quantity demanded
Example: If a company plans on selling pizza for a high price and therefor makes more pizza but consumers only want to buy that much pizza if the price is lower.
Price ceilings- Rent control
A maximum price that can be legally charged for a good of service
Example: Rent control--a price ceiling placed on rent. results in shortage.
Price floor - Minimum wage
A minimum price for a good or service
Example: Minimum wage--a minimum price that an employer can pay a worker for an hour of labor. Results in surplus
Surplus
Situation in which quantity supplied is greater than quantity demanded; also known as an excess supply
Example: a grape farm produces more grapes than people will buy
Shortage
Situation in which quantity demanded is greater than quantity supplied; also known as excess demand
Example: If people want to buy more dolls for a set amount of money but suppliers are only producing an amount lower than that.
Search costs
The financial and opportunity costs consumers pay when searching for a good or service
Example: Calling to different stores and driving to different towns
Role of prices
incentives, signals, flexibility, and "free"
Supply shock
A sudden shortage of a good
Example: gasoline or wheat going short
Rationing
A system of allocating scarce goods and services using criteria other than price
Example: The government intervening to ration potatoes so that people don't starve
Black market
A market in which goods are sold illegally
Example: Drug dealers
Spillover costs
Costs of production that affect people who have no control over how much of a good is produced (also known as externalities)
Example: air and water pollution
Chapter 7 Perfect Competition
Perfect competition
A market structure in which a large number of firms all produce the same product
Example: There are lots of different brands for salad dressing
Commodity
A product that is the same no matter who produces it, such as petroleum, notebook paper, or milk
Example: Petroleum, notebook paper, and milk
Barrier to entry
Any factor that makes it difficult for a new firm to enter a market
Example: really high start up costs for a rocket company
Imperfect competition
A market structure that does not meet the conditions of perfect competition
Example: Energy companies
Start-up costs
The expenses a firm must pay before it can begin to produce and sell goods
Example: A rocket company would have to buy a rocket before it could start its company
Monopoly
A market dominated by a single seller
Example: If the only computer company was Apple
Economies of scale
Factors that cause a producer's average cost per unit to fall as output rises
Example: The more cheese a dairy farm produces, the less average total cost
Natural monopoly
A market that runs most efficiently when one large firm supplies all of the output
Example: water
Government monopoly
A monopoly created by the government
Example: US Postal service
Patent
A license that gives the inventor of a new product the exclusive right to sell it for a certain period of time
Example: Apple has a patent on iPads
Franchise
The right to sell a good or service within an exclusive market
Example: Subway franchises can use their logo and sell the same products
License
A government-issued right to operate a business
Example: Radio broadcast frequencies
Price discrimination
Division of customers into groups based on how much they will pay for a good
Example: Monopolists will want to sell to different groups different prices because then they can take advantage of how much certain people are willing to pay
Market power
The ability of a company to change prices and output like a monopolist
Example: May be found in any company with market power except in perfect competition.
Monopolistic competition
A market structure in which many companies sell products that are similar but not identical
Example: the market for jeans
Differentiation
Making a product different from other similar products
Example: True religion brand jeans vs. Walmart brand jeans
Nonprice competition
A way to attract customers through style, service, or location, but not a lower price
Example: Physical characteristics of a product
Oligopoly
A market structure in which a few large firms dominate a market
Example: Air travel markets
Price war
A series of competitive price cuts that lowers the market price below the cost of production
Example: Southwest may lower their prices a lot to compete with Delta
Collusion
An agreement among firms to divide the market, set prices, or limit production
Example: If Southwest and Delta make a deal to have very similar prices
Price fixing
An agreement among firms to charge one price for the same good
Example: Southwest and Delta agreeing to charge the same price for plane tickets
Cartel
A formal organization of producers that agree to coordinate prices and production
Example: Organization of petroleum-outputting countries
Predatory pricing
Selling a product below cost to drive competitors out of the market
Example: In rival companies like Coke and Pepsi, if Coke sold their product for a very low cost
Antitrust laws
Laws that encourage competition in the marketplace
Example: the federal trade commission
Trust
Like a cartel, an illegal grouping of companies that discourages competition
Example: A tennis shoe company buying out competitors
Merger
Combination of two or more companies into a single firm
Example: Pepsi and Coca Cola joining together
Deregulation
The removal of some government controls in a market
Example: The government deregulating the airline, trucking, banking, railroad, natural gas, and television broadcast industries
5 points: (x1)
-Blog Post Summary of Article:
http://www.asiarice.org/sections/whatsnew/philippines2.html
The article "Balancing Rice Supply and Demand" summarizes the problems Filipinos are facing with getting rice. There isn't a huge incentive for people to produce rice because there isn't a big opportunity for profit. There is, however, a huge demand for rice but the filipinos can't afford to pay that much for it. Therefor, the Filipinos have been forced to import rice which their poor people still cannot afford.
Producing rice is highly labor intensive but doesn't allow for very much profit. Because of this, nobody really wants to be in the rice producing business. Vietnam is the main source of rice for them, but now the inside of Vietnam has a growing demand and they aren't able to export as much rice. This produces a problem for the Philippines because they will need to find a way to meet their demand for rice without any suppliers. Will they be able to meet up to the challenge?
-http://quizlet.com/72681622/how-markets-work-vocabulary-flash-cards/
-Unit 2 Vocabulary
Chapter 4 Demand
Demand
Demand is the desire to own something and the ability to pay for it.
Example: students may demand a computer.
Law of Demand
Consumers buy more of a good when its price decreases and less when its price increases
Example: People will want more chocolate bars if the price goes down rather than if the price goes up.
Substitution effect
When consumers react to an increase in a good's price by consuming less of that good and more of other goods
Example: If the price of white chocolate went up people might start buying milk chocolate in its place.
Income effect
The change in consumption resulting from a change in real income.
Example: If the minimum wage in America went up consumers may be more willing to buy more goods because they have more money
Demand schedule
A table that lists the quantity of a good a person will buy at each different price.
Example: a table showing the price of pizza and the amount of slices a person would buy each day.
Market demand schedule
A table that lists the quantity of a good all consumers in a market will buy at each different price.
Example: A table showing the price of pizza and the total amount of slices a business would sell.
Demand curve
A graphic representation of a demand schedule
Example: a curve on a graph where the x-axis shows the slices of pizza per day and the y-axis shows the price per slice.
Change in demand vs. change in quantity demanded
Changes in demand would shift the whole demand curve but changes in quantity demanded would just move along the curve to a point of higher quantity.
Determinants of demand (reasons for shifts in the demand curve)
-income of buyers
-number of buyers
-expectations
-price of related goods
-taste/preference
Ceteris paribus
A latin phrase that means "all other things held constant"
Example: an increase in the price of a pizza slice will make the quantity demanded fall along the line to the exact location.
Normal good
A good that consumers demand more of when their incomes increase
Example: More people want to buy new cars when they have more money to.
Inferior good
A good that consumers demand less of when their incomes increase.
Example: Generic cereals because when people have more money they will buy more of that cereal.
Complementary goods
Two goods that are bought and used together.
Example: Skis and ski boots.
Substitute goods
Goods used in place of one another.
Example: Snowboards and skis.
Elasticity of demand – definition, formula
A measure of how consumers react to a change in price
Formula: (% change in quantity demanded) / (% change in price)
Inelastic Demand
Describes demand that is not very sensitive to a change in price.
Example: Goods that people need to buy like electricity.
Elastic Demand
Describes demand that is very sensitive to a change in price.
Example: Goods that people want but don't need, like pizza.
Unitary Elastic
Describes demand whose elasticity is exactly equal to 1.
Example: If a magazine costing $2 raises it's price by 50% to $3, they will self exactly half as many copies as before.
Total revenue vs. Total profits
Total Revenue: the total amount of money a firm receives by selling goods or services.
Total Profits: the amount of money left when you subtract total costs from total revenue.
Factors affecting elasticity
-availability of substitutes
-relative importance
-necessities vs. luxuries
-change over time
Chapter 5 Supply
Supply
The amount of goods available
Example: the amount of grapes at a grape farm
Law of Supply
Tendency of suppliers to offer more of a good at a higher price.
Example: If the price for grapes rises, suppliers will want to produce more so that they can make more money
Quantity supplied
The amount a supplier is willing and able to supply at a certain price
Example: Chocolate factories will offer more chocolate to the public at higher prices
Supply schedule
A chart that lists how much of a good a supplier will offer at different prices
Example: A table of how much a slice of pizza costs and how many slices suppliers will provide.
Variable
A factor that can change
Example: prices
Market supply schedule
A chart that lists how much of a good all suppliers will offer at different prices
Example: Bigger numbers than the supply schedule because it counts for all suppliers, so the price per slice of pizza and the amount of slices supplied per day but in bigger quantities.
Market supply curve
A graph of the quantity supplied of a good by all suppliers at different prices
Example: a curve on a graph where the x-axis shows the slices of pizza per day and the y-axis shows the price of a slice of pizza.
Elasticity of supply
A measure of the way quantity supplied reacts to a change in price
Example: When the price for pizza goes up, an elastic pizza company will produce more pizzas.
Costs of production
The amount of money companies would have to pay to produce their product
Example: the price for cheese, sauce, crust, and the ovens, and workers for making pizza are the costs of production for a pizza store.
Marginal product of labor
The change in output from hiring one additional unit of labor
Example: How many more pizzas would be produced if they hired one more pizza maker.
Increasing marginal returns
A level of production in which the marginal product of labor increases as the number of workers increases.
Example: hiring one more pizza maker increases the amount of pizzas being made.
Diminishing marginal returns
A level of production in which the marginal product of labor decreases as the number of workers increases.
Example: Hiring more than 3 beanbag makers increases the total output of beanbags but at a decreasing rate.
Fixed costs
a cost that does not change, no matter how much of a good is produced
Example: The property taxes on a factory
Variable costs
A cost that rises or falls depending on how much is produced
Example: the cost of raw materials for making computers
Total cost
fixed costs plus variable costs
Example: the total amount BMW pays to make a car after factoring in all of their fixed costs and variable costs.
Marginal cost
The cost of producing one more unit of a good
Example: If a firm decides to make just one more beanbag an hour its total cost rises by $8.
Marginal revenue
The additional income from adding one more unit of a good; sometimes equal to the price
Example: The amount of revenue made from selling one more beanbag
Operating costs
The cost of operating a facility, such as a store or factory
Example: The costs Target pays while its store is open
Determinants of Supply (reasons for shifts in the supply curve)
-profitability of other goods
-Input prices>factors of production
-Government regulations
-number of producers
-expectations
-technology
Subsidies
Government payments that support a business or market.
Example: The government will pay a meat factory because they support the business
Excise tax
A tax on the production or sale of a good
Example: In some states, the government puts a tax on clothes.
Regulations
Government intervention in a market that affects the production of a good
Example: Government requires car manufacturers to install technology to reduce pollution from auto exhaust.
Chapter 6 Prices
Equilibrium price
The point at which quantity demanded and quantity supplied are equal.
Example: the point on a graph where the supplies of slices of pizza per day meet the demand of slices of pizza per day.
Disequilibrium price
Describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market.
Example: Producing more slices of pizza than customers demand.
Excess demand
When quantity demanded is more than quantity supplied
Example: When the actual price of pizza on the market is below the equilibrium price.
Excess supply
When quantity supplied is more than quantity demanded
Example: If a company plans on selling pizza for a high price and therefor makes more pizza but consumers only want to buy that much pizza if the price is lower.
Price ceilings- Rent control
A maximum price that can be legally charged for a good of service
Example: Rent control--a price ceiling placed on rent. results in shortage.
Price floor - Minimum wage
A minimum price for a good or service
Example: Minimum wage--a minimum price that an employer can pay a worker for an hour of labor. Results in surplus
Surplus
Situation in which quantity supplied is greater than quantity demanded; also known as an excess supply
Example: a grape farm produces more grapes than people will buy
Shortage
Situation in which quantity demanded is greater than quantity supplied; also known as excess demand
Example: If people want to buy more dolls for a set amount of money but suppliers are only producing an amount lower than that.
Search costs
The financial and opportunity costs consumers pay when searching for a good or service
Example: Calling to different stores and driving to different towns
Role of prices
incentives, signals, flexibility, and "free"
Supply shock
A sudden shortage of a good
Example: gasoline or wheat going short
Rationing
A system of allocating scarce goods and services using criteria other than price
Example: The government intervening to ration potatoes so that people don't starve
Black market
A market in which goods are sold illegally
Example: Drug dealers
Spillover costs
Costs of production that affect people who have no control over how much of a good is produced (also known as externalities)
Example: air and water pollution
Chapter 7 Perfect Competition
Perfect competition
A market structure in which a large number of firms all produce the same product
Example: There are lots of different brands for salad dressing
Commodity
A product that is the same no matter who produces it, such as petroleum, notebook paper, or milk
Example: Petroleum, notebook paper, and milk
Barrier to entry
Any factor that makes it difficult for a new firm to enter a market
Example: really high start up costs for a rocket company
Imperfect competition
A market structure that does not meet the conditions of perfect competition
Example: Energy companies
Start-up costs
The expenses a firm must pay before it can begin to produce and sell goods
Example: A rocket company would have to buy a rocket before it could start its company
Monopoly
A market dominated by a single seller
Example: If the only computer company was Apple
Economies of scale
Factors that cause a producer's average cost per unit to fall as output rises
Example: The more cheese a dairy farm produces, the less average total cost
Natural monopoly
A market that runs most efficiently when one large firm supplies all of the output
Example: water
Government monopoly
A monopoly created by the government
Example: US Postal service
Patent
A license that gives the inventor of a new product the exclusive right to sell it for a certain period of time
Example: Apple has a patent on iPads
Franchise
The right to sell a good or service within an exclusive market
Example: Subway franchises can use their logo and sell the same products
License
A government-issued right to operate a business
Example: Radio broadcast frequencies
Price discrimination
Division of customers into groups based on how much they will pay for a good
Example: Monopolists will want to sell to different groups different prices because then they can take advantage of how much certain people are willing to pay
Market power
The ability of a company to change prices and output like a monopolist
Example: May be found in any company with market power except in perfect competition.
Monopolistic competition
A market structure in which many companies sell products that are similar but not identical
Example: the market for jeans
Differentiation
Making a product different from other similar products
Example: True religion brand jeans vs. Walmart brand jeans
Nonprice competition
A way to attract customers through style, service, or location, but not a lower price
Example: Physical characteristics of a product
Oligopoly
A market structure in which a few large firms dominate a market
Example: Air travel markets
Price war
A series of competitive price cuts that lowers the market price below the cost of production
Example: Southwest may lower their prices a lot to compete with Delta
Collusion
An agreement among firms to divide the market, set prices, or limit production
Example: If Southwest and Delta make a deal to have very similar prices
Price fixing
An agreement among firms to charge one price for the same good
Example: Southwest and Delta agreeing to charge the same price for plane tickets
Cartel
A formal organization of producers that agree to coordinate prices and production
Example: Organization of petroleum-outputting countries
Predatory pricing
Selling a product below cost to drive competitors out of the market
Example: In rival companies like Coke and Pepsi, if Coke sold their product for a very low cost
Antitrust laws
Laws that encourage competition in the marketplace
Example: the federal trade commission
Trust
Like a cartel, an illegal grouping of companies that discourages competition
Example: A tennis shoe company buying out competitors
Merger
Combination of two or more companies into a single firm
Example: Pepsi and Coca Cola joining together
Deregulation
The removal of some government controls in a market
Example: The government deregulating the airline, trucking, banking, railroad, natural gas, and television broadcast industries
5 points: (x1)
-Blog Post Summary of Article:
http://www.asiarice.org/sections/whatsnew/philippines2.html
The article "Balancing Rice Supply and Demand" summarizes the problems Filipinos are facing with getting rice. There isn't a huge incentive for people to produce rice because there isn't a big opportunity for profit. There is, however, a huge demand for rice but the filipinos can't afford to pay that much for it. Therefor, the Filipinos have been forced to import rice which their poor people still cannot afford.
Producing rice is highly labor intensive but doesn't allow for very much profit. Because of this, nobody really wants to be in the rice producing business. Vietnam is the main source of rice for them, but now the inside of Vietnam has a growing demand and they aren't able to export as much rice. This produces a problem for the Philippines because they will need to find a way to meet their demand for rice without any suppliers. Will they be able to meet up to the challenge?