#3 Economic Exam

Is the relationship between various Prices and Quantities producers are willing to produce and sell during some given time period, holding other things constant..

They are related through the Law of Supply, when price goes up- quantity supplied goes up, when Price goes down, quantity supplied goes down.

A direct relationship exists because of the principle of diminishing returns, and the producer’s opportunity cost.

A change in the price.

Supply:
1) increased number of producers
2) resource prices
3) Technological changes
4) prices of other products of the firm
5) producers expectations

Demand:
1) number of consumers in the market
2) Price of related goods
3) Consumer Income
4) Consumer tastes and preferences
5) Consumer expectations

It influences the amount that producers are willing to produce and sell. They change the entire supply schedule and curve.

Quantity Supplied ↑ Price of resources

Supply↓ Technological Changes

Supply↑ Price of other products of the firm

Supply↑ Number of producers

Supply ↓ Number of producers

Supply ↑ prices of other products in the firm

Supply↑ Technological changes

Supply↓ Producers Expectations

Quantity Supplied↑ Price of other products of the firm

A competitive market is a structure characterized by the following three factors:
1) Large number of buyers and sellers 2) Standardized product (almost virtually identical) 3) Freedom of entry and exit of new and existing firms

Is where supply and demand meets: Qd=Qs

Another term for the equilibrium price: Qd=Qs

When consumers want to buy more than is available

By ensuring that the quantity demand does not exceed the quantity supplied

Occurs when quantity supplied exceeds the quantity demanded

By lowering prices

Rent

Interest

Labor

It depends on the demand for a product

when the government sets a minimum price for some products and price is adopted when some producers feel prices are too low,. Causes persistent surpluses set above market clearing prices

when the government sets a maximum price that can be charged for a good or service. Set when consumers think prices are too high. Causes persistant shortages set below market clearing prices A direct relationship exists because of the principle of diminishing returns, and the producers opportunity cost.

This creates persistent surpluses

1)Public Goods( private, public, semi public)
2)Externalities( positive and negative)
3)Restricted Competition (through monopolies and natural monopolies & Economies of scale)
4)Income Redistribution a) how many b) what quality? c) Scarcity? d) how much do people want your resources? Transfer payments: such as social security, unemployment, Medicare, W.I.C., welfare, etc ( all government programs)

The costs or benefits of a market transaction which are experienced by a third party not involve in the transaction.

Excludable - it is reasonably possible to prevent a class of consumers (e.g. those who have not paid for it) from consuming the good.

Rivalrous - consumptions by one consumer prevents simultaneous consumption by other consumers. Private goods satisfies an individual want while public good satisfies a collective want of the society

A private good is the opposite of a public good, as they are almost exclusively made for profit.

Can not be effectively provided in the market place, examples: Fire department, police, education, national defense

a)Shared consumption
b) non-exclusion

a) Shared consumption, implies that many people can benefit at the same time
b) Nonexclusion, means that one can not be excluded from using a good even if they can not pay.

A monopoly, is a market with one seller of a good or service, with no reasonable close substitute
2) A Natural monopoly, is allowed to exist by government & average cost follows regulations

Cost

Embargo, tariff, and quotas

Tax on imports.

Only a specific # of an item can come in

No trading

How a country sets specific specification on how it should be produced

Payment that the government makes the exporter to have a lower price

Imports>exports

Exports>Imports

Expenditure is greater than revenue

Non Existent

Sum of deficits over time- even if they make the minimum payments the debt still exists

1) Outsource- contracting out functions which have been done outside of the country
(Example America online US- India)
2) Off shoring: countries purchase goods and services over seas because of lower costs.

a) In times of inflation, government may decrease spending or increase taxes to lower the total level of spending in the economy and reduce the upward pressure on prices

b)In times of UE ( recession) government may increase the spending or decrease the taxes, in order to increase the total level of spending, encouraging increased production and unemployment

•Both policies, take such a long time, that they do not have the effect we want them to*

Founder of Modern Economics 1723-1796; book came out in 1776