Econ 5,6,7 test

Tendency of suppliers to offer more of a good at a higher price.

• 1. Firms changing their level of production.
• 2. Firms entering or exiting the market.

A way of measuring quantity supplied reacts to a change in price.

Tells how firms will respond to changes in a price of a good.

Change in output from hiring one more worker.

Level of production in which the marginal product of labor increases as the number of workers increases.

A level of production in which the marginal product of labor decreases as the number of workers increases.

• 1. Fixed Cost; Costs that don't change, example; Buildings.
• 2. Variable Costs; Costs that rise and fall depending on issue, example; Electricity.

What: Any change in the cost of an input used to produce a good.

Effect: An increase in cost of an input means that supply falls at all levels, when cost decreases then price goes up.

Graph:

Better technology lowers costs and increases supply at all price levels.

1. Subsidies, shifts to the right:




2. Taxes, shifts to the left:




3. Regulation, shifts to left:

Price Ceiling is a maximum price set by law that sellers can charge for a better service.

• Rent Control Ex: Was introduced to prevent inflation during the housing crisis during the 1940s.
• Pros: Great for sellers because apartments were high in demand.
• Cons : Wait lists, discrimination and bribery.

Graph:

Price Floor: Minimum price for a good or service.

Minimum Wage: Sets a minimum price that an employer can pay a worker for an hour of labor.

Graph minimum wage:

1. New Technology

2. New government tax and subsidies

3. The change in price of raw materials.

From time to time there is a trendy toy that every kid has to have. For instance, Beanie Babies were hip and stylish by the early 90s. Beanie Babies were high in demand due to their exclusive refreshed designs every month. Although each beanie baby was at an affordable at $4.99 it was hard to find a specific one in shortage. Search costs, bidding, and holding fees within retailers were expensive. When a fad passes its peak, demand can fall as quickly as it rose creating excess supply.

Shift in Demand Graph:

• 1. Flexibility
• 2. Incentives
• 3. Signals

Where goods are bought and sold illegally.

• 1. Buyers and sellers participate in the market.
• 2. Sellers offer identical products.
• 3. Buyers and sellers are well informed about products.
• 4. Buyers and sellers are able to enter and exit the market freely.

• 1. Start up costs
• 2. Technology

Dominated buy a single seller.

Factors causing producer's average cost per unit to fall as output rises.

Market that runs most efficiently when one firm supplies all of the output, example; Public Water.

A monopoly created by the government, example; National Parks.

• 1. Senior/student discounts
• 2. Discounted airline fares

1.Limited market power

2. Distinct customer groups

3. Difficult resale

1. There are many firms

2. Few artificial Barriers to Entry

3. Slight control over price

4. Differentiated products

1. Price Leadership

2. Collusion

3. Cartel; Not long term, and people cheat to get ahead.

Market dominated by a few firms.

1. Physical Characteristics

2. Location

3. Service Level

4. Advertising, image or status

• At first it wasn't successful because it didn't have much teeth. It later succeeded due to2 strategies:
• 1. Buy out competitors
• 2. If chain wants to sell certain products you'd have to buy 3 or 4 products to sell.

Example: If Wal-Mart were to sell tennis rackets they would have to also sell the same company's tennis balls, wrist bands and head bands, etc...

• - In 1982, the government broke up AT&T into 7 regional phone companies.
• - Government stepped in when AT&T used its legal monopoly in local phone service to take control of other markets for long distance phone calls and communications equipment.
• - Jump forward, now there are numerous firms that provide a long distance service.
• In return, this makes the market more competitive which then gives consumers a lower price.

• - Let's say the merger was between Staples and Office Depot.
• - The Justice Department observed that Staples charged less in cities where Office Depot also had stores.
• - From this the Federal Trades Commission convinced the courts that the merger would hurt competition and force customers to pay higher prices.

• - 1978, President Carter deregulated the airline industry.
• - Competition began to increase which led to lower prices.
• - Next, many of the busiest airports had only one dominant airline and they charged higher fares.
• - Early 2000s, there was over expansion and labor costs rose which cut profits.
• - Suddenly, there were terrorist attacks and even more economic problems which led to less people flying.
• - Revenue went down because costs of security and insurance rose.