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| important features of a market including the # of buyers and sellers; product uniformity across sellers |
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| a market structure with many fully informed buyers and sellers of an identical product and ease of entry |
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| a product that is identical across sellers (i.e. a bushel of wheat) |
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| the sole supplier of a product with no close substitutes |
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| ability of firm to raise its price without losing all sales to rivals |
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| restrictions on the entry of new firms into an industry |
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| market structure with low entry barriers and many firms selling products differentiated enough that each firm's demand curve slopes downward |
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market dominated by two firms
undifferentiated: identical products
differentiated: different products |
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| group of firms act as a single monopoly |
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| promote the market structure that will lead to greater competition reduce anti-competitive behavior |
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| combination of 2 or more firms to form a single firm |
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| owns everything in the market |
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| many companies owned by the same person |
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| reduces government regulation |
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1. # of buyers & sellers
2. product's uniformity
3. ease of entry
4. form of competition |
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Definition
| 4 Parts of Market Structure |
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| good things about monopolies |
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Definition
| 1. economies of scale; 2. government regulation; 3. keep prices low to avoid regulation; 4. prices low to avoid competition |
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| important thinker on economics who wrote The Wealth of Nations |
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| firms can merge more efficiently and competitively |
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| barriers to entry of an oligopoly |
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| economies of scale; high cost of entry; product differentiation costs (spend $ to show product is different) |
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| oligopolies agree on a price to divide the market; cartel; this is illegal |
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| temptation to cheat; profit of cartels attract competitors; technological change |
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| new firms can't sell enough output to enjoy the same economies of scale by an established firm |
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| only business for many miles around |
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| lower than average costs by selling more |
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| change in consumer....expectations, tastes, number of in market; change in...income, price of substitute good and complementary good |
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Definition
| CHARACTERISTICS OF DEMAND |
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| change in producer expectations, number of sellers, technology, goods and resources |
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Definition
| CHARACTERISTICS OF SUPPLY |
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| a relation showing the quantities of a good that consumers are willing and able to buy at various prices |
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| quantity varies inversely with price |
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| the change in total utility resulting in one unit change in consumption of goods |
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| law of diminishing marginal utility |
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| the more good is consumed, the marginal utility of that good decreases |
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| an individual pt on the demand curve |
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measures the consumers response to a price change
%change in QD/%change in $ |
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| movement along a demand curve |
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| change in QD resulting from a change in the price of the good |
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| increase or decrease in demand |
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| a relation showing the quantities of a good producers are willing and able to sell at various prices during a given time pd |
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| the quantity varies directly with the price |
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| %change in QS/%change in price |
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| =revenue-cost of production |
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| movement along a supply curve |
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| change in QS resulting from change in price of the good |
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| increase or decrease of in demand resulting from a change in one of the determinants of supply |
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| a pd in which 1 of the firm's resources is fixed |
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| a pd during which all of a firm's resources can be varied |
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| the change in total product resulting from a 1-unit change in a particular resource |
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| law of diminishing returns |
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| as more of a variable resource is added to a given amt of fixed resources, marginal product eventually declines and could become negative |
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| any production cost that is independent of the firm's output (i.e. rent for a pizza shop) |
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| any production cost that changes as output changes |
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| the change in TC/change in output |
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| the change in total revenue from selling another unit of the good |
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| QD=QS and the market clears |
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| the costs of time and info needed to carry out market exchange |
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| minimum selling price above equilibrium price...leads to a surplus |
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| maximum selling price is below equilibrium price...leads to shortage |
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| difference btw the total amt consumers are willing & able to buy and what they actually pay |
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| Shell Gas Station, BP Gas Station, 7/11 |
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Definition
| examples of an undifferentiated oligopoly |
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| examples of a differentiated oligopoly |
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beef::pork as chocolate::peanut butter
example of what? |
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ketchup::hot dog as caramel::ice cream
example of what? |
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| a supply greater than one |
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| Adam Smith's Invisible Hand |
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| market prices occur through the voluntary choices of buyers and sellers; buyers and sellers direct resources & products; market competition promotes general welfare |
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