Economics Final Study Guide (Part 2)

Factors Affecting Elasticity
Availability of Substitutes, Relative Importance, Necessities vs. Luxuries, and Change over time

Total Revenue
the total amount of money a firm recieves by selling goods/services

Law of Supply
tendency of suppliers to offer more of a goods at a higher price

Supply Curve
a graphe of the quantity supplied of a good at a diff. price

Elasticity of Supply
a measure of the way quantity supplied reacts to a change in price

Fixed Production Costs
a cost that does not change ex. the cost of building a factory

Variable Cost
a cost that rises or falls depending on how much is produced

Marginal Cost
cost of producing one more unit of a good

Government Influence on Supply
the government can raise or lower costs to produce goods, they can encourage or discourage production of a good

Influences on Supply
future expectations of prices, number of suppliers

Equilibrium
the point at which quantity demanded and quantity supplied are equal, when this is not true it is disequilibrium

Excess Demand
the quantity demanded is greater than the quantity supplied

Excess Supply
the quantity supplied is greater than the quantity demanded

Advantages of Prices
price as an incentive, signals, flexibility, and the price system is free

Price Ceiling
the maximum price that can be charged for a product

Price Floor
the minimum price that can be charged for a good or service

Surplus
quantity supplied > quantity demanded

Shortage
quantity demanded > quantity supplied

Rationing
a system of allocating scarce goods and services using criteria other than price

Conditions of Perfect Competition
many buyers and sellers, identical products, well informed consumers, and sellers can enter and exit the market freely.

Barriers to entry
any factor that makes it difficult for a new firm to enter a market

Monopolies
Government- a monopoly created by the Government Natural- a monopoly that runs most effectively when one firm supplies all ouput

Economies of Scale
factors that cause a production average to fall as output rises

Price Discrimination
division of consumers into groups based on how much they will pay for a good

Conditions of monopolistic Competition
many firms, few barriers to entry, slight control over price, different products

Nonprice Competition
a way to attract customers through style, service, or location, but not a lower price

Oligopolies
market Structure in which a few large firms dominate a market

Collusion
an agreement among firms to divide market, set prices or limit production

Cartel
a formal organization of producers that agree to coordinate prices and production

Price Fixing
an agreement among firms to charge one price for the same good

Government Regulation
the government is allowed to stop firms from merging if they think it will cause a monopoly.

Government Deregulation
the government cannot decide what role each company will play in the market

Corporations
a legal entity owned by individual stock holders

Advantagtes of Corporations
limited liability for owners, transferable ownership, ability to attract capital, and long life

Disadvantages of Corporations
expensive start up costs, double taxation, potential loss of control, and more legal requirements

Horizontal Merger
combines two or more firms that provide the same good or service

Vertical merger
combine two or more firms in different stages of production of a good or service