Economics Unit 2 Microeconomics

the study of people and businesses within a single market. This small focus—on
only one particular market

an economic principle stating that as price rises, the quantity a seller is willing and able to
sell increases.

an economic principle stating that as the price of a good rises, the quantity of the good
consumers are willing and able to buy decreases

When input prices rise, producers must spend more of their
revenue to buy the inputs and therefore are forced to reduce their supply of the good because of
the greater expense associated with the input. When input prices become cheaper, sellers can
increase their supply because it is cheaper to produce their product.

If more taxes are imposed, most businesses will not be willing to supply
as much as before

The supply of a particular good may increase or decrease because of change in
the number of sellers in the market for a good.

When sellers believe the price for a good will go lower in the future and
they can increase their supply now, they will sell all they can before the price decreases. If they
believe prices will go up in the future and they can delay the sale of their goods, they will supply
less of the good now and wait for the price increase.

Technological improvements in the tools or processes used to make goods and
services increase the supply of those goods and services. New technology eventually makes
production cheaper

A better-educated and better-trained workforce should be able to produce more goods
in less time. This should lower costs and increase supply.

Based on the law of demand, we know that when the price of a good rises,
consumers will buy less of that good. If the price of a complementary or related good changes, this
could change the demand curve

When a large number of consumers in the market for a good experience a change in
income, the entire demand curve may shift.

When consumers believe a change in price will occur, they may hold off
on purchasing the good until the price drops or buy more of the good before the price rises.

When a large number of consumers experience a change in preference toward
or away from a good, the demand will change.

The demand for a good may increase or decrease depending on the
number of people in the market for the good.

is found at the intersection of the market demand and supply
curves. It is the point at which the quantity demanded by consumers is equal to the quantity supplied by
producers.

sets a minimum
price for which a product can be sold. Price floors often lead to a surplus of a good. An example of a price
floor is a minimum wage.

sets a maximum price at which a good can be sold. A price ceiling
often leads to a shortage. An example of a price ceiling would be rent control.

When buyers and sellers freely and willingly engage in market transactions

shows the interactions between buyers and sellers in different markets

own productive resources. They sell land, labor, and capital to
businesses in the factor market in exchange for income

are the
consumers of goods and services. They use their income to buy goods and services from businesses.

consume productive resources (land, labor, capital, and
entrepreneurship)

produce the goods and services purchased
by households. The money received by businesses from households is revenue

A sole proprietorship has a single owner

A partnership divides up the risk and reward among a group of people

Corporations issue stock, and anyone who owns stock in the corporation owns a portion
of that corporation

a market structure in which a commodity is supplied by one firm

a market structure of imperfect competition in which an industry is dominated by a small
number of suppliers.

a market structure in which there are a large number of sellers who are
supplying goods that are close, but not perfect, substitutes. Sellers have a degree of control over price.
There are few long-term barriers of entry and exit

a market structure in which there are a large number of sellers who are
supplying goods but not a large enough number to set the price of the goods. There are no barriers of entry
and exit

are usually paid for through the collection of taxes. Public goods are "shared consumption"
goods. This means that when one person uses the good it does not lessen the value of the good for
another person. They also are non-exclusionary. This means that it is difficult to prevent someone from
enjoying the benefit from that good even though they are unwilling to pay for that good.

This means using the tax money from one group
and giving it to other groups. Social welfare payments and unemployment compensation are examples of
the government redistributing income

If consumers or
businesses are uncertain that they will be able to hold on to their physical or intellectual property, they are
less likely to purchase goods or invest in or expand their business. Private property rights are protected by
intellectual property laws, such as patents and copyright laws. Deeds for property and titles for cars are
examples of how physical property is protected by the government

occur when the private market is unable to produce goods and services in a way that the
marginal benefit to society from the production of the good is equal to or greater than the marginal cost
to society for producing the good

are a type of market failure. They occur when a third party
other than the consumer or producer of a good is hurt or benefits from the production or consumption
of that good.

Market power refers to a market failure
resulting from the formation of monopoly and oligopoly market structures.

Some regulations protect citizens from corporate abuse. Other
government regulations help businesses recover from external problems by offering money to help offset
an unforeseen disaster

is the reduction or elimination of government power in an industry.
Deregulation may help increase competition, which could improve business profits and reduce costs for
consumers.