TCU Microeconomics Reynolds Unit 2

-Amount consumers will/able to purchase an item

-Other things equal

-The more it costs, the less people want to buy
-Price is an obstacle to buyers
-Inverse relationship

...

Income
# of Customers
Subsitute Good
Expectations of Customers (what will happen with their income).
Complimentary Goods
Taste/Preferences

-As price rises, quantity supply rises (visa versa)
-Price is an incentive to producers

...

^ = Delta ('change in")
-^ Resource prices
-^ Technology
-^ # of Sellers
-^ Taxes and subsidies
-^ Price of other goods
-^ in producer expectations

Supply shock (sudden change in supply: hurricane)
Technology
Input resources (^ cost of labor)
Government regulation (taxes & subsidies)
Expectations of producers
Related Goods

Inverse relationship

Buyers will get less satisfaction from each successive unit of the product consumed

-Quantity demand on X, price on Y
-Downward slope - buy more of a product at low price

-Factors besides price that determines quantities demanded of a good or service
-Preferences, # of buyers, income, price of related goods, consumer expectations

Products whose demands varies directly with $ income

Goods whose demands varies inversely with $ income

Used in place of other good

Used together with other good

Goods not related to each other

-Shift in demand curve to right or left
-Result of change in consumers mind about a product because of change in determinants of demand

-Movement from one price dot on graph to another
-Caused by change in price of product

The quantities from each producer at each price - horizontal adding

Price where the intentions of buyers and sellers match

Quantity where buyers and sellers match

-Producing goods in the least costly way
-Best tech. and mix of resources

-Combination of goods/services most highly valued by society
-"Majority wants..."

-Sets the max. legal price a seller can charge for a product/service
-If below equilibrium then nobody will actually do that because producers won't make $

Minimum price fixed by the gov.

-Occurs where the demand curve+supply curve intersect
-Surplus + Shortage

-As goes demand, so does price + quantity
-Direct relationship

-As goes supply, so does quantity. Price goes the other way

-Change in the consumption of goods by consumers based on their income
-You don't buy expensive things if you don't have the $

Replacing expensive items with cheaper ones

When the desires + needs of consumers control the output of producers

-Demand curves don't reflect consumers full willingness to pay for a good or service
-When supply and demand don't match up
-Ex: Public education

Occur when supply curves don't reflect the full cost of producing a good or service

-Benefit surplus received by a customer
- Difference between max. price a consumer is willing to pay for a product and the actual price they pay

Difference between actual price a producer receives and the minimum acceptable price that a consumer would have to pay the producer to make a unit of output available

-Reduction of combined consumers and producer surplus
-Result from both underproduction and overproduction

When one person buys and consumes a product, it's no longer available for someone else to buy

-Sellers can keep people who don't pay for a product from obtaining its benefits
-Ex: you can only get the benefits of a water bottle if you buy the bottle

Nonrivalry and nonexclusive goods

-One persons consumption of a good doesn't preclude consumption of the good by others
-Everyone gets the benefits
Ex: Public lighting & national defense

-No effective way of excluding individuals from the benefit of the good
-Ex: Can't exclude someone from national defense

Once a producer has provided a public good, everyone and non taxpayers keep the benefits

Comparing MC to MB to decide if they should employ resources and to what extent

-Some of the cost or benefits of a good/service spill over to someone besides the buyer
-Neg: Fix w/ Pigovian tax, supply side, too much produced
-Pos: Fix w/ subsidies+gov. provision, demand side, too little being produced

Payment from gov. to decrease producers costs

Tax on market activity to fix negative externalities

Economically inefficient outcomes caused by shortcomings in the public sector

Conflicts that arise when tasks are delegated by one group of people to another group of people

Ex: Manager and stockholder

-Projects that benefit only 1 political group
-Any outcome of the political process where a small # of people obtain a gov. program or policy that gives them large gains at the expense of a much greater # of people who individually suffer small losses

-An entity seeks to gain added wealth without any reciprocal contribution of productivity
-Ex: Social-service groups

When gov. commits to making a series of future expenditures without simultaneous commiting to collect enough tax revenues to pay for those

Ex: Social security programs and Medicare

-When tax revenues are less than its spending in a year
-Economic inefficiencies, balance budget laws

-Distribution of resources between alternatives does NOT fit with customer taste
-Perceptions of costs and tastes

When gov. debt is so high they can't borrow any more $

Attempts to use changes in tax rates and spending levels to offset the business cycle

-Attempts to use changes in interest rates to regulate economy
-Ex: Lower interest rates in a recession

When a gov. regulatory agency ends up being controlled by the industry that its supposed to be regulating

Ex: Railroads and Interstates

-Removal of most or all gov. rules designed to supervise an industry
-Used to combat regulatory capture

Unlawful misdirection of gov. resources/actions that occur when gov. officials abuse their powers for personal gain

-Socializing losses
-Privatizing gains
-If the business fails, the economy pays, not the company