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product market
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receives products from businesses and provides goods and services to the individual consumer in exchange for payment
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factor/ resource market
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where the factors of production are bought and sold
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Demand
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the amount of goods and services a consumer is willing to buy at a series of possible prices during a given time
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quantity demanded
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the amount of goods or services a consumer is willing and able to buy at each particular price during a given time
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law of demand
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as price increases- quantity demanded decreases and as price decreases- quantity demanded increases
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supply
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the amount of goods and services that a producer is willing and able to sell at a series of possible prices at a given time
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quantity supplied
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the amount of goods and services that a producer is willing and able to sell at each particular price during a given time
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law of supply
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as price increases- quantity supplied increases and as price decreases- quantity supplied decreases
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Equilibrium/ market clearing price
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where quantity demanded = quantity supplied
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shortage
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when quantity demanded exceeds quantity supplied at market price - below equilibrium
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surplus
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when quantity supplied exceeds quantity demanded at market price- above equilibrium
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price ceiling
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a government imposed maximum price - set below equilibrium -will result in shortages -rent control
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price floor
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a government imposed minimum price- set above equilibrium - will result in surplus - minimum wage
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Sole Proprietorship
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a business owned and operated by one person
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partnership
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a business that is jointly owned by two or more people
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corporation
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form of business organization recognized by law as a separate legal entity with all the rights and responsibilities of an individual
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horizontal merger
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takes place when firms that produce the same kind of product join forces - bank mergers
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vertical merger
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when companies involved in different stages of manufacturing or marketing join together- US Steel Corporation
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franchise
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a type of license that grants a franchisee access to a franchisor's proprietary business, knowledge, and trademarks - CFAs
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conglomerate
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a firm that typically has at least 4 businesses each making unrelated products
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Mulinational Corporations
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a corporation that has manufacturing or service operations in a number of different countries
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perfect (pure) competition
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type of market where many companies sell the same good or service and no one has the power to set prices- milk
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monopolistic competition
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a market structure in which many companies sell products that are similar but not identical- clothing
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Oligopoly
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A market structure in which a few large firms dominate a market and are interdependent on each other for pricing and output policies- drug cartels, OPEC
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monopoly
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when a company and its product dominates a sector/ industry - illegal in US
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barriers to entry
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factors that make it difficult and costly for an organization to enter a particular task environment or industry
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product differentiation
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a marketing strategy designed to distinguish a company's product or services from the competition
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natural monopoly
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exists in a market if a single firm can serve that market at a lower cost than any combination of two or more firms - electricity
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economies of scale
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a proportionate saving in costs gained by an increased level of production.
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collusion
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an agreement among firms in a market about quantities to produce or prices to change
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cartel
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a group of firms acting in unison -drugs
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determinents of demand
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- tastes and preferences
- related good's prices
- income of the consumers
- number of buyers( size of market)
- expectations of the consumer
- related good's prices
- income of the consumers
- number of buyers( size of market)
- expectations of the consumer
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Determinents of Supply
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- resource prices
- other product prices
- taxes and subsides of the government
- technology
- expectations of the producer
number of sellers (competition)
- other product prices
- taxes and subsides of the government
- technology
- expectations of the producer
number of sellers (competition)
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elasticity
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the degree to which a price change affects the quantity demanded or supplied
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inelastic demand
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a change in price leads to little or no change in quantity demanded - < 1
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elastic demand
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a change in price leads to a significant change in quantity demanded - > 1
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unit elastic demand
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when a change in price causes a proportional change in quantity demanded
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Total Revenue
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Price x Quantity
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elasticity formula
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% change in quantity demanded / % change in price
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total revenue elasticity
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when price and revenue move in opposite directions
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total revenue inelastic
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when price and revenue increase and decrease together
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