Unit 3 Econ – microeconomics

study of behavior of individuals, families

the willingness and ability of a producer to produce/sell a product

economic motivation, potential for profits, based on selling price

have factors of productions/skills

- profit
- self-interest
- when dealing with supply THINK like a PRODUCER
- assumption: produce more, sell more, make more money

if there is a higher selling price, then higher quantity will be supplied
- suppliers have the ability AND willingness to sell more goods and services at a higher price

-the amount produced (quantity supplied) changes in the same way as the price
- If price INCREASES then quantity supplied INCREASE

- reflects that suppliers offer greater quantities for sale at higher prices

- price changes 1st, THEN there is a change of quantity supplied at each price ALONG CURVE

when suppliers offer different amounts of products for sale at all possible prices in the market

- cost of production
- cost of inputs
- productivity
- technology
- government taxes
- government subsidies
- number of sellers
- expectations

(key reason) something causes the cost of producing goods more or less expensive

items used to makes finished products, factors of production/raw materials

increase efficiency of workers, makes more in same time frame (specialization of labor)

the computers, software, and other "latest and greatest" tools

when government gives money to producers to support specific industries - farm prices

when the government requires tests and standards for certain industries

more sellers, more competition, overall lower prices

information event would cause suppliers to increase or decrease production change in seasons

quantity that people are willing and ale to buy a good/service at various prices

to buy a good/service at various prices

have the money to purchase the product

- describes the inverse relationship between a certain price (P) and quantity demanded of a product (Qd)
- higher selling price, lower quantity (P increase, QD decrease)
- lower selling price, higher quantity (P decrease, QD increase)

- graphically shows data from demand schedule
- reflects consumers demand greater quantities at lower prices

change in demand that prompts consumers to buy different amounts of goods/service at every price

- change price of product results in change in quantity demanded (Qd)
- what consumers are willing to consume at different prices

- anything except price
- change in buyers TASTE
- change in INCOME
- change in price of related goods, SUBSTITUTE goods COMPLEMENTARY goods
- change in EXPECTATIONS

taste or preferences

getting a raise/tax refund

what is reasonable to expect about the near future

products that are used together

products that can be used in place of other products to satisfy consumer wants

- at lower prices buy more quantity—at higher prices buy less quantity (Law of Demand)

at higher prices produce more quantity—at lower prices produce less quantity

- the point where 2 lines cross (market equilibrium)
- at a specific price level where the quantity supplied is equal to quantity demanded
- compromise point

a price level that producers and consumers both agree on

the level of quantity agreed to be produced and consumed

- demand = consumer = unlimited wants
- supply = producers = limited resource (f of p)
- unlimited wants = limited resources
- solves the economic dilemma for a specific product

- price will NOT cause a change because it is acceptable to both consumers and producers
- can still have shifts

- where equilibrium price is below equilibrium point
- less produced (QS) then demanded (QD)
- QD - QS =

- where equilibrium price is above equilibrium point
- more produced (QS) then demanded (QD)
- QS - QD =

- proprietorship
- partnership
- corporation

- individual/household owns it
- pays personal income tax on profits
- ex: self-contractor, consultant, small business owner
- advantages: easy to set up/take apart, control, fewer regulations/taxes
- disadvantages: total responsibility, liability for debts

- 2 or more people share ownership
- sharing of profits, assets and debts
- ex: insurance, legal, medical, real estate agencies

- more than 1 person: 100's-1000's (stockholders)
- submit into SEC to become a publicly traded company
- considered a "legal person"
- life of its own = independent of owners
- board of members male most decisions for corporation
- share holders have no voice
- Limited Liability: share holders can gain from profits but not responsible for companies debt
- most dominant form in the US

- loans: borrowed $ (usually banks)
- stocks: shares of ownership in a corporation
- apply to the SEC (securities and exchange commision)
- Stockholders: get dividends, increase in stock
- investors: wealthy individuals who are looking to invest in a new idea or product with intention of making money
- get percent of profits, stock options

- social impact of private production
- affects someone other than buying/seller
- cannot be seen on a supply/demand graph
- Negative: costs people
- ex: BP spill summer 2010
- Positive: benefits people
- ex: corporate donations to non-profit/charities

- Number of firms: leads to more or less competition
- Influence over price
- Ease of entry into market
- amount of advertising used to sell product/service: either a lot some or none
- difference in product: look at similarities and differences withing the same market

- perfect competition
- monopolistic competition
- oligopoly
- monopoly

- number of firms: a lot of sellers
- influence over price: no influence bc of competition (best for consumers = lowest price)
- east of entry: easy entry and exit
- advertising: little to none
- diff. in product: identical product
- ex: wheat, corn, cotton, salt, soybean, etc.

- number of firms: many sellers
- influence over price: some control but still lots of competition (good for consumers = better products/cheaper price)
- east of entry: easy but lots of competition (efficient use of resources)
- advertising: use LOTS of ads
- diff. in product: little difference (close substitutes keep prices low = competition)
- ex: nike, starbucks, mcdonalds, etc.

- number of firms: few sellers/similar products
- influence over price: more control of price = less competition
- east of entry: hard to enter (because producers have lots of control)
- advertising: use lots of ads
- diff. in product: may/may not be different, impact on output sales and price
- ex: pepsi vs coke,

- only aloud to exist because of oversight)
- number of firms: 1 seller
- influence over price: total control of price
- east of entry: no entry into market
- advertising: advertise only for public relations
- diff. in product: 1 product = no substitutes
- ex: denver water, xcel, etc.

When quantity supplied does not meet quantity demanded (a little or a lot)

- inefficiency to correctly allocate goods and services
- positive and negative externalities
- environmental concerns
- lack of public goods

- lack of competition
- externalities
- public goods
- income inequality