Prices What would life be like without prices
Prices: What would life be like without prices?
Market Equilibrium A situation in which prices are relatively stable, and the quantity of goods or services supplied is equal to the quantity demanded.
Surplus When quantity supplied is greater than quantity demanded
Shortage When the quantity demanded is greater than the quantity supplied
Perfect Competition 1) Large number of buyers and sellers
Perfect Competition 2) Buyers and sellers deal in identical products.
Perfect Competition 3) Each buyer and seller acts independently… buyers compete with buyers…sellers compete with sellers
Perfect Competition 4) buyers and sellers are reasonably well informed.
Perfect Competition 5) buyers and sellers are free to enter into, conduct, or get out of business
Imperfect Competition Perfect competition does not exist. 1) Monopolistic Competition 2) Oligopoly 3) Monopoly
Monopolistic Competition Product differentiation Non-price competition
Oligopoly Market structure in which a few large sellers dominate the market Each seller has the ability to effect prices of the industry as a whole.
Monopoly A market structure with only one seller
Types of Monopolies 1) Natural monopoly i. e. , telephone companies, electricity, water, etc… Economies of scale: when the average cost of production falls as the firm get larger.
2) Geographic Monopoly based on the absence of other sellers in the area
3) Technological Monopoly Ownership or control of a manufacturing method, process, or other scientific advance Patents and copyrights are a legal exception
4) Government Monopoly The government owns and operates production
Predicting Price What can we expect to happen to the price of corn if there is bad weather this year? S : P QD
Predicting Price Verizon just announced that they will be offering the i. Phone. What will happen to the price of owning an i. Phone? S : P QD
Predicting Price Skinny jeans are the new thing. Everybody’s wearing them and everybody wants them. D : P QS
Predicting Price We just found out that Taco Bell’s beef does not meet the minimum 40% mandated by the FDA D : P QS
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