| Demand | Supply | Equilibrium, Elasticity and Total Revenue | Elasticity and Utility | Market Structures |
|---|---|---|---|---|
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If all other factors remain equal, the higher the price of a good, the less people will demand that good.
The higher the price, the lower the quantity demanded.
What is the Law of Demand?
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The higher the price, the higher the quantity supplied.
What is the Law of Supply
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When supply and demand are equal (when the supply function and demand function intersect). At this point the allocation of goods is most efficient.
What is market equilibrium?
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Good job!
List and explain two determinants of elasticity of demand.
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A monopoly is a single firm that produces a product with no close substitutes and is protected by insurmountable barriers to entry.
What is a monopoly?
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On to the next...
List one determinant that would shift the demand curve. Tell me why that determinant would affect the demand curve.
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Well done!
List one determinant that would shift the supply curve. Tell me why that determinant would affect the supply curve.
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If the price is set too high, excess supply will be created within the economy and there will be allocative inefficiency.
What causes excess supply or a surplus? Draw an example using a supply and demand graph.
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Good work!
List and explain two determinant of elasticity of supply.
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Perfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product.
What is perfect competition?
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Well done!
List four determinants that would shift the demand curve. Tell me why those two determinants would affect the demand curve.
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A change in price
What causes movement along the supply curve?
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Excess demand is created when price is set below the equilibrium price. Because the price is so low, too many consumers want the good while producers are not making enough of it.
What causes excess demand or a shortage? Draw an example using a supply and demand graph.
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Utility: An economic term referring to the total satisfaction received from consuming a good or service.
Marginal Utility:The additional satisfaction a consumer gains from consuming one more unit of a good or service.
Define utility, marginal utility and the law of diminishing utility.
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Oligopoly: many firms, identical products, no barriers to entry, no advantage for existing firms, extremely good price information
Define the characteristics of an oligopoly.
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A change in price.
What causes movement along the demand curve?
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Well done!
List four determinants that would shift the demand curve. Tell me why those two determinants would affect the demand curve.
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Elasticity is a measure of how much buyers and sellers respond to changes in market conditions.
Elasticity equation is the percent change in quantity supplied or demanded over the percent change in price.
What is elasticity? Provide the equation and the written definition for both supply and demand.
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Consumers who are rational will maximize their total utility by purchasing a combination of different products, based on utility per dollar spent.
How do consumers make choices based on utility and the price of a good?
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Perfect Competition: Many sellers, no barriers to entry, identical products, extremely good price information
Monopolistic Competition: Many sellers, high differentiation, low barriers to entry, monopoly in their brand
Define the characteristics of perfect competition and monopolistic competition.
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Good job!
Draw a demand curve with a demand schedule.
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Good job!
Draw a supply curve with a supply schedule.
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Total revenue is price x quantity. If you raise the price of your good and total revenue increases, your good is inelastic. If you lower the price of your good and total revenue goes up, your good is elastic.
How do you find total revenue? If you raise the price of your good and total revenue goes up, what does this say about the elasticity of your good? If you lower the price of your good and total revenue goes up, what does this say about the elasticity?
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Well done!
Calculate the marginal utility and marginal utility per dollar spent for two goods and demonstrate how you would maximize the utility of your income.
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Perfect competition forces prices down and creates efficient allocation in the marketplace. It promotes innovation and growth in the market, leading to greater economic prosperity.
Why do economists hope for perfect competition? Why does a monopoly or oligopoly threaten a market and consumer?
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