Microeconomic Concepts (Chapters 3, 4, 5, & 6)

SSEMI1, SSEMI2, SSEMI3, SSEMI4

  1. Demand – Desire and willingness to buy a product
  1. Individual + Demand / All Consumers + Market Demand
  2. Add all individual demands together
  3. Law of Demand – Price and Quantity move in opposite directions
  4. Downward Slope
  5. Change in Quantity Demanded (Shift on curve)
  6. Income Effect = price goes down, consumers left with extra real income.
  7. Substitution Effect + replace with cheaper but similar item.
  8. Change in Demand (Shift of curve)
  9. People buy different amounts of product at same prices
  10. Income, tastes, consumer expectations, # of buyers
  11. Price change of related product (substitution or complementary)
  12. Price Ceilings = maximum price that can be charged for a product
  13. Example: Rent Controlled Apartments
  14. Can Cause Shortage – price no longer dictates
  15. Elasticity of Demand = how sensitive consumers are to price changes
  16. Elastic = Change in price = Large change in demand
  17. Inelastic + Change in price = small change in demand
  18. Unit Elastic Demand + proportional
  19. Total Expenditures = Price times Quantity Demanded
  20. Fig 4.5 (page 103)
  21. Causes of Changes in Elasticity
  22. Can purchase be delayed?
  23. Available Substitutes?
  24. Portion of income needed for purchase?
  25. Diminishing Marginal Utility
  1. Supply – Amount of product sold at various prices
  1. Individual = Supply /All Producers = Market Supply
  2. Add all individual Supplies together
  3. Law of Supply – Price and Quantity Supplied move in same direction
  4. Upward Slope
  5. Change in Quantity Supplied (Shift on curve)
  6. Change in amount offered for sale in response to change in price
  7. Change in Supply (Shift of Curve)
  8. Cost of inputs, productivity levels, technology, taxes, subsidies (gov’t payment), expectations, gov’t regulations
  9. Price Floors – lowest price that can be paid for a good or service
  10. Example: Minimum Wage
  11. Could increase # unemployment
  12. Elasticity of Supply + how quantity supplied reacts to change in price
  13. Elastic = small increase in price = large increase in output
  14. Inelastic = small increase in price = little change in supply
  15. Unit Supply = proportional
  16. Production Theory = relationship b/w f.o.p. and output of goods and services
  17. Short run = can change only labor
  18. Long run = can change all f.o.p
  19. Diminishing Returns = output decreases the more workers are hired.
  20. Costs
  21. Fixed
  22. Variable
  23. Total
  24. Marginal
  25. Surplus & Shortage
  1. Supply and Demand Together
  2. Both Inelastic = Drastic change in price
  3. Only one inelastic = Small change in price
  1. Businesses & Liabilities

  1. Sole Proprietorship
  2. Partnership
  3. Corporation
  4. Entrepreneurs – Profit Incentive
  5. Monopoly
  6. Oligopoly
  7. Pure or Perfect Competition = 5 characteristics
  8. Monopolistic Competition

STUDY GUIDE – UNIT 2

Microeconomic Concepts (Chapters 3, 4, 5, & 6)SSEMI1, SSEMI2, SSEMI3, SSEMI4

  1. Define microeconomics.
  2. The ______states that more will be purchased at low prices than at ____ prices.
  3. More will be purchased at low process than at high ones.
  4. Less will be purchased at low prices than at high ones.
  5. Approximately the same about will be purchased at low prices than at high ones.
  6. The demand curve is always sloping ______(upward/downward).
  1. All of the following must exist for there to be demand: _____, ______, & ______.
  2. How does the demand curve respond to an increase in demand?
  3. How does the demand curve respond to a decrease in demand?
  4. Define complements. Be able to identify a complement vs. a substitute and how each impact demand.
  5. Define elastic demand.
  6. The Law of Supply states:______.
  7. The supply curve is always sloping ______(upward/downward).
  8. How does a decrease in the price impact demand?
  9. How does an increased in government regulations affect the supply curve?
  10. The period of production is classified into two categories, long run & short run. Be able to identify both the long run of production and the short run of production.
  11. Define rationing and identify the characteristics of rationing.
  12. What is a shortage in the market? How does a shortage impact price?
  13. What is a surplus in the market? How does a surplus impact price?
  14. What is equilibrium price?
  15. Define price ceiling? Give 2 examples of a price ceiling. For the test be able to identify examples of a price ceiling.
  16. Define price floor? Give 2 examples of a price floor. For the test be able to identify examples of a price floor.
  17. What is a result of price ceilings being artificially low?
  18. What is a result of price floors that are artificially high?
  19. List all the shifters of demand. For the test, be able to determine how certain scenarios impact demand. For example, a great advertising campaign.
  20. Define perfect competition and the characteristics of perfect competition. For the test, be able to define and identify characteristics of the following business structures:
  21. Monopoly
  22. Oligopoly
  23. Monopolistic competition
  24. Pure competition

Hint: make and study flashcards for each.

  1. Define the following types of monopolies:
  2. A natural monopoly
  3. A geography monopoly
  4. A technological monopoly

Hint: make and study flashcards for each.

  1. Why are monopolies dangerous to consumers?
  2. Define market failure (positive and negative externalities).
  3. Define and identify public goods.
  4. What is public disclosureand how does it supports competition?
  5. Be able to identify shifters of supply. For example, new technology. Know how to determine what happens to supply if technology improves, technology fails, new regulations, deregulations etc.