EBF 200 Final.docx - Part 1 Lesson 1 key concepts to know 3 axiom of economic way of thinking positive vs normative analysis economic welfare scarcity

EBF 200 Final.docx - Part 1 Lesson 1 key concepts to know 3...

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Part 1 Lesson 1 key concepts to know 3 axiom of economic way of thinkingpositive vs normative analysiseconomic welfarescarcityopportunity costAbsolute vs comparative advantageproperty rightsDemand and SupplyModels to know Comparative advantage and gains from tradewill be on finalLesson 2 - market supply Key concepts to know costsinputs to productiondiminishing returnaccounting vs economic profiteconomies of scaleshort vs long runequilibriumassumptions of perfect competitionmarket and gov failuresLesson 3 - market equilibrium Concepts Consumer surplus/ producer surplusincome elasticitycompliments or substitutesocompliment – goes with a goodosubstitutes – can be used to replace another goodhot dogs and burgershifts in demand and supplyosupplytechnologyprice of inputs
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consumption changeodemandprice of substitutesconsumer preferenceincomeLesson 4 - intervention in markets Concepts reasons to intervene as governmentimplications of intervention in perfect competitionDWL and efficiency costincidence of taxationsubsidy, floor, ceilingPart 2 Lesson 5 - market power Concepts Pareto efficiencyefficiency loss due to interventionoEvery intervention results in an efficiency lossoCreates DWLoMeant to improve social welfaremonopoly, monopsony, duopoly, oligopolyowhen a consumer(s) or producer(s) is the price setteromake choices hoping to improve their welfareomonopolyfirm sets pricemarginal revenue intercept – 2x slopeomonopsonyconsumers set priceone price making buyeroduopolytwo sellers can affect pricehigher than competitive equilibriumooligopolymore sellers move monopoly equilibrium closer to competitive equilibriumprice discriminationHerfindahl - Hirschman index
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oOne firm in market – 10000oModerately concentrated – 1000-1800oOver 1800 is a high concentrationOPEC and cartelsoType of oligopolyoCountries with high exports of crude oil founded OPECIran, Kuwait, Saudi Arabia, and Venezuela
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