Part 1 Lesson 1 key concepts to know •3 axiom of economic way of thinking◦•positive vs normative analysis•economic welfare•scarcity•opportunity cost•Absolute vs comparative advantage•property rights•Demand and SupplyModels to know •Comparative advantage and gains from trade◦will be on finalLesson 2 - market supply Key concepts to know •costs•inputs to production•diminishing return•accounting vs economic profit•economies of scale•short vs long run•equilibrium•assumptions of perfect competition•market and gov failuresLesson 3 - market equilibrium Concepts •Consumer surplus/ producer surplus•income elasticity•compliments or substitutesocompliment – goes with a goodosubstitutes – can be used to replace another goodhot dogs and burger•shifts in demand and supplyosupplytechnologyprice of inputs
consumption changeodemandprice of substitutesconsumer preferenceincomeLesson 4 - intervention in markets Concepts •reasons to intervene as government•implications of intervention in perfect competition•DWL and efficiency cost•incidence of taxation•subsidy, 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
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
You've reached the end of your free preview.
Want to read all 8 pages?
- B
