Econ 104 Money and Banking

Econ 104 Money and Banking - MONEY AND BANKING [ UNIT #3 C....

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MONEY AND BANKING [[[ UNIT #3 C. Most common = Oligopoly - few producers of a good or service 1. Characteristics a. scarce resources -oil, drugs b. Economies of scale: -Average cost of production decreases as output increases --Natural monopoly (or oligopolies) enjoy large economics of scale. --Cost to enter the market is so high, it is a barrier to competition 2. Examples of Oligopolies in US --- Media industries 6 movies studios that make 90% of film revenue 4 Music companies that make 80% of recording revenue 6 major book publishers 5 television companies --- Aircraft manufacturers --- Wireless communications ---Food processing companies Kraft, Pepsico, Nestle, have the largest share of overall global profits. 3. OPEC ---Organization of Petroleum Exporting Countries ---Cartel: a formal agreement among firms to coordinate prices or production. ---12 Coutnries- principal goal: “determine the best practices to protect the organizations interests individually and collectively.” A] Problem : Oil crisis of 1975
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MONEY AND BANKING --- Agreed not to ship oil the the US because the US supported Isreali conflict B] Results ---- Speed limit of 55 mph (1974) ----strategic petroleum reserve (1975) ---- Developed Dept of Energy (1977) ---- US car companies began to produce smaller cars ---- Nascar reduced their distances by 10% ----Investment in renewable resources (wind and solar energy) ----Exploit all current oil stocks in US C] 2 nd Oil crisis in 1979 ---Iraqi invasion of Iran Stopped Irans production Lowed Iraqs production D] Latest Crisis – 2005 --- 9/03 $25/barrel for crude oil ---7/08 $147/barrel for crude oil ???? Why???? Demand brew by 1.76%/ year from 94-06 3.4% increase in demand in 03-04 Transportation sector was booming ---- personal vehicle ownership went up. Everyone has a car now. Supply: Oil supply growth slowed down Price speculation in market for oil --- People buy a future amount at a set price today. --- They make the most money if the set price is low, but the value increases drastically in the future. I. Definitions
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MONEY AND BANKING Barter Economy: Exchange of products of each individuals own labor. For Barter to work must have DOUBLE COINCIDENCE OF WANTS. Begin to specialization. [ Everyone needs fishhooks. Honest John specializes in making fishhooks] Creation of “Commodity” money Money: 1) Widely accepted I used as a medium of Exchange 2) Store of Value- or standard of Value. Example – New England:
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This note was uploaded on 04/27/2009 for the course ECON 104 taught by Professor Shaffer during the Spring '08 term at Kansas.

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Econ 104 Money and Banking - MONEY AND BANKING [ UNIT #3 C....

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