if you build your new office or factory in a poor part of town then you helpto rejuvenate the area. You create various positive externalities, ranging from increasing propertyprices to increased revenue for nearby restaurants and gas stations. 19. What is economic system (economy) - Is a complex interaction where buyers + sellers form the market system - Producers, consumers, labor and products all interact in a process to determine the price of goods/services 20.Command economy, mixed economy, market economy (Which category the U.S. media industry falls into) Command Economy- decisions made by a Gov’t (examples: North Korea, Cuba) Market Economy- Marketplace determines all decisions w/ no Gov’t interventions/ MixedEconomy- privately owned media companies function for profit subject to Gov’t policies and regulations (example: U.S)21.Supply, demand, & equilibrium Supply → The amount of a product a producer will offer at a certain price Law of Supply: The quantity of a good supplied is positively related to the good’s price Demand → Need - measure of the quantity of a particular product/service that consumers will purchase at a given price Law of demand: The quantity of a good demandedis inversely related to good’s price Equilibrium → The point at which supply + demand meet. And equalize the price and quantity provided (Quantity demanded = Quantity supply)22.Supply curves, demand curves (Visualize supply curves, demand curves) Down slope of demand: 1. income effect- decline in the price of a product increases the consumer's real income, enabling to purchase more of the product 23. Equilibrium price, equilibrium quantity- Point supply and demand meet and equalize the price and quantity produced. Optimal point for consumers and producers24. Surplus, shortage ● Surplus: an excess of production or supply over demand. ● Shortage: a state or situation in which something needed cannot be obtained in sufficient amounts. 25.Price elasticity of demand (Definition, meaning of price elasticity of demand, how to calculate price elasticity of demand, how to interpret the price elasticity coefficient, examples of elastic products and inelastic products)/ Percent price change -> Percent demand for the product/Price elasticity of demand is an economic measure of the change in the quantity demanded or purchased of a product in relation to its price change. 26.Factors that influence price elasticity of demand ● Substitution ability: Large number of substitutes ● Proportion of Income: higher the price of a product relative to one’s budget ● Luxuries vs. Necessities: greater the extent to which the product is a luxury ● Time: longer time period is involved since price change27. Cross elasticity of demand (How to interpret the cross elasticity coefficient, what the positive
cross elasticity coefficient means, what the negative cross elasticity coefficient means).
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