Unit 4 Market Structures
Negative externality example
2nd hand smoke beer factories Driving while texting
Signs of a healthy labor market
Check Chart
Pigouvian Tax
a tax on the polluter to correct negative externality fixed by incentives making company fix, not the gov't
Cyclical unemployment
contractions in the economy recession time period being 'let go'
Coase Theorem Example
one neighbor is too loud (700) the other wishes for peace and quiet (1000) neighbor 1000 offers 800 to other neighbor BOTH WOULD BENEFIT SO YES
Private goods CHART
rival in consumption, excludable
Oligopoly
A market structure in which a few large firms dominate a market
Monopoly
A market structure with only one seller price maker
Subsidies
Financial support from the government lower the price and increase the quanitity
Recession (Traditional)
GDP declines for 2 quarters in a row, 6 consecutive months
What has the greatest market power?
Monopoly
Info on Perfect Competition
Price taker Large number of firms Low barriers to entry Identical Products Unlimited # of producers/consumers MILK
Underemployed rate
Unemployed plus two limitation
Perfect Competition
a market structure in which a large number of firms all produce the same product price taker
Monopolistic Competition
a market structure in which many firms sell products that are similar but not identical
Rival in consumption (a good)
a use by one person diminishes the use by another person BOX OF CANDY
Non-rival in consumption
a use by one person does not diminish the use of another BEACH
How to prevent Market Failures
adequate competition buyers + sellers are well informed resources are free to move to + from different industries prices reflect the cost of production
Inflation
average of all rising prices
Real income
base year value
Base Year VS Current Year
benchmark year/reference vs. the now/situation
Positive Externalities
benefit received by someone who had nothing to do with the activity that generated the benefit education example - loans, grants, etc.
Exludable
can prevent someone from doing/attending SIX FLAGS TICKET
Private goods
can prevent use but hard to share the more I use, the less for someone else
Not-excludable
can't prevent someone from attending BEACH, PUBLIC SCHOOL
Structural unemployment
changes in the economy that eliminates some jobs and creates new ones unemployment occurs for a longer period of time and requires new skills to be learned most-likely COMPUTER EXAMPLE
Public goods
collectively consumed value to everyone FIREWORKS
CPI
consumer price index
Social Cost
cost to all members of society
Private Cost
cost to you the decision maker/producer personal costs
Nominal Income
current market value
Deflation
decrease in prices
Causes of Inflation/Consumer Price Index
demand PULL deficit spending wage PUSH spiral of wages and prices excessive monetary growth
Info on Monopoly
determines price single firm no close substitutes some advertising high barriers to entry DIAMOND COMPANY
Limitations on unemployment rate
does not include... part-time workers who wish for a full-time job discouraged workers
Real GDP
effects on inflation taken out
Common resource
everyone has access but may be overused FISHING IN A POND
Coase Theorem
externalities may be privately solved all are better off and the outcome is efficient privately solved
Expansion
growth of GDP
Labor Force
individuals who are working/individuals not working but looking for work
Info on Monopolistic Competition
large number of firms some price influence differentiated products from each other - similar Not perfect substitutes no barriers to entry depends on advertising RESTAURANTS
Artificially scarce (club goods)
may prevent use but one person use does not diminish another's use UNCONGESTED TOLL ROAD
Market Structure
nature of competition among firms operating in the same industry
Club Goods CHART
non-rival in consumption, excludable
Public Goods CHART
non-rival in consumption, non-excludable
Pigouvian Subsidy
payment to encourage activities that generate positive externalities (FLU SHOTS)
TYPES OF MARKET STRUCTURES
perfect competition, monopolistic competition, oligopoly, monopoly
Seasonal unemployment
periodic trends short time period
Product Differentiation
real or imagined differences between competing products in the same industry
Business Cycle Graph
recurrent swings in real GDP PEAK CONTRACTION TROUGH EXPANSION PEAK...
Positive externality example
remodeling a house to make the neighborhood better and richer
Common Resource CHART
rival in consumption, non-excludable
Recession (NATIONAL bureau of economic research)
significant decline in economic activity spread across the economy, lasting for more than a few months and is more visible take their time declaring a recession
Info on Oligopoly
small number of firms owns a majority of market share - can determine price but each company relies on each other identical or differentiable products advertising is useful high barriers to entry AIRPLANE COMPANY
Goal of inflation
stable prices NOT low prices
Negative Externality
the harm, cost, or inconvenience suffered by a third party because of actions by others
Unemployment rate + GOAL OF UNEMPLOYMENT
the ratio of unemployed individuals divided by the total number of persons in the civilian labor force expressed as a percentage GOAL = 4.5%
Externality
unintended side effect that either benefits or harms a third party not involved in the activity that caused it
External Cost
value of the negative impact on bystanders
Free-Rider
with no incentive to pay some obtain the goods for free difficult to force everyone to pay their fair share
Frictional unemployment
workers between jobs with transferrable skills