ECON101 Study Guide - Final Guide: Communication Problems, Fixed Cost, Opportunity Cost

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Provide a legal environment for contract enforcement. People interact in markets to buy and sell. Mixed of decentralized decision making with some gov"t control. Systems found in much of the world. Private markets are dominant force, private ownership of resources. Change in price will change the quantity of demand. Inverse relationship between price and quantity known as the law of demand. Substitute goods: use one good instead of another. Complement goods: when you buy one, you have to buy another. Other things equal, as the price rises, the quantity supplied rises and as the price falls, the quantity supplied falls. Occurs where the demand curve and supply curve intersect. Producing the goods in the least costly way. Price ceiling: set below equilibrium (ex: rent control) Price floor: prices are set above market price (ex: minimum wage law) Market failures: public goods and externalities 12/7/2014 9:43:00 pm. When the market fails to produce the right amount of a product.

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