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Microeconomics, Inelastic: Consumer habits change when the price goes up,…
Microeconomics
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Issues/Problems
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Higher crime, lower education, lower life expectancy
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basic economic concept
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absolute advantage
company, region or country can produce a greater quantity of a good with the same quantity of inputs or produce the same quantity of a good using a lesser quantity of inputs than it's competitors
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market failure
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ex: insulin
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overpricing, underproduction, to artificially keep prices high
raising prices allows all companies to make more money regardless of what others do (game theory / payoff metrics)
Supply & Demand
Law of supply: an increase in the price of goods or services results in an increase in their supply
Law of demand: when the price decreases, there will be more demand for that good
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shifters of the supply curve:
- changes in input prices/ production cost
- changes in technology
- changes in expectations
- changes in the number of producers
- changes in prices of related goods and services
shifters of the demand curve:
- changes in prices of related goods and services
- changes in income
- change in taste
- change in expectation
- changes in number of consumers
government interventions:
price floors
keeps a price from falling below a certain level—the “floor”
--> support producers
price ceilings
keeps a price from rising above a certain level—the “ceiling”.
--> support consumers
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general measure of responsiveness of the percentage in quantity demanded to percentage of price change
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income effect: income change the demand of a good, depending on type of good
Normal goods: Income increases, demand increases ..
Inferior goods: Income increases, demand decreases..
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substitution effect: How price sensitive is the consumer? quantity of demand consumed changes based on the price of equal valued goods
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