EOCT Review Microeconomics

Microeconomics Refers to the decisions made by individuals and firms in society and the relationship between the two.

Microeconomics also refers to: Demand Supply The Determinants of supply and demand. Price Elasticity of demand. Price Ceilings and price floors. Business Organizations Market Structures Organized Labor Effect of government regulation.

Demand What people want. Law of Demand – We want more at lower than higher prices. Determinants of demand (Change in number of consumers, consumer incomes, consumer price expectations, and prices of related (complimentary of substitute goods)

Supply What is available. Law of Supply – We sell more at higher prices than lower prices. Determinants of Supply – (change in cost of resources, technology, opportunities to profit from other products, number of sellers, and expectations of future prices.

Price Elasticity of Demand The degree to which quantity demanded changes with price. Luxury items are said to have elastic demand. Items of necessity have an inelastic demand.

Equilibrium Point Where quantity demanded and quantity supplied are the same. Any price above equilibrium creates a surplus. Any price below creates a shortage.

Types of Business Organizations Sole Proprietorships – Business owned by one person. Partnerships – Business owned by two or more people. Corporations – Business owned by many people.

Businesses operate in different competitive markets. In perfect competition, buyers buy the lowest price. In perfect monopoly – Firms are the only provider of a good and can charge any price. Monopolistic Competition – Many firms with products that are almost the same. Oligopoly – There are few suppliers of the same product in the market.