1. Microeconomics: Market & Exchange
Unit 3

2. First You Must Understand the Law of Supply and Demand
As demand increases the price goes up which attracts new suppliers who increase the supply bringing the price back to normal. However, in the marketing, of high price (prestige) goods, such as perfumes, jewelry, watches, cars, liquor, a low price may be associated with low quality, and may reduce demand.

3. Supply Curve http://www.netmba.com /econ/micro/supply/curv e/
The higher the price, the larger of the quantity supplied if all other things stay constant.

4. Demand Curve http://www.netmba.com /econ/micro/demand/cur ve/
Quantity demanded moves in the opposite direction of price if all other things stay constant.

5. Signals Sent to Buyers & Sellers
Price of Other Goods
Number of Sellers
Price of Relevant Inputs
Technology
Expectations
Customer Preference
Prices of Related Goods
Income
Number of Potential Buyers
Expectations of Price Changes

6. How Markets Interact with Consumers
We will analyze several examples of how consumers are effected by production.
Look at Lesson Five- Activity 2: Markets Interact- The Sequel. You will also need the handout called Visual 2.2: Changes in Supply/Demand.

7. Business Organizations
Sole Proprietorship
Partnership
Run by one person
No distinction between owner and business
All assets and debts are the proprietor’s.
Owned by more than one person.
Combine property together
Share profits and debts together

8. Business Organizations
Corporation
Non-Profit
Separate legal entity from the owners and employees.
A corporation has members and officers. (President, Vice- President, Secretary, Treasury, etc.)
Has a publically registered charter
If a corporation fails, all investments are split up with the members. The liabilities are not shared with its members.
Does not have private owners.
They have controlling boards or members.
They cannot sell their shares for profit or benefit personally in any way.
They are tax exempt.

9. Models of Market Structure
Perfect Competition
Monopolistic Competition
1. All firms sell an identical product.
2. All firms are price takers.
3. All firms have a relatively small market share.
4. Buyers know the nature of the product being sold and the prices charged by each firm.
5. The industry is characterized by freedom of entry and exit.
1. All firms produce similar yet not perfectly substitutable products All firms are able to enter the industry if the profits are attractive All firms are profit maximizers All firms have some market power, which means none are price takers.

10. Models of Market Structure
Oligopoly/Cartel
Monopoly
It is similar to a monopoly but instead of one firm controlling the market, there are at least two controlling the market. This can also be referred to as a cartel to fix prices.
Examples: BP/Shell and Coke/Pepsi
Only one firm controls the market.
Examples: Standard Oil, Microsoft, and the Bell Companies
Monopolies are against the law in the United States because of the Anti-Trust Acts.

11. Role of the Stock Market
The Stock Market is the center of the United States economy. You do not have to have money invested on the market for an effect to be felt.
Companies agree to sell stocks of their companies. The stocks can be sold but depending on what the stocks are worth that day will determine whether you receive a profit or a loss.
It is your job to pick stock that is traded on the Stock Market. You are to track that stock every day to see how much it is worth at the end of the week. You will have to sell your stocks to see if you made a profit or took a loss. Imagine that you have $10, to invest in the stock market. What are you going to invest in?

12. Distinguish Between…
Fixed Costs
Variable Costs
A cost that does not vary depending on production or sales, such as rent, property taxes, insurance, or interest expense.
A cost of labor, material or overhead that changes according to the change in the volume of production units. Combined with fixed costs, variable costs make up the total cost of production. While the total variable cost changes with increased production, the total fixed costs stays the same.

13. Analyze the Influence Improved Factors of Production Has Had on Industry
What are the factors of production? Natural Resources, Human Resources, Capital Resources, and Entrepreneurship
Discuss how each of these have been influenced by the following: Technology, Education, Training, Specialization, and Division of Labor.
This will be a classroom discussion. You must participate in order to receive an assessment.