Not everyone holds debt, crowds out private investment- forces private businessescompete with
gov. Bonds for investor dollars
Reduce wages, less gov. Spending on programs,
1.6
1.
What is the relationship between prices and demand for a product?
As prices decreases, there are a larger pool of willing buyers, with higher prices, there will be less
demand.
2.
How is market equilibrium achieved? Describe the circumstances under which the price for
gasoline would have returned to equilibrium in the United States after Hurricane Katrina.
Equilibrium- quantity demand equals the quantity supplied. Achieved through quantity and price
adjustments that occur automatically.
3.
Draw a graph that shows an equilibrium point for supply and demand.
1.7
What is meant by market structure?
The number of suppliers in a market defines then the market structure. How the different
companies interact with other companies in the space, and how much it takes of the market
share of potential customers.
Compare and contrast perfect competition and pure monopoly. Why is it rare to find perfect
competition?
Pure monopoly- single firm accounts for all industry sales of a particular good or service. There
are Barriers to entry, factors that prevent new firms from entering the industry. Technological or
legal reasons are usually why.
Perfect competition- many firms are in the market, firms offer products that are close substitutes
but still differ from one another, relatively easy to enter the market
How does an oligopoly differ from the monopolistic competition?
1.
How does an oligopoly differ from monopolistic competition?
●
Few firms produce most or all of output
●
Large capital requirements or other factors limit number of firms
○
What one firm does has an impact on other firms
