Micro Economic

1890 Words8 Pages
No 3. What is inflation and what causes it? = Inflation is an increase in the overall level of prices in the economy. Inflation happen because culprit is growth in the quantity o money when a government creates larges quantities of the nation’s money, the value of the money.
No 5. Explain the two main causes of market failure and give an example of each! = Externality, is the impact of one person’s action on the well being of a bystander Example: pollution. = Market power, is the ability of a single economic actor (or small group of acors) to have a substantial influence on market prices. Example : if everyone in town needs water but there is only one well,
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No. 9. What is a competitive market? Briefly describe a type of market that is not perfectly competitive. = competitive market is a market in which there are many buyers and many sellers so that each has a negligible impact on the market price. * Monopolistic competition = market characterized by numerous buyers and relatively numerous sellers trying to differentiate their product from those of competitors. * Oligopoly = market characterized by a handful of (generally large)sellers with the power to influence the prices of their products. * Monopoly = market in which there is only one producer that can therefor set the prices of its products 5. PRINCIPLES OF ECONOMICS-MANKIEW
No. 5. If the elasticity is grearter than 1, is demand elastic or inelastic? If the elasticity equals 0, is demand perfectly elastic or perfectly inelastic? = If the elasticity is greater than 1, and demand is elastic.if the elasticity yequals 0, demand is perfectly inelastic
No 9. List and explainthe four determinantsof the price elasticity of demand discussed in the chapter. * Availability of close substitutes
Goods with close substitutes tend to have more elastic demand because it is easier for consumer s to switch from that goods to others. * Necessities versus luxuries
Necessities tend to have inelastic demands,
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