V. Finkelshteyn Economics ’09 Lesson 37

Aim: Per-Test Review Do Now:

Recall the following topics1. Freakonomics – major concepts discussed in Ch.1-Ch.42. Economic Market – what is it, who is a part of it, what qualifies participants, how are prices set and influenced, what are the four major market systems and how do they influence output and prices

FreakonomicsFreakonomics What is economics according to Levitt and Dubner? How do incentives encourage or discourage economic output/interest? What tools are used by economists to measure how people respond to

incentives? What variables may influence incentives? What conditions may impact

economic behavior? To what extent is lack of expertise a handicap for the consumer? What impact does revealing of insider information have on an organization?

What is the economic relevance of that? What is information asymmetry? Why, according to authors, is “conventional wisdom” sometimes an obstacle

rather than an asset? What incentive do authors identify that accounts for one’s seemingly

irrational decision of choose a profession with 1 in 4 chances of being killed?

How did the authors define the immutable law of labor and the factors that determine a wage? (Ch. 3 pg.105)

• # of people willing and able to do the job, specialized skills a job requires, unpleasantness of the job, and demand for services job fulfills

4 Major Market Structures4 Major Market Structures• Pure (perfect) Competition Pure (perfect) Competition

– Many firms can easily enter/exit, products consist of commodities, no one group controls the prices, and there is virtually no non-price competition

• Monopolistic CompetitionMonopolistic Competition– Numerous competing firms, relatively easy to enter/exit,

differentiated products and prices, use of non-price competition, some influence over price

• OligopolyOligopoly– Few competing firms, very difficult to enter the market, products

differentiated mostly through firm names, price control due to lack of competition, great deal of non-price competition

• MonopolyMonopoly– Virtually no competition, great amount of control over prices,

some use of non-price competition, extremely difficult to enter into the market

Market EconomyMarket Economy• Market is created by the needs consumers have

for certain products/services and the ability of producers to fulfill those needs– interaction of buyers and sellers determines the prices

of most goods/services, as well as output– Qualifications for suppliers

• fulfill a need• Have the resources • ability to service the market

– Qualifications for consumers • Seek a solution to a need, and • Are eligible to make a purchase, and • Possess the financial ability to make the purchase• Have the authority to make the decision

Market EquilibriumMarket Equilibrium

Demand – what the consumers are willing and able to buy

Supply – what the suppliers are willing and able to produce

Supply

Demand

Price

Quantity

Personal Finance• What is personal finance and what are it’s components?• What are the two important factors that determine one’s

management of finance?• What constitutes an income?

– Land - rent– Capital - interest– Labor - wage– Entrepreneurship - profit

• What factors impact one’s credit?• What is a saving? What is an economic investment? • What are loanable funds and how do individual financial

decisions impact economy overall?• What is Consumer Price Index? How is it used? What is

included?