Three Questions every economic system

Economic Systems Each point along the economy’s production possibilities frontier is an efficient combination of outputs. Whether the econo...

Disequilibrium the price

Disequilibrium A surplus exerts downward pressure on the price, and a shortage exerts upward pressure. Markets, however, don’t always reach...

Changes in equilibrium price and quantity

Equilibrium occurs when the intentions of demanders and suppliers exactly match. Once a market reaches equilibrium, that price and quantity...

Demand and supply create a market

Demanders and suppliers have different views of price. Demanders pay the price and suppliers receive it. Thus, a higher price is bad news f...

Shifts of the supply curve

The supply curve isolates the relation between the price of a good and the quantity supplied, other things constant. Assumed constant along...

The supply schedule and supply curve

Supply Just as demand is a relation between price and quantity demanded, supply is a relation between price and quantity supplied. Supply i...

Shifts of the demand curve

A demand curve isolates the relation between the price of a good and quantity demanded when other factors that could affect demand remain u...

Tax principles and tax incidence

The structure of a tax is often justified on the basis of one of two general principles. First, a tax could relate to the individual’s abil...

The law of demand

The law of demand says that quantity demanded varies inversely with price, other things constant. Thus, the higher the price, the smaller t...

Government intervention in the market

The Role of Government Sometimes the unrestrained operation of markets yields undesirable results. Too many of some goods and too few of ot...

Why does household production still exist?

 If firms are so efficient at reducing transaction and production costs, why don’t they make everything? Why do households still perform so...

Types of firms

The Firm Household members once built their own homes, made their own clothes and furniture, grew their own food, and amused themselves wit...

Households play the starring role in a market economy

The Household Households play the starring role in a market economy. Their demand for goods and services determines what gets produced. And...

Three questions every economic system must answer

Economic Systems Each point along the economy’s production possibilities frontier is an efficient combination of outputs. Whether the econo...

The economys production possibilities

The focus to this point has been on how individuals choose to use their scarce resources to satisfy their unlimited wants or, more specific...

Choice and opportunity cost

Think about a choice you just made: the decision to begin reading this  right now rather than use your time to study for another course, pl...

The science of economic analysis

Economists use scientific analysis to develop theories, or models, that help explain economic behavior. An economic theory, or economic mod...