M1-M3 MIDTERMS

• WHAT ARE THE DIFFERENT ECONOMIC ACTIVITIES?

  Production

  Distribution
• Production is the process of creating goods and services, and the conversion of raw materials into finished or consumable goods.
• Distribution is the process to allocate or to apportion the different fruits of production to the owners of the different factors of production.
• The Factors of Production are classifications of what goes into the making of a good or service.
• WHAT ARE THE FACTORS OF PRODUCTION?

  Land or Natural Resources

  • Renewable Resource
  • Non - Renewable Resource

  Labor or Human Resources

  Capital

  Entrepreneur
• Land or Natural Resources

  products used in the production of goods and services, come from the earth. Examples could include lumber or oil.
• Renewable resources

  are resources that can be replenished, such as trees that can be replanted.
• Non-renewable resources

  are resources that cannot be replaced such as coal.
• Labor or Human Resources

  is the physical and mental talents people contribute to the production process
• Capital

  is the term used for the items that are used to create a good or service, the produced goods that can be used as inputs for further production
• Entrepreneur

  The talent that some people have for organizing the resources of land, labor, and capital to produce goods, seek new business opportunities, and develop new ways of doing thing
• Entrepreneurship is the putting together of land labor and capital to create a good or provide a service.
• WHAT ARE THE FRUITS OF PRODUCTION?

  Exchange

  Consumption

  Public Finance
• The fruits of production refers to those benefits received by the owners
• Exchange

  is the delivery of the finished goods from the producer to the end user.
• Consumption

  refers to the utilization of goods purchased by the buyer to satisfy his demand.
• Public Finance

  is the management of the nation's monetary or financial resources by the government.
• WHAT ARE THE TYPES OF SECTORS OF THE ECONOMY?

  Consumers

  Producers

  Government

  International Market
• Consumers

  Individuals who purchase and use the finished products.
• Producers

  Manufacturers and sellers of finished products
• Government

  Regulates the actions of consumers and producers.
• International Market

  Buyer of excess products and seller of limited products
• WHAT ARE THE 4 BROAD CATEGORIES OF MARKET STRUCTURE?

  Perfect Competition

  Monopoly

  Monopolistic Competition

  Oligopoly
• Perfect Competition

  A market where infinite number of sellers sell homogeneous good to infinite number of buyers and buyers, and sellers have perfect knowledge of market conditions.
• Perfect Competition is a market structure in which large number of sellers sell a homogenous product at uniform price.
• A marker is said to be perfectly competitive if it satisfies the following features:

  Large number of buyers and sellers

  Homogenous goods

  Price is uniform

  ·        Price takers

  ·        Price makers

  ·        Price leaders

  ·        Price followers

  Free entry and free exit

  Profit maximization

  No government regulation

  Perfect mobility of factors of production

  Perfect knowledge:

  Absence of transport cost

  Perfectly elastic demand curve
• LARGE NUMBER OF BUYERS AND SELLERS:

  under perfect competition, there exist a large number of sellers and the share of an individual seller is too small in the total market output
• HOMOGENOUS GOODS:

  under perfect competition, all firms sell homogenous goods which are identical in quantity, shape, size, color, packaging etc.
• Differentiated product

  similar but not identical or different but close substitutes
• PRICE IS UNIFORM:

  as the product of the different sellers in the market are homogeneous.
• Price takers - have no option but to charge the ruling market price
• Price makers - able to fixed their own price
• Price leaders - market leaders whose price changes are followed by rivals
• Price followers follow the price-changing lead of the market leader
• FREE ENTRY AND FREE EXIT:

  any firm can enter or leave the industry whenever it wishes.
• PROFIT MAXIMIZATION:

  the goal of the firm is to maximize profit
• NO GOVERNMENT REGULATION:

  there is no government intervention in the market.
• PERFECT MOBILITY OF FACTORS OF PRODUCTION:

  resources can move freely from one firm to another without any restrictions
• PERFECT KNOWLEDGE:

  individual buyer and seller have perfect knowledge market and information is given free of cost
• ABSENCE OF TRANSPORT COST

  Transport cost is zero. Price of the product is not affected by the cost of transportation.