Opportunity Costs can be defined as the benefits, the profits, or anything that holds any value that can be derived from any activity. and which we give up and forgo in order to do some other activity in its place. Every form of resource such as land, money, time etc., can be put to several uses; thus every action, choice or decision has an opportunity cost. Few conditions are necessary for the existence of perfect competition. Firstly, there must be large number of buyers and sellers in the market. Then the condition is that the sellers must be selling an identical product in all sense such that it has same characteristics, quality, condition and formula etc. The entry and exist from the market must be free such that any firm or individual …show more content…
If the price ceiling of the rents is below the equilibrium then an excess of demand is created for apartments and thus there is a shortage of apartments due to low rent. This is so because most people will like to rent an apartment especially young people who rent apartments rather than stay with their parents. If the rent were higher, then the opportunity cost of staying at parents house would be low as the appartments would be expensive. But in case of rent controls, the opportunity cost for them to stay with their parents is high since the apartments can now be rented at a cheaper …show more content…
It means that the status of the marijuana is based on the consumer preferences. Consider a society where a large number of people like to have marijuana and are addicted to it for example. There the demand for pot would be high but the supply would be limited since the pot is illegal for production and has to be sold undercover and in the black market away from the prying eyes. Similarly in a society of low marijuana consumers where there are low number of pot addicts and buyers, there might be a surplus in the market as not many people would buy pot. If the federal government were to allow the manufacture of marujuana, then there would be a drastic change in the prices and quantity sold in the market. Like when the pot was illegal, then it had to be sold in the black market meaning its price was high and its quantity supplied limited. But in case of a market where pot manufacture is legal, there the price and quantity will be determined according to the forces of demand and supply meaning that the prices will be realistically lower and the supply may be
In economics, particularly microeconomics, demand and supply are defined as, “an economic model of price determination in a market” (Ronald 2010). The price of petrol in Australia is rising, but the demand remains the same, due to the fact that fuel is a necessity. As price rises to higher levels, demand would continue to increase, even if the supply may fall. Singapore is identified as a primary supplier ...
Although the recent tech boom in San Francisco has been blamed for the increased housing demand and the lack of affordable rental housing in the City, the reality is that the shortage of affordable rental housing been steadily climbing for the last 35 years. Rent control is oftenat the center of the controversy regarding the affordable housing shortage. In response to high inflation, and escalating rents, San Francisco’s Residential Rent Stabilization and Arbitration Ordinance was passed in 1979 (Forbes, Sheridan, 1999). Rent control imposes restrictions on landlords in regards to rent increases and evictions. It is estimated that seventy percent of San Francisco’s rental units are under rent control (Marti, Shortt, 2013). Because of the limited rent increases allowed, tenants living in these rent controlled apartments seldom move out, which severely impacts the vacancy rates in the City. Although the vacancy rate among rent-controlled units is extremely low, there are occasions when a tenant may vacate a rent control unit (a job out of the area, the decision to purchase a home, etc.). When a rent-controlled unit is voluntarily vacated, the landlord is allowed to raise the rent to market rates (this is called vacancy de-control); then the rent control annual increase takes effect on the new rent. A landlord will often raise the new rent to the highest possible price the market will allow, in an attempt to recoup the financial loss he is incurring on the units still under rent control. Because of the new higher rent, the previously affordable unit is no longer considered affordable; which then impacts the inventory of affordable housing in San Francisco.
An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies. Although firms in oligopolies have competitors, they do not face so much competition that they are price takers (as in perfect competition). Hence, they retain substantial control over the price they charge for their goods (characteristic of monopolies).
First, a perfectly competitive market provides low prices for consumer of the market. This exists as a pro for the consumers buying the product. In the example, it remains a pro for people purchasing the corn cheaply in Tap. When low prices exist in the market however, the burden is placed on the producers. This happens because the producers identify as price takers, and the price stays low due to competition. Low prices result in lower profits. On the island of Tap for example, low prices in a competitive market hurt the producers of corn. Meaning, farmers prefer the monopoly version of the market. The monopoly form results in farmers getting paid above the perfectly competitive market price. On the contrast, in a monopoly form prices remain higher for the consumers. The final pro of the monopoly form exists as the uniform packaging and quality. Since only one firm produces the specific product, they use the same quality and packaging throughout the process. This also be views as a con for the perfectly competitive side. This side uses many different forms of packaging and quality due to the various amounts of producing firms. Overall, many different pros and cons result when implementing various kinds of market
Rent control is a price ceiling imposed by the government. Which means is a law that places a maximum price a landlord can charge a tenant. This rent control affects the equilibrium of the market, making a change on supply and demand because if the price is set below the market price, the quantity demanded will exceed supply; as a result, people who want to rent will have to lean to units that are not rent controlled which will have a higher price. In a normal competitive market, when the quantity demanded exceeds supply, the price increases to eliminate the problem of shortage. In this case of rent control, the price of rent can only be increased each year by a fraction of the inflation rate.
A perfectly competitive market is based on a model of perfect competition. For a market to fall under this model it must have a number of firms, homogeneous products, and easy exit and entry levels into the market (McTaggart, 1992).
Cost-benefit analysis is an economic approach decision making that compares the strengths and weaknesses of each choice in order to determine which option will provide the most amount of benefits and the least amount of costs. This method is often applied to decisions that concern the environment as an attempt to determine the value of the environment before following through with decisions to preserve or utilize the environment for resources. Although many economists believe that cost-benefit analysis is an efficient way to make most decisions, some philosophers suggest that certain things, including the environment, have innumerable values, therefore, cost-benefit analysis may not be a reliable method to make decisions regarding these things.
In the three articles I researched, each author looks at the following use of marginal cost & marginal revenue in decision-making with a strategic point of view. I looked at Covering Entrepreneurship and small business: Basic economic principles: Part II & I the articles written by Karen Hallows. I also looked at What Are the Benefits of Marginal Costs Equal to Marginal Revenue by Thomas Metcalf.
In addition to these prerequisites, the perfect market required perfect consumer and supplier information, no rent seeking behaviour and no moral hazard existed. If these conditions were not met, market mechanisms would fail to produce the efficient allocation of resources.
Perfect and monopolistic competition markets both share elasticity of demand in the long run. In both markets the consumer is aware of the price, if the price was to increase the demand for the product would decrease resulting in suppliers being unable to make a profit in the long run. Lastly, both markets are composed of firms seeking to maximise their profits. Profit maximization occurs when a firm produces goods to a high level so that the marginal cost of the production equates its marginal
The Perceived Demand Curve for a Perfect Competitor and Monopolist (Principle of Microeconomics, 2016). A perfectly competitive firm (a) has multiple firms competing against it, making the same product. Therefore the market sets the equilibrium price and the firm must accept it. The firm can produce as many products as it can afford to at the equilibrium price. However, a monopolist firm (b) can either cut or raise production to influence the price of their products or service. Therefore, giving it the ability to make substantial products at the cost of the consumers. However, not all monopolies are bad and some are even supported by the
Pure or perfect competition is seldom noted in present enterprises but it is still essential to know the model since it benefits to the analysis of industries similar to the pure competition. Defined the perfect competition is a market of many producers and consumers will impact the market price but one of either has almost no impact depending on the general percentage as a whole. In terms of the products offered regardless of the sellers the products are still have the same basis. This also means that each firm is required to be price takers causing them to have no effect on the market price. Another condition is the free entry and exit of the market where the firms can come and go at will with a lack of barriers to say otherwise. As far as demand, each firm will see their demand as perfectly elastic. This will create a horizontal line at the price on the demand curve, not for the industry but only as it pertains to individual firms because they take the market price with no yield to the quantity that they produce. To
1.a)Because of the issue of scarcity, people must make choices, what determines these choices is the value we place on them and what we have to give up to get them. What we have to give up is called opportunity cost (OC). For example, if I decide to go hiking instead of attending my tutorial class, “attending the class” would be my opportunity cost, and “hiking” what I have evaluated more important in term of benefits and costs. In this instance, the opportunity cost of making a pizza for Monica is 6 coffee: which is the quantity of coffee Monica has to give up to make a pizza, for Rachael the opportunity cost is 4 coffee. To determine absolute and comparative advantages we compare the opportunity costs. Given that Monica and Rachael are using
Everyone in life has made sacrifices. Historical periods have experienced years of giving up something in exchange for another. It occurs on such a daily basis that we don't even notice we do it. But every choice has a cost, no matter how greatly or how little its extension may reach. Nothing in life is free, and everything comes with a price, be it monetary or not.
Opportunity cost is the benefits one could have gained if another option was chosen. The opportunity cost associated with bethel’s online program would be meeting new friends. In a traditional setting, one can attend study groups with classmates to help one another. Students also miss out on the opportunity to have that human interaction with the professor.