Firms, markets, and price

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  1. Firms, Markets, and Price Overview:
  2. Coordination in An Economy
    • Four complementary social institutions
    • Firm
    • Market
    • Property Rights
    • Money
  3. Competitive Market and Price
    • Competitive Market
    • Money Price
    • Relative Price
  1. Understanding Economic Coordination
    Which of the following is not  a social complementary social institution?
    1. Firm
    2. Market
    3. Money
    4. Human Rights
  2. Opportunity cost is a _________________.
    1. Money Price
    2. Relative Price
    3. Revenue Price
    4. Best Alternative Price
  3. In a competitive market, can seller set a specific money price of a good, and ensure buyers will buy the good? Why or why not?
    1. Understanding Money Price and Relative Price
      Bella owns a cow farm to produce large quantities of milk. Last week, she placed an advertisement for her willingness to exchange milk for a variety of items. Here is what she is willing to exchange:

      1 litre of milk for 1 bag of rice.
      2 litres of milk for 1 bag of chips.
      4 litres of milk for 1 box of mac and cheese.
      8 litres of milk for 1 pound of chicken.
      1. What is the relative price of chips in terms of chicken?
      2. If the money price of chips was $3 a bag, then what do you think the price of mac and cheese is?
      3. If the money price of rice is 10 cents a bag, and the price of a chicken is $1, do you think anyone will accept Bella's offer of milk for chicken?
    Topic Notes

    Coordination in An Economy

    Firm: a business organization that hires factors of production, and utilizes those factors to produce goods and services to sell.

    Market: a medium that allows buyers and sellers to get information, and do business with each other by exchanging goods and services.

    Property Rights: A social agreement that presides over the legal ownership, use, and disposal of resources, goods, or services.

    Money: is any commodity or token that is acceptable as payment for goods and services.

    Competitive Market and Price

    Competitive Market: a market with many buyers and sellers so that no single buyer or seller can influence the price.

    Money Price: the amount of money needed to buy a good or a service.

    Relative Price: the ratio of one good relative to the price of another good. This is an opportunity cost.