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Econ 4.3
Monday, January 25, 1999
Announcements: The first exam
will be Monday, February 1. Fox urges students to check out the
Case & Fair website for practice problems.
Lecture notes:
Chapter 3: The Structure
of the US Economy
Structure of the US
Economy
- Private Sector: the
non government part; includes all independently owned
profit-making firms, nonprofit organizations, and
households; all the decision-making units in the economy
that are not part of the government
- Types of
Private Sector Firms
- Sole
Proprietership: represents the
largest number of businesses in the US;
one person owns it all and is liable for
it all
- Partnership:
2 or more individuals together that own
business; everyone is collectively liable
for everything
- Corporation:
the minority form of business
organization that has infinite life
unless it fails; has all the legal rights
of an individual; owners of a corporation
are only liable for that which they
personally invest; board of directors are
only liable for what they invest, unless
dishonest action is taken; the
corporation is dominant in sales
- Public Sector: the
government part; includes all agencies at all levels of
government -- federal, state and local
- International Sector:
everyone else in the world; ROW -- rest of the
world; from any one country's perspective, the economies
of the rest of the world
Industry Characteristics
| |
Number |
Product |
Price Setting |
Easy Entry |
| Perfect |
Many |
Homogeneous |
No |
Yes |
| Monopolistic |
Many |
Differ |
Limited |
Yes |
| Oligopoly |
Few |
Homo/Differ |
Yes |
Limited |
| Monopoly |
One |
Unique |
Yes |
No |
- A monopolist can set the
price, but the market will determine how much will be
bought; can set one, but not the other
Competitive Trends since
1970
- Private Sector becomes more
competitive; companies put price before quality
- Percent manufacturing
employment is shrinking
- Fastest growth
sector-services
- US becomes net importer
Some Empirical Observations
- Government expenditures as %
of GDP -- relatively constant since 1970s, 32-34%
- % non military government
employment has been declining
- International trade since
1970
- Exports 5.5% GDP,
11.9% by 1997
- Imports 5.4% GDP,
13.1% by 1997
Chapter 4: Demand, Supply
and Market Equilibrium
- Law of Demand: There
is an inverse relationship between price and quantity
purchased
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