Price ceilings (continued)
effects of, 79
inefficient allocation to
consumers, 80
inefficiently low quality, 81
reason for, 81–82
wasted resources, 80–81
Price competition, 641
Price controls,77–85
Price determination
AD-AS model, 190–197,
199–207
aggregate demand, 172–177
aggregate supply, 179–188
consumer spending, 161–166
economic policy, 199–207,
209–213
income, expenditure,
158 –170
investment spending,
166 –170
multiplier, 158–161,
209–213
Price discrimination
definition, 624
elasticity and, 626
logic of, 624–626
perfect price discrimination,
627–629
Price effect
collusion and competition,
640
monopolist demand curve,
marginal revenue and,
609–612
Price elasticity of demand,
457, 460–463
along demand curve,
471– 472
examples of, 466–471
factors determining,
472–473
monopoly behavior and, 614
Price elasticity of supply,
457, 477–479
Price floors,77, 82–85
agricultural, 82–84
effects of, 83
illegal activity, 85
inefficient allocation of sales
among sellers, 84
inefficiently high quality, 85
inefficiently low quantity, 84
minimum wage, 82–85
reason for, 85
school lunches, 84
surplus, 83–84
wasted resources, 84–85
Price indexes,142–147
Price leadership
definition, 656
product differentiation and,
655–656
Price level. See alsoAggregate
price level
classic model, 322–323classical macroeconomics,
343
money supply, 321–324
Price regulation,619–620
Price shock, 190
Price stability,13, 200, 310
Price support programs, 84
Price war
definition, 654
tacit collusion and, 653–655
Price-fixing, 637
Price-taker, 568
Price-taking consumer, 568
Price-taking firm, 568
Price-taking firm’s optimal
output rule,585–586
Pricing power, 181
Principle of diminishing
marginal utility, 513
Principle of marginal
analysis,537–538
Prisoners’ dilemma,644–647
arms race and, 649
repeated interaction, tacit
collusion and, 647–649
Private goods
characteristics of, 743–744
market supply of, 744–745
Private information,782–784
Private savings,105, 281,
415 – 416
Producer price index (PPI),
143, 145–146
Producer surplus,63–64,
482, 490
changes in trade quantity,
498–499
changing prices and, 492
cost and, 489–492
equity and efficiency, 499
gains from trade and,
495–496
market efficiency and,
496–499
reallocation of consumption,
496–497
reallocation of sales,
497–498
taxation costs and, 506–507
Product differentiation
advertising, role of, 670–671
brand names, 671–672
definition, 637, 655
by location, 669
price leadership and,
655–656
by quality, 669–670
by style or type, 668–669
Product markets,103, 700
Production capacity, 168
Production function,542,
542–546
Production possibilities
curve (PPC),16 –21,
24–25, 396–400
Production workers, pay, 12Productivity,27, 370 –371
aggregate production func-
tion, 374–378
diminishing returns to physi-
cal capital, 374–377
information technology, 379
natural resources, 378
physical capital, 371
short-run aggregate supply
curve, 183–184
technological progress, 371,
377–378
total factor, 377–378
Profit
accounting profit versuseco-
nomic profit, 531–533,
539, 586
explicit versusimplicit costs,
530–531
maximization of, 536–539
monopoly and, 612–615
negative, 533
normal, 533–534
perfect competition and,
584–588, 590–592,
595–596
positive, 533
production and, 539
Progressive tax, 499
Property rights,3, 388–389
Property tax, 202–203
Proportional tax, 499
Public debt,300–302
Public goods, 745–746
provision of, 746–748
voting as, 749
Public ownership, 619
Purchasing power parity,
425–426Q
Quantity competition, 641
Quantity control,88–93
costs of, 92–93
deadweight loss, 90, 92
demand price, 89–90
New Jersey clams licenses, 92
quota rent, 91
supply price, 90
taxicab medallions, 88–93
wedge, 90–91
Quantity demanded, 49
Quantity effect
collusion and competition,
640
monopolist demand curve,
marginal revenue and,
609–612
Quantity supplied, 59
Quantity Theory of Money,
349
Quintiles, 764–765
Quota,88.See alsoQuantity
control
Quota rent, 91R
Rate of return, 278
Rational expectations, 352
R&D (research and develop-
ment),386–387
Reagan, Ronald, 357
Real business cycle theory,
352–353
Real exchange rate,423–425
Real gross domestic product
(GDP),112–116
aggregate demand, 172–173,
175
calculating, 113–115
chain-linking, 115
defining, 112–115
fiscal policy, 210–211
versusGDP, 113
Great Depression, 161
investment spending, 168
money demand curve, 272
multiplier, 159–160,
210 –211
versusnominal GDP, 114
potential output, 185–186
unemployment, 122–123
Real gross domestic product
(GDP) per capita, 115
economic growth, 13,
366–368
long-run economic growth
comparison, 379–383
productivity, 370–371
Real income,135, 459
Real interest rate,138, 282
Real price of oil, 389–390
Real wage, 135
Recessionary gap,195 –196
expansionary fiscal policy,
205
Federal Reserve, 313
revaluation, 436
unemployment rate, 195,
328
Recessions,10 –11, 197
fiscal/monetary policy,
355–356
macroeconomic theories,
355–356
unemployment, 122
Reconstruction Finance
Corporation (RFC),
256–257
Recovery. SeeExpansions
Re-entrants, 127
Regional Federal Reserve Banks,
255–256
Regressive tax, 499
Regulation Q, 257, 273
Relative price, 797
Relative price rule, 798
Rent control, 78–82
Rental rate, 691
Reputation, 784
Required reserve ratio, 244I-10 INDEX