1. Economics

5. Economics assumes scarcity of goods and services.

7. Let’s Define a Few Terms

11. Normal Good A good that is bought in greater quantities as income increases.

12. Inferior Good A good you buy less of as your income rises.

13. Luxury Good Demand for the good rises even faster than income .

18. Consumption = rival when one’s person’s use (consumption) diminishes another person’s use -- it is a rival good

19. Available to one and all . . . nonexcludable

20. Cost of Producing One More “Good” marginal cost

21. Revenue from Selling One More “Good” marginal revenue

22. Economies of Scale Long term average cost of production decreases as plant size and rate of output increase.

28. Economies of Scope Achieved Through Multi-Product Production

29. Cost structures costs for production in a particular market fixed and variable

30. Fixed Cost costs needed to produce one unit of a product also called “first copy”costs

31. Variable costs costs that vary depending on quantity produced

32. Vertical integration firm controls different aspects of production, distribution and exhibition of its products

33. Marginal Revenue The revenue generated when one additional unit is sold.

34. Marginal Cost The cost of producing one more unit of output.

35. Price discrimination The practice of charging different prices to different consumers for a nearly identical good.

36. Transaction costs The costs involved in making a market transaction.

37. Utility satisfaction offered by the product subjective measure individuals assign value based on utility

38. Barriers to Entry Anything that prevents a new firm from entering a market.

39. Competition Should bring increased choices and lower prices to consumers.

40. Brand names lower transaction costs. Brand names convey important information to consumers, which lowers the transaction cost.

45. Price = Demand/Supply

46. People Want Less of the Product Demand Decreases Supply Increases Suppliers will Make More of the Product

47. People Want More of the Product Demand Increases Supply Decreases Suppliers will Make Less of the Product What a deal!

48. Market Demand The total quantity of a good or service demanded by potential buyers.

51. Firms are Price takers. A price taker is one whose buying or selling decisions do not affect the market price of the good.

53. Demand Curve Shifts

58. Oligopoly Several firms control a market.

60. Monopoly Only one producer of a good or service.

69. Cartel A group of firms seek to act like a monopolist.

74. Capital cost requirements Amount of “up-front” money needed to start new business.

75. Economies of scale Bigger is better

76. Demand for differentiated product counteracts push for economies of scale.

85. What happens when the price changes?

86. Is there price elasticity of demand? Or How sensitive are consumers to changes in price?

89. Price Elasticities of Demand and Revenue -- Prices Go Down

90. Price Elasticities of Demand and Revenue -- Prices Go Up

92. Cross-price Elasticity % change in quantity demanded of a good in response to a change in the price of another good.

93. Cross price elasticity of demand % change in quantity of good 1 % change in price of good 2

95. In the rule making proceeding concerning the local and national TV ownership rules and the TV-radio cross ownership rules, a fundamental economic issue is the determination of the proper product or service market. Or putting it another way, to what extent do TV stations, radio stations, cable TV systems, wireless cable, DBS, open video systems, video cassette rentals, newspapers, magazines, etc. compete in the same market and appear to be substitutes to advertisers, viewers, consumers, program suppliers? In addition, what is the proper way to analyze the degree of competition or the degree of substitutability between services that are primarily advertiser supported, and services that are primarily subscription supported? How does one measure cross price elasticity of demand or supply between advertiser supported and subscription supported services?