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ETS Business Major Field Test: Microeconomics

Microeconomics

The study of the behavior of individual consumers and producers operating in the individual markets of the economy. 

Video tutorial of microeconomic principles @ Khan Academy

Definition and examples of key microeconomic concepts

Utility Theory

Utility is the satisfaction obtained by the consumer from consuming a good.

Marginal Utility (MU) is the extra ability from an additional unit of consumption.  (Video tutorial @ Khan Academy)

Principle of Diminishing Marginal Utility - Additional consumer satisfaction from the last unit of consumption.  Falls as more of the good is consumed.

Demand

Demand Curve (Schedule) - A curve (table) showing the quantities of a good a consumer is willing and able to buy at alternative prices.

Law of Demand - Increase in price (P) causes decrease in quantity (Q) demanded.

Change in Quantity Demanded  (movement along the demand curve) - This is caused by a change in price of the given good.

Supply Curve (Schedule) - A curve (table) showing the quantities of a good a seller is willing an dable to sell at alterantive prices at a given cost of production.

Law of Supply - Increase in price (P) causes increase in quantity (Q) supplied.

Change in Quantity Supplied (movement along the supply curve) - This is caused by a change of price for the given good.

Change in Supply (shift in the entire supply curve) - Results from change in the cost of production, business taxes, expected price or quantity, change in the price of other goods, change in number of sellers, change in planned sales at all prices, and change in technology. 

Competition

Antitrust Policy

   Prevents oligpolists from colluding with each other to eliminate competion. 

   Prevents a firm from growing so large that it can drive competition out of business by restraining trade. 

Antitrust Laws

   Sherman Act (1890) - Prohibits collusion and attempts to monopolize

   Clayton Act (1914) - Outlaws actions that would lessen competition and certain types of price discrimination

   Federal Trade Commission Act (1914) - Established a government agency to invetigate unfair and deceptive business practices

   Robinson-Patman Act (1936) - Further prohibited price discrimination among customers

Tutorials

Lectures & Online Textbooks