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READING STUDY GUIDE

Prices as Signals and Incentives

N o w You Will Learn Prices act as signals and incentives to both producers and consumers, and the price system provides equality, independence, flexibility, and efficiency in a market economy.

Before You Learned Producers and consumers interact to determine equilibrium price, which can change with changes in supply and changes in demand, sometimes leading to surpluses or shortages.

AS YOU READ Ta k e notes to help you understand the how the price system works and how prices act as signals and incentives to both producers and consumers.
1. Definition

Competitive Pricing

Characteristics of the Price Sytem in a Market Economy

2. Example

VOCABULARY HUNT Circle each term where it appears in your notes and be sure you understand its meaning. I f a term does not appear, write it beside the box where it best belongs. Copyright C) McDougal LineII/Houghton

competitive pricing

incentive

Chapter 6: Demand, Supply, and Prices

Economics: Concepts and Choices

Reading Study Guide 1 2 5

Unit 2 Resource Book

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PRICES AS SIGNALS AND INCENTIVES, CONTINUED APPLICATION Mark it Up!

IkES'Utitc14,ADAMs, 3 1 1 1 MID 4 ctimPtITEIL GeEp_. 1 ntE yEsetolci+ 0 E U L P D 1 T 2 v a 0 .._..--1 s ) O K N T M ' Harley Schwadron/www.CartoonStock.com A S K S I 7. Reread your notes on "How the Price System Works" and "Price Motivates Producers M N A the people in the cartoon as either producers or consumers. and Consumers." Label G L 8. What is the customary Lrelationship between the size of a product and its price? How does this help explain the ironic humor of the cartoon?

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6: Demand, Supply, and Prices

Concepts and Choices

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SECTION

READING STUDY GUIDE

What Is Perfect Competition?

Before You Learned There are many factors that affect supply and demand, which determine equilibrium market price. N o w You Will Learn Perfect competition is the ideal by which economists measure all market structures.

AS YOU READ Ta k e notes listing the characteristics of perfect competition. Use the cluster diagram on this page of the worksheet.
Independent

Standardized

Knowledgeable

Characteristics
Enter/Exit

1
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\ I

of Perfect Competition

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Copyright C) McDougal Littell/Houghton Mifflin Company.

Economics: Concepts and Choices Chapter 7: Market Structures

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c t a Name D a l 4 1 IS PERFECT COMPETITION?, CONTINUED WHAT , VOCABULARY HUNT Write the letter of the term that best matches the description. I. A business that accepts the market price determined by supply and demand 2. Occurs in markets with few sellers or products that are not alike 3. The ideal model of a market economy 4 . A n economicmodelo f competition within the same industry

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A. perfect competition B. imperfect competition C. market structure D. price taker

APPLICATION Mark it Up!

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;''. h i l . 1 4 N : f Many buyers and sellers A t i ' l Standardized product t i ' a t a t e to enter and leave the market aFreedom t i t i t t r i Independent t action r a i l eWell-informed l l i buyers and sellers

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5. Complete the chart. Check the characteristics that each market has at all times. 6. Which characteristic is sometimes missing in both markets?

7. How does government affect competition in the corn market?

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Concepts and Choices

7: Market Structures

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READING STUDY GUIDE

The Impact of Monopoly

N o w You Will Learn A monopoly is the least competitive market structure.

Before You Learned Perfect competition is the most competitive market structure.

AS YOU READ Ta k e notes listing the characteristics of different types of monopolies. Use the chart below and on the next page of this worksheet.

One Seller
Natural Monopoly

Restricted Market

Control of Prices

Government Monopoly

Technological Monopoly

Geographic Monopoly
VOCABULARY HUNT Circle each term where it appears in your notes and be sure you understand its meaning. I f a term does not appear, write it in or next to the box where it best belongs. monopoly price maker natural monopoly technological monopoly economies of scale cartel barrier to entry government monopoly geographic monopoly patent

Copyright McDougal LineII/Houghton Mifflin Company.

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Economics: Concepts and Choices

Chapter 7: Market Structures

Reading Study Guide 1 7 7 Unit 2 Resource Book

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THE IMPACT OF MONOPOLY, CONTINUED APPLICATION Mark It Up!

C Clive Goddard/www.CartoonStock.com 13. Circle the word in the cartoon indicating that the cottage represents a monopoly. 14. Why are similar properties unlikely to be available?

15. What kind of monopoly does the cottage represent? Why?

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Concepts and Choices 7: Market Structures