ECONOMICS
A cartel is an association of manufacturers or suppliers with the purpose of
maintaining prices at a high level and restricting competition, an example would be
OPEC.
A derivative is a financial instrument that has a value determined by the future value
of an entity. Two types of bets include betting on the better or win big/lose big
(speculators) and betting on worst-case scenario (risk-averse).
Four types of derivatives include:
1. Forward is a way for a buyer or seller to lock in purchasing or selling price for
an asset, with the transaction to occur in the future.
2. Future is similar to forward but uses exchange as an intermediary.
3. Option involves two types of contracts – one party has the obligation to buy or
sell at a later date whereas the other party can make a choice. The party that
has the option has to pay a premium for the privilege.
4. Swaps allow two parties to exchange their streams of cash flows. Private
contracts are negotiated between two parties.
CH3: Demand, Supply, and Market Equilibrium
A competitive market is where neither buyers nor sellers can set the price.
Equilibrium price exists when intentions of buyers and sellers match. Above
equilibrium price, quantity supplied exceeds quantity demanded.
Equilibrium quantity exists when quantity supplied and quantity demanded match.
Equilibrium means “in balance” or “at rest”.
Surplus is excess supply; shortage is excess demand.
The ability of competitive forces of supply and demand to establish a price at which
selling and pricing decisions are consistent is called rationing function of prices.
Those able to sell will sell and those able to buy will buy.
Production efficiency is the production of a commodity in the least costly way.
Allocative efficiency is the particular mix of goods and services mostly demanded by
society.
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A cartel is an association of manufacturers or suppliers with the purpose of
maintaining prices at a high level and restricting competition, an example would be
OPEC.
A derivative is a financial instrument that has a value determined by the future value
of an entity. Two types of bets include betting on the better or win big/lose big
(speculators) and betting on worst-case scenario (risk-averse).
Four types of derivatives include:
1. Forward is a way for a buyer or seller to lock in purchasing or selling price for
an asset, with the transaction to occur in the future.
2. Future is similar to forward but uses exchange as an intermediary.
3. Option involves two types of contracts – one party has the obligation to buy or
sell at a later date whereas the other party can make a choice. The party that
has the option has to pay a premium for the privilege.
4. Swaps allow two parties to exchange their streams of cash flows. Private
contracts are negotiated between two parties.
CH3: Demand, Supply, and Market Equilibrium
A competitive market is where neither buyers nor sellers can set the price.
Equilibrium price exists when intentions of buyers and sellers match. Above
equilibrium price, quantity supplied exceeds quantity demanded.
Equilibrium quantity exists when quantity supplied and quantity demanded match.
Equilibrium means “in balance” or “at rest”.
Surplus is excess supply; shortage is excess demand.
The ability of competitive forces of supply and demand to establish a price at which
selling and pricing decisions are consistent is called rationing function of prices.
Those able to sell will sell and those able to buy will buy.
Production efficiency is the production of a commodity in the least costly way.
Allocative efficiency is the particular mix of goods and services mostly demanded by
society.
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