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EXCESS CAPACITY: A condition that exists when monopolistic competition achieves long-run equilibrium such that production by each firm is less than minimum efficient scale. The implication of this condition is that each firm is not producing up to its fullest capacity, as would be the case under perfect competition, and thus more firms are need to produce total market output compared to perfect competition. Excess capacity results because market control means a monopolistically competitive firm faces a negatively-sloped demand curve. Long-run equilibrium is thus achieved by the tangency of the negatively-sloped demand curve and the long-run average cost curve, which results in economies to scale.
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PREFERENCES CHANGE, UTILITY ANALYSIS A disruption of consumer equilibrium identified with utility analysis caused by changes in the preferences for a good, which likely results in a change in the quantities of the goods consumed. The change in preferences alters the marginal utility-price ratio and forces a reevaluation of the rule of consumer equilibrium.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time going from convenience store to convenience store hoping to buy either storage boxes for your computer software CDs or a set of tires. Be on the lookout for small children selling products door-to-door.
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This isn't me! What am I?
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Two and a half gallons of oil are needed to produce one automobile tire.
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"No task is a long one but the task on which one dare not start: It becomes a nightmare. " -- Charles Baudelaire, poet-critic
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LF
Labor Force, Laissez-Faire
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