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January 19, 2018 

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ZERO BOND: Also termed a zero coupon bond, a bond that does not pay interest, in which the return is generated by the difference between the purchase price and the face value paid at maturity. Because they do not pay interest, zero bonds are sold at a discount. For example, a $10,000 zero bond that matures in one year, would generate a 10% return if it sold at a discount of $9,000.

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Lesson Contents
Unit 1: The Exchange
  • What It Is
  • Equilibrium
  • Competition
  • Number
  • Unit 1 Summary
  • Unit 2: The Numbers
  • Schedule
  • Market Agreement
  • Equilibrium
  • Unit 2 Summary
  • Unit 3: A Graph
  • The Curves
  • The Equilibrium
  • Unit 3 Summary
  • Unit 4: Adjustment
  • Self-Correction
  • Shortage
  • Surplus
  • Unit 4 Summary
  • Unit 5: Efficiency
  • What It Is
  • Efficient Markets
  • Too Little Production
  • Too Much Production
  • Inefficiency
  • Unit 5 Summary
  • Course Home
    Market

    In this lesson, we'll see how buyers (discussed in the demand lesson) come together with sellers (discussed in the supply lesson) to exchange commodities using a market. More precisely, this lesson develops an abstract market model, or market analysis, that we can use to explain and understand a wide range of real world exchanges.

    • This lesson begins with an overview of the basic exchange process underlying markets, including the notion of equilibrium, the roles played by price and quantity, and the importance of competition.
    • In the second unit we work through a simple market analysis using demand and supply schedules, highlight both equilibrium and disequilibrium conditions.
    • The third unit then carefully examines the notion of market equilibrium using demand and supply curves, which generates the widely used graphical model of the market.
    • Moving onto the fourth unit, we use the graphical market model to investigate the automatic market responses to shortages and surpluses.
    • The lesson concludes in the fifth unit by considering the relation between market exchanges and efficiency.

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    PERFECT COMPETITION, SHORT-RUN PRODUCTION ANALYSIS

    A perfectly competitive firm produces the profit-maximizing quantity of output that equates marginal revenue and marginal cost. This production level can be identified using total revenue and cost, marginal revenue and cost, or profit. Because a perfectly competitive firm faces a perfectly elastic demand curve, it efficiently allocates resources by equating price and marginal cost. In addition, the marginal cost curve above the average variable cost curve is the perfectly competitive firm's short-run supply curve.

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    Today, you are likely to spend a great deal of time lost in your local discount super center looking to buy either a computer that can play music and burn CDs or a T-shirt commemorating last Friday (you know why). Be on the lookout for attractive cable television service repair people.
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