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TIEBOUT HYPOTHESIS: The notion that people relocate from one political jurisdiction to another in search of a more preferred package of government taxes and spending. This hypothesis suggests that people "shop" for compatible government activity in the same way they might shop for a car, a house, or a flavor of ice cream. The Tiebout hypothesis indicates that people have two methods of "voting" on government activity -- one is at the ballot box the other is with their feet by seeking a more preferred location.

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Lesson 6: Market Supply | Unit 2: Law of Supply Page: 6 of 19

Topic: Production Cost <=PAGE BACK | PAGE NEXT=>

An important question is: Why does the law of supply work?
  • The answer rests with production cost. In particular, the law of supply exists because of the law of increasing opportunity cost.
  • As we saw with production possibilities analysis, by increasing the production of a good, the opportunity cost of production increases.
  • Production cost increases as we increase production. To supply a larger quantity, producers need to cover these higher production costs with a higher price.

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AVERAGE REVENUE CURVE, PERFECT COMPETITION

A curve that graphically represents the relation between average revenue received by a perfectly competitive firm for selling its output and the quantity of output sold. Because average revenue is essentially the price of a good, the average revenue curve is also the demand curve for a perfectly competitive firm's output.

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Today, you are likely to spend a great deal of time at a garage sale seeking to buy either a cross-cut paper shredder or a birthday greeting card for your father. Be on the lookout for florescent light bulbs that hum folk songs from the sixties.
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The first "Black Friday" on record, a friday marked by a major financial catastrophe, occurred on September 24, 1869 -- A FRIDAY -- when an attempted cornering of the gold market induced a financial crises and economy-wide depression.
"There is no passion to be found playing small in settling for a life that idles than the one you are capable of living."

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