Ch.

1 The Market
Exogenous variable price is taken as determined by factors and not discussed in
the particular model
Endogenous variable price is determined by forces described in the model
The optimization principle people try to choose the best patterns of consumption
that they can afford.
The equilibrium principle prices adjust until the amount that people demand of
something is equal to the amount that is supplied.
Reservation price the highest price that a given person will accept and still
purchase the good.
Competitive market many sellers who operate independently and sell for the
highest price the market will bear
Monopoly a situation where a market is dominated by a single seller of a product
Price discriminating monopolist know each persons reservation price and sells to
that price
Pareto improvement if there is a way to make some people better off without
making anybody else worse off