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25 Cards in this Set
- Front
- Back
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Demand Curve
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H&O: A curve that shows to relationship between the price of a product and the quantity of the product demanded
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inferior goods
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"A good for which the demand increases as income FALLS and decreases as income RISES."""
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Normal Goods
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Supply Curve
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A curve that shows the relationship between he price of a product and the quantity of the product supplied.
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equilibrium
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"A situation in which the price has reached the level where quantity to supplied equals quantity demands"" "
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Price Floor
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"A legally determined minium price that sellers may receive"""
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Price Ceiling
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a legally determined maximum price sellers may charge It is a fixed price above which goods are NOT ALLOWED to be sold - the market may (and generally does) face an artificially LOW price.
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Consumer Surplus
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"The amount that buyers are willing to pay for a good minus the amount they actually pay for it, measures the benefit that buyers receive from a good as the buyers themselves perceive it."""
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Producer Surplus
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"the amount that sellers receive for a good over and above the minimum for which they are willing to sell the good. The minimum for which they are willing to sell the good is their marginal cost, and is given by their supply curve."""
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Welfare Economics
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Consumer Surplus
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"H&O: The difference between the highest price and consumer is willing to pay for a good or service and the price the consumer actually has to pay."""
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Marginal Benefit
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"H&O: The additional benefit to a consumer from consuming one more unit of a good or service"""
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Producer Surplus
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"H&O: the difference between the lowest price in a firm would be willing to accept for a good or service and the price into actually receives """
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Marginal Cost
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marginal cost to the consumer is the market price (i.e. how much they have to pay for the burger)
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surplus contemplates the difference between marginal benefit and marginal cost
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Marginal Benefit
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"marginal benefit to the producer is also the market price (i.e. how much they get, or benefit from, selling the burger)"
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Depends on the marginal cost
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Marginal Cost
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"H&O: Is the additional cost to a firm of producing one more unit of a good or service."""
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Marginal Cost
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the amount that sellers receive for a good over and above the minimum for which they are willing to sell the good
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Consumer Surplus
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Value to buyers – Amount paid by buyers
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Producer Surplus
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Amount received by sellers – Cost to sellers
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Social Surplus
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social surplus which is just the total surplus in the market (consumer surplus + producer surplus)
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Market Efficiency
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Market Efficiency (as we discussed in lecture) is the degree to which social surplus (total surplus received by all members of society) is maximized
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Market Efficiency
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"H&O: A market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum."""
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Marginal Benefit
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Always in $$ as a fixed amount of value
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