15 Cards in this Set
| Front | Back |
|---|---|
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Producer Surplus
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difference between lowest price a firm would accept and the price it actually receives
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Consumer Surplus
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diffence between price consumer has to pay and price consumer would be willing to pay
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Demand function - supply function
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Demand --- P=A-B*(Q)
Supply --- P=A+B*(Q)
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When both supply / demand curves move
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both curves move same direction quantity known, price unknown
opposite direction, price known quantity unknown
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Equilibrium
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the place we move toward (may never reach the point)
pressure upward / clownward
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Demand curve shift factors
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1. Change in income
2. Change in price of related goods
3. Change in taste and or preferences
4. A change in expectations (price)
5. Population + Demographics
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3 ideas of economics
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1. people are rational
2. people respond to economic incentives
3. optimal decisions are at the margin
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Supply curve shift factors
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1. A change in technology
2. Change in price of inputs (factor costs)
3. Change in expectations
4. Change in # of sellers
5. Change in price of substitutes in production
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Change in price
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movement along the demand curve
change in quantity demanded
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Market Economy V.S. Centrally planned economy (gov't)
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Government -centrally planned gov decides how economic resources will be allocated
Market - decisions of households and firms decide how to allocate economic resources
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Productive efficiency V.S. Allocative Eff.
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productive eff - lowest cost
Allocative eff. - produce goods/services at consumer preference
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Market
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Set of buyers and sellers whose action affect price of a product or service
ex. house paint
buyers and sellers
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Dead weight loss
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reduction in economic surplus that results when the market isn't efficient
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positive statement/ Normative statement
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P: Statement of fact (what is)
N : State meant of what "should be" contains judgement
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opportunity cost
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next best alternative
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ECON 142: Exam 2