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30 Cards in this Set
- Front
- Back
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A group of buyers and sellers (need not be in a single location) |
MARKET |
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“Organize economic activity” means determining |
WHAT goods to produce HOW to produce them HOW MUCH of each to produce WHO gets them |
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An economy that allocates resources through decisions of many firms and house holds as they interact in markets for goods and services |
MARKET ECONOMY |
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The decisions of a central planner are teplaced by the decisions of millions of firms and households |
MARKET ECONOMY |
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Decide what to buy and who to work for |
HOUSEHOLDS |
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Decide who to hire and what to produce |
FIRMS |
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Means the market of suppliers and consumers that guides suppliers to produce quality goods at the lowest price and consumers to purchase these goods |
INVISIBLE HAND |
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AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS (1776) “Households and firms interacting in markets act as if they are guided by an INVISIBLE HAND that leads them to desirable market outcomes” |
ADAM SMITH (1723-1790) |
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Front (Term) |
ADAM SMITH (1723-1790) |
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Central planning |
COMMUNIST COUNTRIES |
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The benefit or good feeling of getting a good deal |
CONSUMER SURPLUS |
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Always increases as the price of a good falls and decreases as the price of a good rises |
CONSUMER SURPLUS |
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The total amount that a producer benefits grom producing and selling a quantity of a good at the market price |
PRODUCER SURPLUS |
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Represents the total benefit to everyone in the market from participating in production and trade of good |
PRODUCER SURPLUS PLUS CONSUMER SURPLUS |
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Decentralized, determined by the interactions of many self-interested buyers and sellers |
ALLOCATION OF RESOURCES |
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An allocation of resources is EFFICIENT if it maximizes total surplus |
MARKET EFFICIENCY |
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The goods are consumed by the buyers who value them most highly |
EFFICIENCY |
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The goods are produces by the producers with the lowest costs |
EFFICIENCY |
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Raising or loweing the quantity of a good would not increase total surplus |
EFFICIENCY |
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Total surplus is maximized, that the goods are produced by sellers with lower cost, and they are consumed buyers who most value them |
EFFICIENCY |
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Allocate economy’s scarce resources |
GOVERNMENT OFFICIALS (CENTRAL PLANNERS) |
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To measure of society’s well-being, we use ______, the sum of consumer and produce surplus |
TOTAL SURPLUS |
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French for “allow them to do” the notion that govt should not interfere with the market |
LAISSEZ FAIRE |
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Studies how the allocation of resources affects economic well-being (social welfare) |
WELFARE ECONOMICS |
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The study of economic efficiency and income distribution, as well as how they affect the overall well-being of people in the economy |
WELFARE ECONOMICS |
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The ALLOCATION OF RESOURCES refers to |
• HOW MUCH OF EACH GOOD IS PRODUCED • WHICH PRODUCERS PRODUCE IT • WHICH CONSUMERS CONSUME IT |
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Welfare economics |
CONSUMERS SURPLUS PRODUCER SURPLUS MARKET EFFICIENCY |
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The amount of buyers are willing to pay for good minus the amount they actually pay for it |
CONSUMER SURPLUS |
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Measures the benefit that buyers receive grom a good as the buyers themselves perceive it |
CONSUMER SURPLUS |
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A good measure of economic well-being if policymakers want to satisfy the preferences of buyers |
CONSUMER SURPLUS |
