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13 Cards in this Set
- Front
- Back
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Welfare Economics
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The study of how the allocation of resources affects economic well-being
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The equilibrium of supply&demand in a market maximizes the total benefits received by buyers and sellers
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true
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Consumer Surplus
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The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
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Consumer Surplus is closely related to the demand curve for a product?
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true
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Marginal Buyer
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Buyer who would leave the market first if the price goes any higher
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The area below the demand curve and above the price measures the consumer surplus in a market.
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true
because the height of the demand curve measures the value buers place on the good, as measured by their willingness to pay for it. The difference between this willingness to pay and the market price is each buyer's consumer surplus Thus, the total area below the demand curve and above the price is the sum of the consumer surplus of all buyers in the market for a good or service. |
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Consumer Surplus measures...
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the benefit that buyers receive from a good <i>as the buyers themselves perceive it.
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Cost
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the value of everything a seller must give up to produce a good
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Producer Surplus
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THe amount a seller is paid for a good minus the seller's cost of providing it
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Consumer Surplus & Supplier Surplus
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are the basic tools that economists use to study the welfare of buyers and sellers in a market
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Efficiency
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The property of a resource allocation of maximizing the total surplus received by all members of society
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Equality
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the property of distributing economic prosperity uniformly among the members of society
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At the equilibrium point we can gather 3 insights about market incomes
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1. Free markets allocate the supply of goods to the buyers who value them most highly, as measured b their willingness to pay
2. Free markets allocate the demand for goods to the sellers who can produce them at the least cost. 3.Free markets produce the quantity of goods that maximizes the sum of consumer and producer surplus |
