Chapter 3 And 4 Economics

Front 1

Consumer Surplus

Back 1

Benefit or extra satisfaction consumers gain from paying a price that is lower than what they’re willing to pay.

Front 2

Producer surplus

Back 2

The benefit producers receive when they receive a price above the one they’re willing to supply at.

Front 3

Allocative efficiency

Back 3

When competitive market is in equilibrium where all resources are allocated in the most efficient way from society’s POV.

Front 4

When is there allocative efficiency?

Back 4

Social surplus is maximized

Marginal social benefit=Marginal social cost.

Front 5

MSB

Back 5

When satisfaction tends to decline with added consumption.

Front 6

MSC

Back 6

Is that the additional cost of producing 1 more unit tends to increase.

Front 7

MC - MB

Back 7

A= underproduction

B= overproduction

Front 8

Elasticity

Back 8

The responsiveness of consumers or producers to a change in a variable in the market places.

Front 9

Elasticity Implications for business

Back 9

Helps them decide on increases or decreases of price based on how it would affect the QD.

Will also shed light on the effect of a price change in a related good will have on the demand of your product.

Front 10

Elasticity implications for government

Back 10

Helps decide on tax

Front 11

PED

Back 11

Price elasticity of demand a measure of the responsiveness of consumers to a change in price of a good.

Front 12

Between 0 and 1 Elasticity

Back 12

Inelastic

Front 13

Smaller than 1

Back 13

Elastic

Front 14

Elasticity=1

Back 14

Unit elastic

Front 15

Elasticity=0

Back 15

Perfectly inelastic

Front 16

Elasticity = infinity

Back 16

Perfectly elastic

Front 17

Determinates of PED

Back 17

SPLAT

Substitutes

Proportion of income

Luxury or necessity

Addictive or not

Time to respond

Front 18

Is PED constant?

Back 18

No because consumers are more repsonsive to change at higher prices.

Front 19

XED

Back 19

Measure of the responsiveness of consumers of a good to change in piece of a related good.

Front 20

XED is more responsive when.. and less responsive when

Back 20

1- More subs

2-Less subs and complimentary

Front 21

Positive or negative XED coefficients

Back 21

Positive=complimentary

Negative=substitute

Front 22

YED

Back 22

Income elasticity of demand is the measure of responsiveness of a consumers demand for a particular good to their change in income.

Front 23

Positive YED coefficient

Back 23

Positive is direct relationship and normal good

Negative is indirect and inferiro

Front 24

PES

Back 24

Price elasticity of supply is the measure of the responsiveness of a producer of a good to a change in price of that good.

Front 25

Determinants is PES

Back 25

Amount of time following price change

Mobility of factors of productions

Ability to store stocks

Amount of unused capacity

Front 26

Applications of PES

Back 26

Inelastic = burden on producer

Elastic = butden in consumer

Front 27

Indirect taxes aims

Back 27

Increase revenues and government spending

Internalize externalities

Front 28

Types of indirect taxes

Back 28

Fixed amount is imposed

Per unit

Ad valorem or sales tax (% of selling price)

Front 29

Consequences of tax

Back 29

Producer revenue falls

Consumer price rises

Government review tax revenues

Tax shrinks market shrinks output

Front 30

Market equilibrium

Back 30

The state in which quantity supplied is equal to quantity demanded

Front 31

Market equilibrium

Back 31

The state in which quantity supplied is equal to quantity demanded

Front 32

Equilibrium price

Back 32

Quantity supplied and demand are equal. The amount purchased is exactly equal to the amount sold. There is. I surplus product on the market not any shortages of supply at that price.

Front 33

Market equilibrium

Back 33

The state in which quantity supplied is equal to quantity demanded

Front 34

Equilibrium price

Back 34

Quantity supplied and demand are equal. The amount purchased is exactly equal to the amount sold. There is. I surplus product on the market not any shortages of supply at that price.

Front 35

Market disequilibrium

Back 35

Any price where demand and supply are not equal.

Front 36

Market equilibrium

Back 36

The state in which quantity supplied is equal to quantity demanded

Front 37

Equilibrium price

Back 37

Quantity supplied and demand are equal. The amount purchased is exactly equal to the amount sold. There is. I surplus product on the market not any shortages of supply at that price.

Front 38

Market disequilibrium

Back 38

Any price where demand and supply are not equal.

Front 39

There can be changes in demand and supply

Back 39

Demand shifts, supply shortage, movement along supply and increase price to reach equilibrium.

Supply *****, supply excess movement along demand by decreasing price to reach new equilibrium.