5.1 Micro Flashcards
1
Q
What is rationing function?
A
As prices rise, demand is removed and only the consumers with the ability to pay can purchase it
2
Q
What is the incentive function?
A
High prices motivate producers to increase supply due to greater contribution, increasing revenue and profit
3
Q
What is the signalling function?
A
Provide important market signals to participants
4
Q
What is allocative efficiency?
A
Where customer satisfaction is maximised in the production of goods/services
5
Q
What is productive efficiency?
A
Where no additional output can be produced from the factor inputs available at the lowest possible average/ unit cost
6
Q
What is economic efficiency?
A
Where we can have allocative and productive efficiency at the same time
