ch 4

Question 1

willingness to pay?

Answer 1

this is the max price that someone will buy the good for

Question 2

individual consumer surplus?

Answer 2

net gain to a individual butyer from the purchase of the good

Question 3

what happens to the quantity demanded as price goes down

Answer 3

the quantity demanded will go up since they are inversely related

Question 4

total consumer surplus

Answer 4

the sum ( total amount) of a individual buyers of a good

Question 5

how to calculate the consumer surplus

Answer 5

same as a triangle half of the base times height

Question 6

what would happen to the consumer surplus when prices fall

Answer 6

when prices fall the surplus is increased because of new costumers of are persuaded by the new price and also from a gain to the original people who would’ve bought at the original price

Question 7

what happens to consumer surplus when the price goes up

Answer 7

the consumer surplus goes down since they are inversely related

Question 8

what is the lowest price a seller will be willing to sell a good for in most cases (potential sellers cost)

Answer 8

they will sell at the cost of production or beak even do not think about losses that’s too advanced

Question 9

Individual producer surplus

Answer 9

net gain to the seller when selling a good

Question 10

how to find the individual producer surplus

Answer 10

difference between the market price and the price firms are willing to supply the good (cost of production)

Question 11

what is the total producer surplus

Answer 11

the sum of all individual producer surplus

Question 12

increase in producer surplus 2 causes

Answer 12

gains from people who supply the good at a higher price and the gains from those who supply the good at original or lower price

Question 13

total surplus?

Answer 13

total net gain from consumers and producers from trading in the market

Question 14

total surplus calculation

Answer 14

ts=cs+ps

Question 15

what does reallocating consumption cause

Answer 15

a consumer surplus

Question 16

what does re allocating sales cause

Answer 16

a producer surplus

Question 17

what does changing quantity cause

Answer 17

lowers the total surplus

Question 18

why are markets usually efficient

Answer 18

they allocate consumption to potential buyers who value it the most / willing to pay more for it. they allocate sales to sellers who have the lowest cost. all transactions are beneficial for all parties. no mutually beneficial transactions every potential buyer who doesn’t make a purchase values the good less than the seller who doesn’t make the sale

Question 19

equity definition

Answer 19

being fair

Question 20

efficiency vs equity

Answer 20

equity is only looking out for fairness ensuring that all parties are treated the same or have the same outcome while efficiency is more selfish becoming more efficient causes you to directly hurt the competition

Question 21

why do markets work so well

Answer 21

2 reasons property rights once you buy some thing you own it and economic signals mostly price signals which show that at a certain price people are willing to buy something these signals allow for producers and consumers to make decisions

Question 22

what are property rights

Answer 22

rights to valuable items and to do what they want with them protects incentive to trade and promotes innovation do not think of this only as patents but more importantly like how once consumers buy a good that good is theirs any changes in price or value or condition or anything to that good is there’s eg some one buys land they can build what ever they want as long as it follows regulations or someone buys a stock and the price goes up there entitled to the gain from that purchase

Question 23

what are economic signals

Answer 23

piece of information that helps people make better economic decisions prices are the most important signal since it shows shortage and excess, if the price is going up for consumers that could mean there is a shortage and for producers that could be a sign to produce more etc

Question 24

are markets always efficient

Answer 24

no some times they fail

Question 25

what is happening when a market is inefficient

Answer 25

there might be equity in the market but there are also missed opportunities

Question 26

what causes market failure

Answer 26

inefficient markets