Competitive Markets Flashcards
Define consumer surplus
The extra amount a consumer is willing to pay for a product above the price they actually do pay (market price)
what is a competitive market
A market made up of many rival firms who are free to enter or leave the industry
Define demand
The amount of a product consumers are willing and able to purchase at various prices in a given time period
Define supply
The amount of a product producers are willing and able to supply at different market prices in a given time period
Define producer surplus
The extra amount a producer is paid for a product above what they are willing to accept to supply the product
Define price
The amount of money for which a product is sold
Define income
Earnings per period of time eg monthly wage
Define cross elasticity of demand
Measures responsiveness of demand for one product to a given change in the price of another product
Define equilibrium
A situation where there is a state of balance and so no tendency for change
Define disequilibrium
A situation where there is a state of imbalance and so a tendency for change
Define allocative efficiency
When resources are being used to produce those items most valued by society given their costs. This means consumer satisfaction is maximised
Define allocatively efficient output
The level of output where MSB = MSC ie the socially optimum output level
