consumer and surplus intro Flashcards
What is market efficiency?
Market efficiency is the production of goods and services that society wants at the lowest possible cost, maximizing surplus for both consumers and producers.
What does an efficient market mean in terms of reallocating resources?
In an efficient market, it is not possible to make someone better off without making someone else worse off. If inefficient, reallocating resources can improve total well-being.
How do economists relate the term “efficiency”?
Economists relate efficiency to making the best use of scarce resources.
How does the demand curve reflect consumer behavior?
The demand curve reflects the marginal benefits a consumer gets from a good, acting as a marginal benefit curve.
What is consumer surplus?
Consumer surplus is the difference between what a consumer is prepared to pay and what they actually pay in the market.
How can consumer surplus be measured?
Consumer surplus is measured as the area above the price and below the demand curve.
What happens to consumer surplus if the price of a good decreases
f the price decreases, consumer surplus increases because consumers pay less and consume more.
Why is consumer surplus a useful concept?
Consumer surplus measures economic well-being for consumers, indicating that higher surplus means consumers are better off.
What is producer surplus?
Producer surplus is the difference between the price producers are willing to accept and the price they actually receive in the market.
How does the supply curve reflect producer behavior?
The supply curve shows the minimum price producers are willing to sell their products, reflecting a marginal cost curve or “willingness to accept” curve.
How can producer surplus be measured?
Producer surplus is the area below the price and above the supply curve.
What is total surplus?
ts =cs+ps
In a supply and demand model, where is consumer surplus located?
Consumer surplus is above the price and below the demand curve.
n a supply and demand model, where is producer surplus located?
Producer surplus is below the price and above the supply curve.
