Definitions Flashcards
Price discrimination definition
Price discrimination occurs when a producer sells the same good at different prices whereby the price of the good does not reflect differences in the cost of supplying the customer.
Allocative efficiency definition
When society produces and consumes a combination of goods and services that maximises its welfare. It is achieved when the firm prices at P=MC
Productive efficiency definition
When all resources are fully and efficiently utilised.
From society’s POV, it is producing at Minimum Efficiency Scale.
From firm’s POV, it is producing on any point of the LRAC
Dynamic efficiency definition
When the firms are technologically progressive through R&D
When does consumer surplus improve?
When consumes enjoy lower prices or greater quantity
