Free Market Equilibrium Flashcards
1
Q
What is the firm supply curve and what does that show?
A
Firm supply curve = MPC curve (… private costs mainly faced by producers)
2
Q
What is the consumer demand curve and what does that show?
A
Consumer demand curve = MPB curve (… private benefits mainly faced by consumers)
3
Q
What is the market equilibrium and what does it show?
A
Market Equilibrium- intersection of MPB & MPC (price & output here)- shows actual price & output
4
Q
What is the social optimum equilibrium and what does it show?
A
Social Optimum Equilibrium- intersection of MSB & MSC (price & output here)- shows optimum price & output- welfare maximised here
