M 3/4 Flashcards
What happens with price increases?
Supply increases due to producers wanking to make a profit at high prices
Costs stay the same - more profit , produce more
Low prices - very little profit, produce less
Increase in the supply of a good can be due to :
Cheaper raw materials More efficient production Productivity New technology Markets exploited
Decrease in supply of a good can be due to:
Expensive raw materials Higher production costs Less efficient production Poor productivity Bad weather /harvest
What is the price equilibrium?
Where supply and demand are equal
What happens when S > D?
A surplus is created
What is a disequilibrium ?
Demand would be greater than supply
What happens when S
Shortage created
What does a consumer surplus measure?
The welfare gained by consumers when they buy a good/service for any price lower than the maximum they are prepared to pay
What is consumer surplus?
What consumers are willing to pay for a good/service and what they actually pay
How is the level of consumer surplus shown?
By the area under the demand curve and above the ruling market price
What happens what price increases (consumer surplus)?
Consumer surplus decreases
What does a monopolist charge?
High prices - large part of consumer surplus own profit, producers revenue under perfect competition welfare is at its maximum as the lowest prices possible are charged
What is supply?
Amount of goods producers are willing to supply/sell at a given price
