Market Efficiency Flashcards
What is marginal benefit?
The additional benefit a consumer receives from consuming an additional unit of a good or service.
What does a demand curve also show?
The demand curve also shows the marginal benefits the consumer gets from a good – so it is also a marginal benefits curve. The marginal benefit curve shows that as the quantity consumed increases, the marginal benefit decreases.
What is consumer surplus, with an example?
Consumer surplus is the difference between what consumers have to pay and what they are willing to pay. For example if Jack values 3 pizzas at $30, but only has to pay $25, there is a consumer surplus of $5
What is the concept of equity in economics?
The concept of equity in economics refers to the fairness or justice in the distribution of resources, income and wealth within a society.
What is producer surplus?
The difference between what the producer is willing to receive and what they actually receive in the market
What is vertical equity?
redistribution of income so that a minimum standard of living can be achieved for all participants
What is Marginal cost?
The extra costs of one more unit of output
What are and describe the two main forms of vertical equity?
- Taxation
-income tax
-progressive tax, where the higher a person’s income, the higher percentage of tax they have to pay. - Welfare payments
-Jobseeker, age pension, disability pension
-this provides additional income to low income earners to provide a minimum standard of living
What is horizontal equity
This is where people are given the structures and right to be treated equally so that they have the freedom to chase after their own pursuits
- Fair Work Act
- Equal access to healthcare and education
What is deadweight loss?
the difference between the actual level of welfare generated in a market and the maximum possible level of welfare
Why does tax always create a deadweight loss?
Because output in the market has decreased and so the market isnt functioning at equilibrium
Does a subsidy shift a supply curve up or down
It shifts the supply curve down by the amount of the subsidy
Does a tax shift a supply curve up or down
It shifts the supply curve up by the amount of the tax
What is a price ceiling?
A maximum price set below the equilibrium
What does a price ceiling result in?
A shortage
an increase in consumer surplus
a decrease in producer surplus
