Market Efficiency, Surplus Flashcards
define well being
happiness or satisfaction with life as reported by individuals
what is allocative efficiency
values of the output that firms produce matches the value placed on that output by customers
what can we look at to tell if the market allocation is desirable
wellbeing and welfare of buyers and sellers
what is welfare economics
the study of how allocation of resources affects economic wellbeing
how can we maximise total welfare of buyers and sellers
equilibrium in market
what is willingness to pay
the buyers willingness to pay for a good minus the amount the buyer actually pays for it
what is consumer surplus
if the buyer would’ve paid more for the product than they did
what is producer surplus
the amount a seller is paid for a good minus the seller’s cost
what is total surplus
consumer surplus plus producer surplus
free markets allocate the supply of goods to the buyers who ….
value them most highly
free markets allocate the demands for goods to the sellers who …
produce them at the lowest costs
what is efficiency
the property of a resource allocation of maximising the total surplus received by all members of society
what is equity
the fairness of the distribution of well-being among the various buyers and sellers
an example of a product that has a price that will clear the market
original art, cao points, concert tickets (limited number)
