micro - market equilibrium and welfare

Question 1

normative analysis

Answer 1

Assessing factual economic situations

Question 2

positive analysis

Answer 2

prediction what happens in markets based on value judgements

Question 3

Welfare economics

Answer 3

Study of the allocation of resources that affects the economies well being - considers whether the market allocation is desirable

Question 4

Social welfare

Answer 4

Total gains from trade to assist people on food, housing and medical care

Question 5

Consumer surplus equation

Answer 5

buyers willingness to pay for a good - the amount the buyer actually pays for it

Question 6

Willingness to pay (v)

Answer 6

the maximum amount that a buyer will pay for a good

Question 7

Producer surplus + equation

Answer 7

This is the amount the seller is paid for a good minus the sellers cost. It measures the. benefit to sellers participating in a. market or their profit.

Value to buyers - Cost to buyers

Question 8

Is produce and consumer surplus a paternalistic approach?

Answer 8

No, because paternalistic is when an authority make decisions for other people rather than them taking responsibility for their own. So in this case, consumers get to decide their own willingness to pay and producers decide their minimum price to sell.

Question 9

Efficiency

Answer 9

is the property of a resource allocation of maximising the total surplus received by all members of society( i.e the total gains from trade )

Question 10

What are three methods of government intervention that can impact the trade quantity?

Answer 10

Price ceiling = increases consumer surplus and created deadweight loss
Price floor = increases producer surplus and crease deadweight loss
Tax = reduces consumer surplus and producer surplus and forms fiscal tax revenue and deadweight loss